The Centers for Medicare & Medicaid Services (CMS) has published the final rule for long term care (LTC) facilities with an effective date of November 28, 2016. Among its many proclamations, CMS has ruled that LTC facilities receiving Medicare and Medicaid funds will be prohibited from asking residents to sign pre-dispute arbitration agreements. To cut to the chase, on November 28, 2016, all LTC facilities must remove arbitration provisions from their admission paperwork. However, CMS clearly states that the rule is not retroactive so arbitration agreements entered into before November 28, 2016, are unaffected by the rule.
With respect to post-dispute arbitration agreements, CMS will permit residents and their representatives to have the option of voluntarily signing an arbitration agreement after being fully informed. A resident, however, cannot be forced to sign a post-dispute agreement as a condition of staying at the facility. Further, the agreement must contain language permitting the choice of a neutral arbitrator which must be agreed upon by both parties and must permit selection of a venue convenient to both parties. Among other provisions, a copy of the signed agreement must be maintained by the facility for five years and be available for inspection by CMS or its designee. This part of the rule, however, is hardly throwing a bone to the LTC industry because of the rarity of post-dispute arbitration agreements in LTC litigation.
To justify its new rule, CMS declares that "there is significant evidence that pre-dispute arbitration agreements have a deleterious impact on the quality of care for Medicare and Medicaid patients, which clearly warrants our regulatory response." That policy statement by CMS is not dissimilar to the refrains advanced by sundry courts and state legislatures around the country that have tried to abolish arbitration agreements. The United States Supreme Court has repeatedly struck down outright bans on arbitration agreements finding that "a categorical rule prohibiting arbitration of a particular type of claim … is contrary to the terms and coverage of the [Federal Arbitration Act] (FAA)." It would seem that without explicit statutory authority from Congress, CMS' prohibition on arbitration agreements is equally contrary to the FAA and unenforceable.
CMS further points to a September 23, 2015 letter from 34 U.S. Senators urging CMS to pass this rule. Support from one third of the U.S. Senate hardly constitutes authority since no bill giving explicit powers to CMS would pass the Senate floor with such limited support.
Given the widespread use of arbitration agreements in LTC facilities, CMS should prepare for legal challenges to its authority to categorically ban pre-dispute arbitration agreements.
