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New CMS Regulation Prohibits Nursing Facilities from Using Pre-Admission Binding Arbitration Agreements

Health Law Alert Randall R. Fearnow, Edward L. Holloran, III, Mark W. Bina, Jaya F, White

Yesterday, the Department of Health and Human Services released a final rule that would bar long-term care facilities that participate in Medicare and Medicaid from including binding arbitration clauses in their admission agreements. The final rule will become effective on November 28th. The rule is part of a larger series of regulations affecting skilled nursing facilities, with requirements implemented in phases over the next three years.

The full text of the final rule is available here.

The rule does not impact existing contracts containing arbitration clauses entered into before the November 28th effective date. Going forward, long-term care facilities can no longer require binding arbitration agreements as a condition of admission or enter into binding arbitration agreements with residents before an actual dispute arises.

If a dispute arises, the long-term care facility may request that a resident enter into an independent agreement for binding arbitration. Failure to sign the agreement, however, may not be grounds for termination of a resident's right to remain in the facility. Residents must (1) be provided an explanation of the agreement in a form and manner that they understand, (2) acknowledge that they understand the agreement, and (3) voluntarily enter into the agreement. The post-dispute arbitration agreement itself must allow the parties to select a mutually-agreed upon neutral arbitrator and a venue that both parties deem convenient. It may not contain any language that discourages communication with federal, state, or local officials.

In the event that a dispute results in an arbitration, the facility must retain a copy of the signed agreement for arbitration as well as the arbitrator's final decision for 5 years.

Long-term care facilities should carefully review and re-draft resident agreements in light of this regulation. Facilities that wish to utilize arbitration agreements for post-dispute proceedings must develop separate post-dispute arbitration agreements. These agreements should accompany guidelines for explaining agreements to residents and negotiating arbitration agreements with residents.

If you or your organization have any questions about the requirements of this rule or its implementation, please contact either Randall Fearnow at 312-715-5194/, Ed Holloran at 317-399-2892/,  Mark Bina at 312-715-5051/, Jaya White at 312-715-5242/, Laura Pone at 312-715-5090/, or your local Quarles & Brady attorney.