ARBITRATION UPDATE: Final Rule - CMS Will Allow Binding Arbitration

Wake me up. I must be dreaming. Did CMS really do this? Did CMS propose this week to delay implementation of parts of phase three of the Requirements of Participation one year until Nov.28, 2020? Did CMS also issue a final rule allowing pre-dispute arbitration agreements? Will nursing home operators save over $600 million dollars (think Dr. Evil’s voice)? Yes, CMS did! Yes, nursing home operators will!

ARBITRATION IN LONG TERM CARE HISTORY OVERVIEW:

Arbitration and “Informed Choices” are two topics this column has covered over the past 10 years. Prior to Oct. 2016, the requirements for long-term care facilities to participate in the Medicare and Medicaid programs contained no provisions specific to the use of predispute, binding arbitration agreements between the facilities and their residents. Then, on Oct. 4, 2016, CMS published the “Reform of Requirements for Long-Term Care (Final Rule)” and established several requirements regarding the use of binding arbitration agreements by long-term care facilities.  

After the reforms were published, we reported that the American Health Care Association (AHCA) and a group of affiliated nursing homes filed a complaint in the United States District Court for the Northern District of Mississippi, Oxford Division seeking a preliminary and permanent injunction enjoining agency enforcement of the prohibition on predispute, binding arbitration agreements. On Nov. 7, 2016, the district court preliminarily enjoined enforcement of that regulation prohibiting the use of predispute, binding arbitration agreements. 

As a result of the court’s decision, on Dec. 9, 2016, CMS issued a nationwide instruction to State Survey Agency Directors, directing them not to enforce the 2016 final rule’s prohibition of predispute, binding arbitration provisions during the period that the court-ordered injunction remained in effect.

In addition, CMS determined that further analysis of the arbitration provisions was warranted. CMS reevaluated the provisions to determine if a policy change would achieve a better balance between the advantages and disadvantages of predispute, binding arbitration for residents and their providers. On June 8, 2017, CMS published a proposed rule that would remove the provision prohibiting predispute, binding arbitration agreements and strengthen requirements regarding the transparency of arbitration agreements in facilities. The proposal was designed to support the resident’s right to make informed choices about important aspects of his or her health care.

THE FINAL REGULATIONS ALLOWING ARBITRATION IN LONG-TERM CARE FACILITIES

On Tues., July 16, 2019, CMS adopted the June 8, 2017 proposed rule with some changes. The following are highlights from the final rule. My firm will be revising our client arbitration agreements, training programs and related information as needed on arbitration consistent with the final rule if there are no challenges to the final rule by the AHCA and other parties in the Federal Court action on the grounds that CMS lacks authority and cannot prescribe the following terms of the parties’ agreement:

  • A facility must not require any resident or his or her representative to sign an agreement for binding arbitration as a condition of admission to, or as a requirement to continue receiving care at, the facility and must explicitly inform the resident or his or her representative of his or her right not to sign the agreement as a condition of admission to, or as a requirement to continue receiving care at the facility.

  • The facility must ensure that the resident or his or her representative acknowledge that he or she understands the agreement.

  • The agreement must provide for the selection of a neutral arbitrator agreed upon by both parties.

  • The agreement must provide for the selection of a venue that is convenient to both parties.

  • The agreement must explicitly grant the resident or his or her representative the right to rescind the agreement within 30 calendar days of signing it.

  • The arbitration agreement must explicitly state 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.

  • When a 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 five years after resolution of that dispute and be available for inspection upon request by CMS or its designee.

THE REGULATORY IMPACT STATEMENT

The CMS final rule recognizes the need to allow predispute arbitration as indicated by the district court’s that granted the preliminary injunction against enforcement of the prohibition on predispute arbitration agreements. That court indicated that CMS would, at a minimum, face some substantial legal hurdles from pursuing the arbitration policy set forth in the 2016 final rule. 

CMS now believes that the protections for residents in the final rule strikes a better balance of competing policy concerns. The final rule will increase transparency in long-term care, per CMS, for facilities that chose to use arbitration while, at the same time, allowing facilities to use arbitral forums as a means of resolving disputes for the many reasons we have been advocating over the years. 

There is no connection supported by evidence that there is an impact on quality of care by the use of predispute arbitration agreements. The policy balance that CMS discusses is part of its decision making.

WHAT TO DO NEXT?

The effective date is Sept. 18, 2019, but that may change based on AHCA’s position on additional challenges to the CMS final rule in Federal Court. You need to be ready to comply with the final rule if there is no further challenge. The next steps include:

  • Reviewing your existing arbitration agreements, admission protocols and any related arbitration policies to make sure they meet the final rule’s requirements.

  • If you do not have an arbitration agreement, please consider implementing one consistent with the final rule.

  • Update/create protocols to “ensure” that the resident or his or her representative acknowledge that he or she understands the agreement. 

  • Update/create protocols for five years retention of the signed agreements and the arbitrator’s final decision (and final court order, I would add) if the dispute is resolved through arbitration.

Please contact me to discuss arbitration agreements, training and compliance, as you know it’s one of my all-time favorite topics. 

Also, please save the dates of April 21-22, 2020 for the 8th Annual National Long-Term Defense Summit! 2019 was amazing. Look forward to education, networking and fun in New York City in 2020! You’ll love The Parker Hotel and the penthouse Estrela conference room with 360-degree views of the city and Central Park! Please plan to join us! For more information, please contact me at rebecca@adelmanfirm.com

Rebecca Adelman