Administration Rolls Back Ban on Nursing Home Arbitration Agreements

Under the Obama administration, the Centers for Medicare and Medicaid Services (CMS) issued a 2017 rule barring nursing homes that accept Medicare and Medicaid from using binding pre-dispute arbitration agreements. Before this rule, the practice of nursing homes effectively forcing their residents to use arbitration to settle disagreements with skilled nursing facilities was widespread. Residents and family members who signed such arbitration agreements waived their rights to seek redress in the courts, including the constitutional right to a jury trial by one’s peers. Instead, disputes with nursing homes were privately settled using arbitrators, thus avoiding public disclosure of the alleged wrongdoing. The result was inequitable to nursing home residents and their families.

Following litigation commenced by the nursing home industry, the Trump administration revisited and ultimately effectively rolled back the ban on such binding arbitration agreements, announcing a new rule effective September 16, 2019.  The new rule permits nursing homes to enter into arbitration agreements with residents prior to any dispute arising, provided that residents have a 30-day period to change their minds, that the agreement does not prohibit residents from communicating with government officials, and that the agreement is satisfactorily explained to the resident and is in a readily understandable form. However, nursing homes are specifically barred from requiring residents to sign arbitration agreements as a condition to admission to a skilled nursing facility.  Given the power advantage of nursing homes in negotiating admission agreements, advocates for nursing home residents fear that, as a practical matter, the new rule will have the effect of requiring residents to sign problematic arbitration agreements.

The U.S. Supreme Court has consistently affirmed that the Federal Arbitration Act (“FAA”) preempts state laws that interfere with the FAA’s objectives.  Relevant recent New York caselaw includes Friedman v. Hebrew Home for Aged at Riverdale, 131 AD3d 421 (1st Dept’ 2015) (reversing trial court’s denial of defendant nursing home’s motion to stay action pending arbitration, finding that arbitration clause in admission agreement is not invalidated by NY Public Health Law), lv to appeal dismissed by, 28 NY3d 1050 (2016); and Hyde v. Jewish Home Lifecare, 149 AD3d 674 (1st Dep’t 2017) (reversing trial court’s grant of nursing home’s motion to compel arbitration, where nursing home failed to respond to plaintiff’s demand for arbitration and participated in subsequent litigation commenced by plaintiff without raising the issue of arbitration).

As relevant to guardianships, guardians entering into nursing home admission agreements should carefully review and consider any arbitration provisions contained therein, and specifically seek court approval to approve of any waiver of the ward’s constitutional right to a jury trial.

The new CMS rule can be found here.

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