CMS issued a final rule on October 4, 2016, prohibiting pre-dispute arbitration agreements between long-term care facilities and residents.  As reported here, on November 7, 2016, a Federal judge issued a preliminary injunction blocking the rule.  There was speculation about how CMS would react to the rule being blocked under the Trump administration.  Any remaining speculation was removed after CMS dropped its appeal of the 2016 ruling and when CMS issued a new proposed rule on June 8, 2017 reversing course and permitting pre-dispute arbitration agreements.  Comments are invited and will be accepted until August 7, 2017.

In re-evaluating its prior rule prohibiting pre-dispute arbitration agreements, CMS said it now believes “that a policy change regarding pre-dispute arbitration will achieve a better balance between the advantages and disadvantages of pre-dispute arbitration for residents and their providers.”  CMS explained that it now “believe[s] that arbitration agreements are, in fact, advantageous to both providers and beneficiaries because they allow for the expeditious resolution of claims without the costs and expense of litigation.”  This conclusion was reinforced by many of the comments CMS received in response to the prior rule while it was being implemented.  CMS also said that its new proposed rule is more consistent with the January 30, 2017 Executive Order “Reducing Regulation and Controlling Regulatory Costs.” 

The new proposed rule amends 42 C.F.R. § 483.70(n) in several key ways.  It removes the requirement at § 483.70(n)(1) that prohibited pre-dispute arbitration agreements.  It also removes the ban on facilities requiring patients to sign a pre-dispute arbitration agreement as a condition of admission, § 483.70(n)(2)(iii), and the provisions in § 483.70(n)(2)(ii) regarding the terms of arbitration agreements.

In addition, the new conditions require the provider to explain the arbitration agreement to the patient (or his or her representative) “in a form and manner” the patient understands, in a language the patient understands, and the patient must contain acknowledge that the he or she understands the agreement.  The agreement must be in writing, and must be in “plain language.”  Also, the agreement may not contain any language discouraging the patient from communicating with any Federal, State, or local officials.