The Roller Coaster Ride That Is Arbitration Agreements
Are Arbitration Agreements Gone for Good?
On September 28, 2016, the Centers for Medicare & Medicaid Services (CMS) released a complete overhaul of Part 483 to Title 42 of the Code of Federal Regulations, the Requirements for States and Long-Term Care Facilities. CMS's final regulations cover many regulatory requirements for long-term care facilities and create new compliance obligations for providers. The final regulations seek to target re-hospitalizations, facility-acquired infections, overall quality and resident safety. Notably, the final regulations banned the use of pre-dispute arbitration agreements in long-term care facilities. §483.70(n)) of the final regulations prohibits facilities from entering into an agreement for binding arbitration with a resident or their representative at admission or any time before a dispute arises between the parties. These regulations become effective on November 28, 2016. However, due to the success of the American Health Care Association (AHCA), the ban on pre-dispute arbitration clauses has come to a temporary halt.
While proponents of the final regulations predict the arbitration ban will help improve the care and safety of residents. The ban's opponents see it as clear overreach by CMS. On October 17, 2016, the AHCA, along with the Mississippi Health Care Association, two Mississippi healthcare facilities and a Texas healthcare facility filed a lawsuit fighting the ban. The complaint, entered in the U.S. District Court for the Northern District of Mississippi, claims the ban directly violates the Federal Arbitration Act and goes beyond CMS's and the Department of Health and Human Services' authority. On November 7, 2016, the federal district court agreed with the AHCA, and its request for preliminary injunction was granted by Judge Michael Mills.
In his decision, Judge Mills noted that the ban "changes a practice which CMS accepted for many years." Arbitration has long been used by long-term care providers and other industries to settle legal disputes in a manner that is faster, more efficient and less costly than the court system. Without arbitration agreements, facilities and residents are susceptible to contentious trials and all of the attendant costs. Judge Mills further notes that although the Court is sympathetic to the public policy considerations which motivated the ban, it’s unwilling to ratify the expanding role of federal agency authority. That authority properly lies with Congress. Because the AHCA has succeeded in achieving at least a temporary halt to the government's ban on pre-dispute arbitration clauses, it is likely the federal district court will adjudicate the substantive case similarly to its order regarding preliminary injunction.
This is a tumultuous time for arbitration in nursing homes. The court's injunction of the ban on pre-dispute arbitration caused disappointment for many groups who believe arbitration deprives residents of their rights. Next year, the U.S. Supreme Court will be reviewing another case arguing the validity of arbitration agreements between a resident's family and a Kindred Healthcare facility in Kentucky. For now, it’s business as usual for long-term care facilities with pre-dispute arbitration agreements.
If you currently utilize pre-dispute agreements, we recommend you continue to do so until the courts say otherwise. Facilities should still offer the option of arbitration and ensure that staff members are gathering the proper paperwork to enforce signed arbitration agreements. Barring any contract defense, the agreements should be enforceable unless and until the courts say otherwise.
Contact us if you have further questions.
*The above post was written by Assurance guest bloggers Norris Cunningham and Angela Fox of Hall Render.
Norris Cunningham is a shareholder with Hall Render and leads the firm’s litigation practice group. He has tried numerous long-term care and medical malpractice cases throughout the nation. He serves as chair of the Long Term Care Subcommittee of the Health Section of the Defense Trial Counsel of Indiana. He has made national and regional presentations on long-term care litigation and long-term care regulations for the Defense Research Institute, the National Business Institute, the American Conference Institute and the Defense Trial Counsel of Indiana.
Angela Fox is a shareholder with Hall Render’s litigation practice group. She regularly consults on matters of litigation, risk management, arbitration and regulatory matters involving both state and federal agencies. Angela is a trial lawyer with criminal and civil experience, having successfully prosecuted and defended numerous cases before state and federal courts in Indiana, Ohio and Kansas. She has given regional and national presentations on post-acute litigation, regulatory matters and trial strategy for the Defense Research Institute, the National Business Institute and the Defense Trial Counsel of Indiana.