As anticipated, the Centers for Medicare & Medicaid Services (CMS) has released new regulations addressing the use of arbitration agreements in nursing home admission agreements applicable to facilities that participate in Medicaid and Medicare programs. However, the scope has far exceeded what was expected. The proposed regulations only sought to ban mandatory arbitration agreements as a condition of admission. The actual regulations prohibit “pre-dispute” arbitration agreements instead.

The regulation, 42 CFR § 483.70(n) (Binding Arbitration Agreements), states:

We are requiring that facilities must not enter into an agreement for binding arbitration with a resident or their representative until after a dispute arises between the parties. Thus, we are prohibiting the use of pre-dispute binding arbitration agreements.

The regulation further provides that if, after a dispute between the facility and a resident arises, a facility chooses to ask a resident or the resident’s representative to enter into an agreement for binding arbitration, the facility must ensure that the agreement is explained to the resident/resident’s representative in a form and manner that he or she understands, including in a language the resident/resident’s representative understands, and the resident acknowledges that he or she understands the agreement.

Additionally, the arbitration agreement may not condition a resident’s right to remain in a facility upon the resident/resident’s representative signing a binding arbitration agreement; nor can it contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state or local officials (such as surveyors or other health department employees), and representatives of the Office of the State Long-Term Care Ombudsman.

The following questions are thus raised.

When does a “dispute” arise?

CMS does not define “pre-dispute.” So, how does one determine exactly when in time a dispute arises? Perhaps it is when the resident suffers a fall or develops the first pressure ulcer? Or does the resident need to have suffered an injury or be transferred to the hospital? Do complaints by family members about the temperature in the room or the quality of the food count?

Certainly, most would agree that by the time the first attorney letter comes in or when suit is filed, a dispute has arisen. Yet, the likelihood of the party agreeing to arbitration at that point in time is slim to none.

Does this mean that no competent person can chose to arbitrate a dispute before it arises?

In response to comments elicited to its proposed ban of mandatory arbitration provisions last year, CMS has concluded that requiring residents to sign pre-dispute arbitration agreements is fundamentally unfair because it is almost impossible for residents or their decision-makers to give fully informed and voluntary consent to arbitration before a dispute has arisen. In other words, CMS has concluded that under no circumstances can a resident or his or her designated representative have enough capacity or the right state of mind to voluntarily waive their right to a trial. Yet, it believes that after a “dispute” has arisen, they might.

It would seem counterintuitive, given the heavy emphasis on the rights and needs of residents to maintain their dignity and the same quality of life during an admission as they were able to enjoy before, to presume that they can never truly be competent enough to agree to arbitration.

Conclusion

We can expect organizations, both not-for-profit and for-profit, to challenge the regulation and ask the courts to reconcile it with the Supreme Court’s decision in Marmet Health Care Center, Inc. v. Brown, 132 S.Ct. 1201 (2012).

Until then, facilities can continue to seek enforcement of agreements signed before November 28, 2016.