Binding Arbitration Clauses Barred in Nursing Home Contracts | Practical Law

Binding Arbitration Clauses Barred in Nursing Home Contracts | Practical Law

A new rule from the Department of Health and Human Services' (DHHS) Centers for Medicare & Medicaid Services (CMS) prohibits nursing homes participating in Medicare and Medicaid from using pre-admission binding arbitration agreements.

Binding Arbitration Clauses Barred in Nursing Home Contracts

Practical Law Legal Update w-003-7531 (Approx. 4 pages)

Binding Arbitration Clauses Barred in Nursing Home Contracts

by Practical Law Commercial Transactions
Published on 05 Oct 2016 • USA (National/Federal)
A new rule from the Department of Health and Human Services' (DHHS) Centers for Medicare & Medicaid Services (CMS) prohibits nursing homes participating in Medicare and Medicaid from using pre-admission binding arbitration agreements.
The Department of Health and Human Services (DHHS) has released a new final rule from the Centers for Medicare & Medicaid Services (CMS) that prohibits long-term care facilities participating in Medicare and Medicaid (nursing homes) from using pre-admission binding arbitration agreements (Medicare and Medicaid Programs; Reform of Requirements for Long-Term Care Facilities, 81 FR 68688-01). The new rule does not impact existing agreements or those signed before November 28, 2016, when the rule goes into effect. The rule allows the parties to agree to arbitrate after admission, but regulates the method and content of such agreements.

Binding Arbitration Agreements in Long-Term Care Facilities

The new rule prevents nursing homes from:
  • Requiring binding arbitration agreements as a condition of admission.
  • Using the refusal to sign a binding arbitration agreement after admission as grounds for terminating a resident's right to remain in the facility.
If a dispute arises after admission, the facility may still propose an independent agreement for binding arbitration, within the following parameters:
  • The facility must provide an explanation of the arbitration agreement in a form and manner that the resident understands.
  • The resident must acknowledge that they understand the agreement.
  • The resident must voluntarily enter into the agreement.
  • The agreement must permit parties to mutually agree upon:
    • a neutral arbitrator; and
    • a venue convenient to both parties.
  • The agreement must not contain any language that discourages communication with government officials.
  • The facility must retain a copy of any signed arbitration agreement and any arbitration decision for five years.

Practical Implications

In light of this new rule, nursing homes should:
  • Review templates of pre-admission contracts and remove binding arbitration clauses in anticipation of the new rule, which will be effective on November 28, 2016.
  • Replace binding arbitration clauses with appropriate choice of law and choice of forum clauses.
  • Review or develop independent post-admission arbitration agreements to ensure compliance with the new rule.
  • Examine admission and dispute resolution procedures to ensure compliance with this and other CMS rules and guidelines.
  • Train facility personnel to properly inform prospective and current residents of proper dispute resolution procedures under the new rule.
For more information on arbitration clauses generally, see Practice Note, Standard Recommended Arbitration Clauses..