CLIENT ADVISORY: CMS Final Rule Permits and Regulates Pre-Dispute, Binding Arbitration Agreements in Nursing Facility Admission Agreements

August 6th, 2019

A new Final Rule, effective September 16, 2019, revises Medicare’s Requirements of Participation (ROPs) to permit and regulate the use of pre-dispute, binding arbitration agreements in nursing facility admission agreements. Nursing facilities using arbitration agreements will need to review and revise their admission procedures to assure compliance with the Final Rule and avoid regulatory sanctions and litigation.

Regulatory History

Since 2016, the Centers for Medicare and Medicaid Services (CMS) has been implementing three phases of new requirements that long term care facilities must meet in order to participate in Medicare and Medicaid programs.[1] Within the proposed overhaul of the ROPs, CMS proposed banning the use of pre-dispute, binding arbitration agreements within resident admission agreements used by nursing facilities.[2] Court action brought by trade groups supportive of arbitration agreement led to the national enjoinment of the enforcement of this regulation on December 9, 2016 by a federal court in the Northern District of Mississippi. Following a June 2017 proposed rule, the current Final Rule implements updated regulations regarding the use of pre-dispute binding arbitration agreements by nursing facilities.[3] This client advisory will summarize the new regulations related to pre-dispute, binding arbitration agreements for nursing facilities that participate in the Medicare and Medicaid programs.

Provisions of the Final Rule

Most importantly, the Final Rule does not prohibit the use of pre-dispute binding agreements.[4] However, such agreements must not be required as a condition of admission to, or as a requirement to continue to receive care at the facility. In addition, the Final Rule preserves many components that CMS states are intended to persevere transparency in the admission process and a resident’s decision of whether to agree to an arbitration agreement. Under the new provisions, the facility must ensure that the agreement is explained to the resident and his or her representative in a form and manner that he or she understands, including in a language the resident and his or her representative understands. In addition, the facility must ensure through the terms of the agreement that:

  • The resident or his or her representative acknowledges that he or she understands the agreement;
  • The agreement provides for the selection of a neutral arbitrator agreed upon by both parties;
  • The agreement provides for the selection of a venue that is convenient to both parties;
  • The agreement explicitly grants the resident or his or her representative the right to rescind the agreement within 30 calendar days of signing it;
  • The agreement explicitly states that neither the resident nor his or her representative is required to sign an agreement for binding arbitration as a condition of admission to, or as a requirement to continue to receive care at, the facility.
  • The agreement does not contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state, or local officials, including but not limited to, federal and state surveyors, other federal or state health department employees, and representatives of the Office of the State Long-Term Care Ombudsman

In addition to requiring the above provisions to be included in an arbitration agreement, the Final Rule requires nursing facilities to retain a copy of the signed agreement and arbitrator’s final decision when the facility and a resident resolve a dispute through arbitration. These documents must be preserved for 5 years after the resolution of that dispute and be available for inspection upon request by CMS or its designee.[5]

Conclusion

Due to the nationwide injunction, nursing facility arbitration agreements have not previously been subject to a uniform set of requirements under the ROPs and have instead developed largely under the requirements of state law. Thus, the provisions of the Final Rule will likely require revisions to arbitration agreements or clauses currently in use if nursing facilities wish to continue to offer them. Nursing facilities utilizing pre-dispute arbitration agreements should be mindful that admission contracts in use on and after September 16, 2019 must abide by the above requirements. As noted in the Final Rule, the new regulations do not affect contracts with arbitration agreements entered into prior to September 16, 2019.

Should you have any questions related to the updated pre-dispute binding arbitration agreements, please contact Peter Mellette, Harrison Gibbs, Elizabeth Dahl, or Scott Daisley at Mellette PC.

This client advisory is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice.

[1] 81 Fed. Reg. 68688, 38696 (Oct. 4, 2016).

[2] 84 Fed. Reg. 34718, 34718 (July 18, 2019).

[3] Id.

[4] Id. at 34719.

[5] 84 Fed. Reg. 34735.

Categories: Client Advisory