On October 1st, a federal appeals court decided to uphold restrictions that limit the use of binding arbitration agreements in nursing home admissions agreements. Binding arbitration agreements prior to the rise of any actual dispute have been promoted for decades as a way to reduce expenses by providing an alternative dispute resolution method. When used properly, arbitration agreements can provide the parties with a less expensive forum to solve disputes.
However, binding arbitration agreements have also been used by the business community to attempt to limit themselves from potential liability by having a party relinquish their right to bring their dispute in front of a jury prior to any claim arising. In the case of nursing homes, nursing homes for decades have attempted to include a binding arbitration provision in their admission agreements. Nursing home resident advocates have long argued that the nursing homes’ superior bargaining power could result in a resident feeling coerced into signing the agreement. By doing so, the resident might be waiving the right to judicial relief without full understanding, and that the prevalence of pre-dispute arbitration agreements could be detrimental to residents’ health and safety.
As a result, beginning in 2016, the Centers for Medicare and Medicaid Services (CMS), issued regulations that prohibited nursing homes from entering into pre-dispute, binding arbitration agreements with residents or their representatives. However, the facility may voluntarily enter into a binding arbitration agreement if both parties agree and comply with certain notice requirements.
Prior to this regulation going into effect, a group of Mississippi nursing homes sued to enjoin enforcement on this regulation. The federal court issued a nationwide stay of this CMS regulation.
As a result, CMS in 2019 revised its regulation to remove the ban on pre-dispute binding arbitration agreements in nursing home admission agreements, and instead required proper notice provisions before asking a resident to sign such an agreement. The revised CMS regulation codified at 42 C.F.R.
§ 483.70(n) states:
(n) Binding arbitration agreements. If a facility chooses to ask a resident or his or her representative to enter into an agreement for binding arbitration, the facility must comply with all of the requirements in this section.
(1) The facility must not require any resident or his or her representative to sign an agreement for binding arbitration as a condition of admission to, or as a requirement to continue to receive care at, the facility and must explicitly inform the resident or his or her representative of his or her right not to sign the agreement as a condition of admission to, or as a requirement to continue to receive care at, the facility.
(2) The facility must ensure that: (i) The agreement is explained to the resident and his or her representative in a form and manner that he or she understands, including in a language the resident and his or her representative understands; (ii) The resident or his or her representative acknowledges that he or she understands the agreement; (iii) The agreement provides for the selection of a neutral arbitrator agreed upon by both parties; and (iv) The agreement provides for the selection of a venue that is convenient to both parties.
(3) The agreement must explicitly grant the resident or his or her representative the right to rescind the agreement within 30 calendar days of signing it.
(4) The agreement must explicitly state that neither the resident nor his or her representative is required to sign an agreement for binding arbitration as a condition of admission to, or as a requirement to continue to receive care at, the facility.
(5) The agreement may not contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state, or local officials, including but not limited to, federal and state surveyors, other federal or state health department employees, and representatives of the Office of the State Long-Term Care Ombudsman, in accordance with § 483.10(k).
(6) When the facility and a resident resolve a dispute through arbitration, a copy of the signed agreement for binding arbitration and the arbitrator’s final decision must be retained by the facility for five years after the resolution of that dispute and be available for inspection upon request by CMS or its designee.
The same Mississippi nursing homes filed suit challenging the legality of such revised regulations. In 2020, a federal district court dismissed this challenge upholding the legality of these above regulations, but a stay was granted from enforcing these regulations pending a Federal Appellate court appeal.
Now, in Northport Health Svcs. of Ark. v. USDHHS (8th Cir. 2021), on October 1, 2021, the 8th Circuit Federal Appeals Court has upheld these regulations by affirming the lower court decisions. As a result, nursing homes cannot require binding arbitration agreements as a condition of admission to the nursing home unless the resident agrees to do so, and after proper notice provisions are provided pursuant to the above regulations.
The court decision should have the effect of limiting the use of arbitration agreements in nursing home admission contracts. What is clear is a nursing home cannot bar a resident from admission if the resident refuses to sign an admission agreement that contains a binding arbitration clause. Please note the arbitration regulations should also apply to assisted living communities that receive Medicaid funding.