On October 4, 2016, the Centers for Medicare & Medicaid Services (“CMS”) published a final rule that implements sweeping changes to the requirements long-term care facilities (“LTCs”) must meet to participate in the Medicare and Medicaid programs. These new and modified requirements offer heightened protections for residents.  Most notably, the final rule prohibits Medicare and Medicaid participating LTC facilities from using pre-dispute arbitration agreements as a condition of participation in the Medicare and Medicaid programs. Beginning November 28, 2016, LTC facilities may not approach a resident to request that they sign an agreement for binding arbitration until after a dispute has arisen between the LTC facility and the resident. The rule does not affect already existing arbitration clauses contained in resident agreements.

CMS provides the following reasons for justifying enforcing the prohibition against pre-dispute arbitration agreements:

  • Unequal Bargaining Power. CMS explains that pre-dispute binding arbitration agreements do not enable an LTC resident’s fully informed or voluntary consent because not signing the agreement for binding arbitration often means not receiving needed care. LTC facility agreements are often made when the resident is physically and/or mentally impaired and in immediate need of nursing care. Geographic and financial restrictions may also limit resident choice.
  • Resident Health and Safety. Based on extensive review of literature and court opinions, CMS uncovered evidence that pre-dispute arbitration agreements are detrimental to the health and safety of residents. These agreements (1) are often inadequately explained to residents, (2) are inappropriately presented to residents during a stressful time upon admission, and (3) provide incentives to LTC facilities to deliver substandard care because these facilities are largely immune to legal consequences for mistreatment of residents (including sizable jury verdicts).
  • Confidentiality. CMS also expresses its concern with the confidentiality and secrecy surrounding the arbitration process. Accordingly, the final rule requires that any post-dispute arbitration agreement must not contain language that would prohibit, discourage or limit the ability of any resident from communicating with federal, state, or local officials, particularly where resident abuse or neglect is concerned.

The final rule also provides a mechanism for CMS to monitor compliance with the new post-dispute arbitration requirement. When an LTC facility and resident resolve a dispute by arbitration, the LTC facility must retain a copy of the arbitrator’s final decision for at least 5 years and make the decision readily available for CMS inspection upon request.  CMS explains that this record retention policy will enable CMS and surveyors to learn when and under what circumstances arbitration is occurring at the LTC facility.

Lastly, in addition to prohibiting pre-dispute arbitration agreements, the final rule provides other important protections for residents. For example, the final rule requires that LTC facilities investigate and report all cases of abusive conduct, develop and implement a baseline care plan for residents within 48 hours of admission, and conduct, document and annually review a facility-wide assessment to determine what resources are available to residents during routine care and emergencies, among other requirements. CMS will implement the changes imposed by the final rule in three phases. The first phase will begin on November 28, 2016. As previously mentioned, LTC facilities may no longer enforce pre-dispute binding arbitration agreements beginning November 28, 2016.