The Centers for Medicare & Medicaid Services (CMS) has announced plans to do away with a rule banning the use of pre-dispute arbitration agreements by long-term care facilities.
History of a Controversial Rule:
The final rule prohibiting the use of pre-dispute arbitration agreements was released by CMS in October 2016 in the waning days of the Obama administration, and was scheduled to take effect in November 2016. At the time it was estimated that this prohibition would result in an average increase in costs of $62,900 per facility, or $831 million in the first year. Before the rule could be implemented, the American Health Care Association, the national trade association representing skilled nursing facilities, filed litigation in federal district court challenging the rule. An injunction was granted, preventing the ban from taking effect as scheduled. In his order, Judge Michael Mills stated that the court was “unwilling to play a role in countenancing the incremental ‘creep’ of federal agency authority beyond that envisioned by the U.S. Constitution.”
On June 2, 2017, the U.S. Court of Appeals for the Firth Circuit dismissed a motion filed by CMS to remove the injunction, after CMS indicated it was abandoning its appeal.
The Trump administration has been signaling since April 2017 that it was considering reversing the Obama-era rule, which culminated in CMS releasing a new proposed rule on June 5, 2017. The proposed rule would revise the requirements regarding pre-dispute arbitration agreements. While pre-dispute arbitration agreements will no longer be banned under the proposed rule, there are still requirements attached to their use, including:
- Agreements must be written in plain language;
- Agreements must be explained to the resident and their representative in a way they understand, and understanding must be acknowledged;
- If an arbitration agreement is a condition of admission if must be plainly stated in the admission contract;
- Agreements cannot contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state or local official;
- Facilities must post a notice in plain language that describes its policy on the use of agreements for binding arbitration in an area that is visible to residents and visitors; and
- If a facility resolves a dispute through arbitration, the agreement and arbitration decision must be retained for five years post-arbitration and be available for inspection by CMS or its representative.
This amended rule recognizes the right of a resident and their family to make informed decisions about health care with increased requirements regarding the transparency of arbitration agreements, while also addressing CMS’ announced goal of reducing unnecessary burdens on providers.
CMS will accept public comment on the proposed rule for 60 days after its publication in the Federal Register. The full text of the proposed regulation is available here.
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