CMS Removes Ban on Nursing Homes Arbitration Agreements

On July 16, 2019, the Centers for Medicare & Medicaid Services (CMS) announced a final rule that lifted the ban on the use of pre-dispute, binding arbitration agreements by long term care facilities. Under the Obama administration, the use of arbitration agreements was banned. This prohibition was subject to subsequent legal challenge and an injunction prohibiting the enforcement of the ban. While the final rule permits arbitration agreements, CMS has implemented certain safeguards to protect the health and safety of residents.

The final rule will take effect on September 16, 2019. Upon the effective date, the following safeguards and/or requirements must be included in a facility’s arbitration agreement in order for the agreement to be enforceable:

• Admission or continuation of care must not be conditioned on the requirement to arbitrate, and long term care facilities must inform the resident or his/her representative of the right not to sign the agreement after disclosing the above;
• The resident shall have the right to rescind the agreement within 30 calendar days of signing;
• The agreement must be explained in a way the resident and his/her representative can understand, including in a language he/she understands, and the individual must acknowledge that he/she understands the agreement;
• The agreement cannot contain language that prohibits or discourages residents from communicating with federal, state, or local officials; and
• The agreement must provide for the selection of a neutral arbitrator agreed upon by both parties and provide for the selection of a venue convenient to both parties.

Additionally, facilities must retain copies of the signed arbitration agreement and arbitrator’s final decision for five (5) years after the resolution of the dispute and must make them available for inspection by CMS. Failure to comply with these requirements can result in sanctions and cause a facility to be de-certified from the Medicare Program.

CMS has clearly expressed its intent to closely monitor these agreements and will revisit the use of these agreements if it believes they harm residents. While these new requirements apply prospectively, CMS advises and suggests that facilities offer new agreements that comply with the above to residents who have signed prior arbitration agreements.

Due to the increased attention from CMS, long term care facilities should revisit their arbitration agreements and policies for executing these agreements. For questions on complying with these requirements, contact one of the authors of this alert.