CMS Issues Proposed New Rule on Nursing Home Pre-Dispute Arbitration Agreements

by Mark Kantor and Karl Bayer

The Centers for Medicare and Medicaid Services (CMS), an arm of the United States Department of Health and Human Services, released an announcement on June 5th withdrawing its 2016 Rule prohibiting pre-dispute arbitration agreements for long-term care nursing home contracts.  CMS has now proposed a new Rule, which is the first clear statement of the direction that agencies of the Trump Administration will take towards Federal regulation of arbitration of consumer, health, labor and similar controversial issues.  CMS has reportedly proposed the following changes, which are subject to a 60-day public comment period.

• The prohibition on pre-dispute binding arbitration agreements is removed.
• All agreements for binding arbitration must be in plain language.
• If signing the agreement for binding arbitration is a condition of admission into the facility, the language of the agreement must be in plain writing and in the admissions contract.
• The agreement must be explained to the resident and his or her representative in a form and manner they understand, including that it must be in a language they understand.
• The resident must acknowledge that he or she understands the agreement.
• The agreement must not contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state, or local officials, including federal and state surveyors, other federal or state health department employees, or representatives of the State Long-Term Care Ombudsman.
• If a facility resolves a dispute with a resident through arbitration, it must retain a copy of the signed agreement for binding arbitration and the arbitrator’s final decision so it can be inspected by CMS or its designee.
• The facility must post a notice regarding its use of binding arbitration in an area that is visible to both residents and visitors.

The text of CMS’s proposed new Rule and explanatory remarks are available online.  The operative portions of the agency’s explanatory remarks set out the changes in more detail.

We are proposing to revise the provisions related to pre-dispute arbitration at §483.70(n). Specifically, we propose to remove the requirement at §483.70(n)(1) precluding facilities from entering into pre-dispute agreements for binding arbitration with any resident or resident’s representative, which we do not believe strikes the best balance between the advantages and disadvantages of pre-dispute arbitration. For the same reason, we also propose removing the prohibition at §483.70(n)(2)(iii) banning facilities from requiring that residents sign arbitration agreements as a condition of admission to a facility. And, we propose removing the provisions at §483.70(n)(2)(ii) regarding the terms of arbitration agreements.

We would retain provisions that protect the interests of LTC residents in situations where a facility chooses to ask a resident or his or her representative to enter into an agreement for binding arbitration (whether pre-dispute or post-dispute). We propose to retain the requirements that the agreement be explained to the resident and his or her representative in a form and manner that he or she understands, including in a language that the resident and his or her representative understands; and the resident acknowledges that he or she understands the agreement. We also propose to retain the requirements that the agreement must 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 accordance with §483.10(k).

Finally, we would retain the requirement that when the facility and a resident resolve a dispute through arbitration, a copy of the signed agreement for binding arbitration and the arbitrator’s final decision must be retained by the facility for 5 years and be available for inspection upon request by CMS or its designee.

We propose to add a requirement that the facility must ensure that the agreement for binding arbitration is in plain language. If an agreement for binding arbitration is a condition of admission, it must be in plain writing in the admission contract. We also propose to require facilities to post a notice in plain language that describes its policy on the use of agreements for binding arbitration in an area that is visible to residents and visitors. We believe this revised approach is consistent with the elimination of unnecessary and excessive costs to providers while enabling residents to make informed choices about important aspects of his or her healthcare.

The CMS announcement also notes the impact of the decision of the U.S. District Court for the Northern District of Mississippi preliminarily enjoining the 2016 Rules on grounds that it was contrary to the U.S. Federal Arbitration Act.

On October 17, 2016, the American Health Care Association and a group of affiliated nursing homes filed a complaint in the United States District Court for the Northern District of Mississippi seeking a preliminary and permanent order enjoining agency enforcement of the prohibition on pre-dispute arbitration agreements regulation (§483.70(n)(1)). On November 7, 2016, thirty-four days after the issuance of the regulation prohibiting pre-dispute arbitration agreements, the district court preliminarily enjoined enforcement of that regulation. On December 9, 2016, we issued a nation-wide instruction to State Survey Agency Directors, directing them not to enforce the 2016 final rule’s prohibition of pre-dispute arbitration provisions during the period that the court ordered injunction remained in effect (S&C: 17-12-NH) https://www.cms.gov/Medicare/Provider-Enrollment-andCertification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-17-12.pdf).

The district court held that the plaintiffs were likely to prevail in their challenge to the 2016 final rule. It concluded that it would likely hold that the rule’s prohibition against LTC facilities entering into pre-dispute arbitration agreements was in conflict with the Federal Arbitration Act (FAA), 9 U.S.C. 1 et seq. The court also reasoned that it was unlikely that CMS could justify the rule, or could overcome the FAA’s presumption in favor of arbitration, by relying on the agency’s general statutory authority under the Medicare and Medicaid statutes to establish rights for residents (sections 1891(c)(1)(A)(xi) and 1919(c)(1)(A)(xi) of the Act) or to promulgate rules to protect the health, safety and well-being of residents in LTC facilities (sections 1819(d)(4)(B) and 1919(d)(4)(B) of the Act).

The full text of the proposed Rule is set out at the end of the CMS announcement.

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