CMS Prohibits Arbitration Provisions in LTC Admission Agreements
Centers for Medicare & Medicaid Services (CMS) seeks to provide basic protections to residents of long-term care (LTC) facilities in signing an agreement for the arbitration of disputes between residents and LTC facilities. On September 28, 2016, as part of a massive overhaul of consumer protections applicable to LTC facilities, CMS issued a rule prohibiting LTC facilities that accept Medicare or Medicaid from requiring potential residents to enter arbitration agreements as a condition of admission.
The rule places clear restrictions on arbitration agreements entered between LTC facilities and residents after November 28, 2016, the effective date of the rule. Restrictions and/or requirements include the following:
- Arbitration agreements cannot be entered into prior to the existence of a dispute;
- Arbitration agreements must be separate agreements in which residents make “an affirmative choice to either accept or reject binding arbitration for disputes between the resident and the facility[;]”
- The LTC must provide an explanation of the agreement including, at a minimum, that the resident is waiving the resident’s right to judicial relief for any potential cause of action covered by the agreement;
- The agreement must be voluntary;
- The agreement must provide for the selection of a neutral arbitrator and a venue convenient to both parties;
- The agreement must not be contained within another agreement relating to other issues; and
- Guardians or other representatives entering agreements on behalf of a resident must be permitted to do so under state law and must not have a financial interest in the LTC facility.
Opponents of the new rule have suggested CMS lacks the statutory authority to restrict the use of arbitration, but in addressing those concerns CMS has concluded that the Federal Arbitration Act (FAA) does not limit its ability to regulate how arbitration agreements are reached as a condition of participation in the federal payment programs. Because CMS acknowledges the FAA applies to already existing arbitration agreements, the new rule has no application to such agreements between LTC facilities and current residents. The final rule provides: “[T]he rule we are issuing does not affect already-existing arbitration clauses, but prohibits Medicare-and Medicaid-participating LTC facilities from using them in the future, as a condition of participating in these programs. While we share the same public policy concerns about already-existing arbitration agreements, we are only addressing agreements reached after the effective date of this rule.”