CMS, Arbitration, and Long Term Care Facilities: Round Two

Author: Amy L. Dilday

What is the status of the Centers for Medicare & Medicaid Services (CMS) regulation for arbitration agreements with residents of long term care facilities?  Once again, like it was three years ago, it is on hold.  In 2016, the CMS drafted a major overhaul Round-Twoof its regulations governing nursing homes and assisted living facilities.  Included in the revamped regulations was a prohibition of pre-dispute binding arbitration and specifications for permissible post-dispute agreements to arbitrate.  In October of that year, the American Health Care Association and several nursing homes sued CMS in the Northern District of Mississippi, challenging the agency’s authority to regulate arbitration agreements and asking the court to enjoin the agency from enforcing its pre-dispute arbitration prohibition.  The federal district court granted the plaintiffs’ motion and enjoined enforcement until the case was resolved.  The CMS, therefore, issued a nation-wide instruction for its surveyors to not enforce the prohibition.

Rather than defend the litigation to its conclusion, the CMS decided to reevaluate its position on arbitration agreements.  The results of that reevaluation were published as a final rule this year, on July 18, 2019.  The revised rule, set to go into effect on September 16, permitted pre-dispute arbitration agreements.  It included some of the specifications from the former rule and added new requirements.  Two new provisions require an arbitration agreement to: 1) explicitly grant the resident the right to rescind the agreement within 30 days, and 2) expressly state that the resident is not required to sign an arbitration agreement as a condition for admission or continued care at the facility.

Again, several nursing facilities sued the CMS, this time in the Western District of Arkansas.  As in the prior suit, the nursing home plaintiffs asked the court to enjoin the CMS from enforcing its rule until the court resolved their challenge to the agency’s authority to regulate arbitration agreements.  To avoid another injunction, on September 13, 2019, the CMS agreed with the plaintiffs to voluntarily stay enforcement of the new arbitration rule until December 31, 2019, in exchange for an expedited case management schedule that would allow the court to decide the case by the end of the year.

So, stay tuned.  While current arbitration agreements for long term care facilities remain valid (and the CMS has stated that its rule is to operate only prospectively), it may be wise to take the extra time permitted and review your arbitration agreement to see how it will fare if the court decides the new rule is enforceable.  The full rule for binding arbitration agreements may be found at 42 CFR § 483.70(n),