CMS to Publish Proposed Rule Allowing LTC Pre-Dispute Arbitration Agreements as Condition of Admission

Today (June 8, 2017), CMS is publishing its proposed rule removing prohibitions against binding pre-dispute arbitration provisions in long-term care agreements.  On October 4, 2016, CMS published a final rule entitled “Reform of Requirements for Long-Term Care Facilities.” The final rule amended 42 C.F.R. 483.70(n) to prohibit LTC facilities from entering into pre-dispute arbitration agreements with any resident or his or her representative, or requiring that a resident sign an arbitration agreement as a condition of admission. The final rule required 1) that an agreement for post-dispute binding arbitration must be entered into by the resident voluntarily; 2) that the parties must agree on the selection of a neutral arbitrator; and 3) that the arbitral venue must be convenient to both parties. The arbitration agreement could be signed by another individual only if allowed under state law and all other requirements under the Federal Rule were met.  Particularly, a resident’s admission or right to remain at the facility could not be made contingent upon the resident or his or her representative signing an arbitration agreement.

However, in October 2016, the American Health Care Association and a group of affiliated nursing homes succeeded in obtaining a preliminary injunction in the United States District Court for the Northern District of Mississippi.  The district court held that the plaintiffs were likely to prevail in their challenge to the 2016 final rule. It concluded that it would likely hold that the rule’s prohibition against LTC facilities entering into pre-dispute arbitration agreements was in conflict with the Federal Arbitration Act (FAA), 9 U.S.C. 1 et seq. The court also reasoned that it was unlikely that CMS could justify the rule, or could overcome the FAA’s presumption in favor of arbitration, by relying on the agency’s general statutory authority under the Medicare and Medicaid statutes to establish rights for residents (sections 1891(c)(1)(A)(xi) and 1919(c)(1)(A)(xi) of the Act) or to promulgate rules to protect the health, safety and well-being of residents in LTC facilities (sections 1819(d)(4)(B) and 1919(d)(4)(B) of the Act).  CMS subsequently issued a nation-wide instruction on December 9, 2016, directing state survey agency directors not to enforce the 2016 final rule’s prohibition of pre-dispute arbitration provisions,  while the injunction remained in effect.

Under the recently announced policy change, CMS would retain provisions of the 2016 final rule related to protecting the interests of LTC residents, including the requirement that the agreement be explained to the resident and his or her representative in a form and manner that he or she understands. However, the proposed rule would remove the following:

  • the requirement at §483.70(n)(1) precluding facilities from entering into pre-dispute agreements for binding arbitration with any resident or resident’s representative;
  • the prohibition at §483.70(n)(2)(iii) banning facilities from requiring that residents sign arbitration agreements as a condition of admission to a facility;
  • certain provisions regarding the terms of arbitration agreements.

The proposed rule would retain the requirement that a copy of the signed agreement for binding arbitration and the arbitrator’s final decision must be retained by the facility for 5 years and be available for inspection upon request by CMS or its designee. Comments on the proposed rule must be received at CMS by 5:00 p.m. on August 7, 2017.


Effective November 28, 2016, long-term care facilities that participate in Medicare and Medicaid will no longer be able to enter into “pre-dispute” agreements for binding arbitration with their residents.  The Centers for Medicare & Medicaid Services (CMS) issued the final rule on September 28, 2016, after consideration of extensive comments from key stakeholders in the long-term care community regarding proposed revisions.

Under the rule, a facility can ask a resident or a resident’s representative to enter into an arbitration agreement after a dispute arises.  However, the facility must comply with several requirements, such as ensuring that the agreement provides for the selection of a neutral arbitrator and a venue convenient to both parties.  Further, a resident’s right to remain in the facility cannot be contingent upon entering into the arbitration agreement and the agreement cannot contain language that discourages communications with federal, state or local surveyors and other officials.

As one of the more controversial changes, critics of the new arbitration rule have reacted strongly against the change and have commented that this part of the rule “clearly exceeds” CMS’s statutory authority.  In its response to public comments, CMS explains that the Secretary of Health and Human Services has the authority to administer the program under the Social Security Act by setting general practice parameters for payment under Medicare and Medicaid.  CMS further cites to its authority to promulgate regulations for residents’ health, safety and well-being and states that there is “significant evidence that pre-dispute arbitration agreements have a deleterious impact on the quality of care for Medicare and Medicaid patients.”  Nevertheless, there are several legal bases upon which to challenge the agency’s ability to preclude an arbitration agreement.

While CMS’s comments cite to a resident’s waiver of the right to a jury trial as a major factor considered in its decision to disallow pre-dispute arbitration agreements, the final rule does not expressly preclude jury trial waiver provisions within facility admissions agreements.  Jury waivers may help to address runaway verdicts that have become a concern in negligence cases in past years, while still respecting expressed concerns that arbitration presents undue costs to residents and creates an environment of “secrecy.”  Note that state law may vary on whether such waivers are enforceable.

Also remarkable is CMS’s comment that it will not address waiver of class-action litigation in this rule, but rather reserve the issue for consideration during future rulemaking.

The broad-sweeping final rule also contains several other provisions that directly affect compliance programs, training of nursing staff, updating infection and control programs, and other key requirements that long-term care facilities must comply with in order to participate in the Medicare and Medicaid programs.  It is advisable for long-term care facilities to promptly consult with a knowledgeable healthcare attorney to assess modifications to admissions packets and to otherwise establish the framework necessary to comply with the revised Requirements of Participation.

CMS Releases Nursing Home Enforcement Information

On June 3, 2016, the Centers for Medicare and Medicaid Services (CMS) posted information about nursing home provider enforcement from 2006 to 2014 as part of the agency’s “ongoing efforts to ensure transparency, consistency of application of enforcement remedies, and data management to track enforcement actions across the nation.” The report includes general information about nursing home enforcement, frequently asked questions about enforcement, and enforcement reports detailing the distribution of federal enforcement remedies from 2006 to 2014.

The CMS enforcement reports provide information about CMS and state survey agency enforcement actions for all Health Inspection and Life Safety Code Standard and Complaint surveys from 2006 to 2014. The reports show the percent of providers with remedies in effect (rather than imposed) and detail civil monetary penalties by region, as well as the frequency of per day and per instance civil monetary penalties in effect. There is additional data on the number of facilities by region with the following enforcement remedies: denial of payment; discretionary and mandatory denial of payment for new admissions; directed in service training; directed plan of correction; termination; state monitoring; temporary management; transfer of residents; and facility closure.

The CMS report also discusses the impact of the recession that began in December 2007 and officially ended in June 2009. The period before the recession showed an increase in survey activities, initiatives, and deficiency citations, while there was a decline in overall survey activities and enforcement actions after the recession began.

CMS Proposes Rule Updating Nursing Home Conditions of Participation

On July 16, 2015, the Centers for Medicare and Medicaid Services (CMS) issued a lengthy proposed rule revising the requirements that long term care facilities must meet to participate in the Medicare and Medicaid programs. This is the first comprehensive revision of long term care facilities’ conditions of participation since 1991. CMS states that it revised many of the requirements to reflect current clinical practice standards, noting that innovations in resident care and quality assessment practices have emerged since the last revision. Comments on the proposed rule will be accepted until 5 p.m. on September 14, 2015.

Some of the major provisions in the proposed rule include the following.

  • CMS proposes updating resident rights provisions, including addressing roommate choice. Under the proposed rule, a resident has the right to share a room with the roommate of his or her choice.The rooming arrangement could include a same-sex couple, siblings, other relatives, long term friends, or another combination as long as certain requirements are met.
  • The rule proposes a new section that focuses on facility responsibilities, bringing together many of the facility responsibilities dispersed throughout the current regulations. CMS proposes to revise visitation requirements to establish open visitation.
  • The rule would add a new section titled “Comprehensive Person-Centered Care Planning.” This proposal would require facilities to develop a baseline care plan for each resident within 48 hours of admission, which includes instructions about providing effective and person-centered care. This section also adds several other requirements, including expanding the required members of the interdisciplinary care team to add a nurse aide, a member of the food and nutrition services staff, and a social worker.
  • While CMS considered establishing minimum nurse hours per resident day, the proposed rule does not impose minimum staffing numbers or ratios. However, the proposed rule does include some new requirements related to staffing. The proposed rule adds a competency requirement for determining sufficient nursing staff based on a facility assessment. The facility assessment includes the number of residents, resident acuity, ranges of diagnoses, and care plan contents.
  • The proposed rule changes some pharmacy requirements. The rule proposes requiring a pharmacist to review a resident’s medical chart at least every six months when the resident is new, a prior resident returns or is transferred from a hospital or other facility, and during each monthly drug regimen when the resident has been prescribed or is taking a psychotropic drug, an antibiotic, or any drug the Quality Assessment and Assurance Committee has requested be included in the pharmacist’s month review. In addition, there are several proposed revisions to requirements regarding antipsychotic drugs, which the proposed rule revises to be referred to as psychotropic drugs, defined to include any drug that affects brain activities associated with mental processes and behavior.
  • The rule proposes specific requirements for binding arbitration agreements, including provisions to ensure that the agreement is voluntary, not permitting admission to be contingent on signing an arbitration agreement, and not allowing arbitration agreements to prohibit or discourage a resident or anyone else from communicating with federal, state, or local health care or health-related officials.
  • There are several new physical environment provisions in the proposed rule. CMS proposes that facilities certified after the effective date of the regulation accommodate no more than two residents in a bedroom and have a bathroom equipped with at least a toilet, sink, and shower in each room.
  • The proposed rule adds a new section on training requirements setting out all the requirements of an effective training program that facilities must develop, implement, and maintain.
  • There are also new provisions relating to laboratory, radiology, and other diagnostic services; dental services; food and nutrition services; food safety; specialized rehabilitative services; administration; quality assurance and performance improvement; and infection control.

Getting Your LTC Arbitration Dispute into Federal Court

Last week, I noted that it often can be crucial – if you want to arbitrate a long term care (LTC) tort claim – to keep that claim out of state court.  But, as I also noted, this can be easier said than done.  Plaintiff’s lawyers often will sue employees of the LTC facilities (most often nursing home administrators) as co-defendants, and while the facility itself may be a foreign corporation, the employees normally are Colorado residents, thus spoiling diversity jurisdiction.  So does that mean the LTC facility is stuck in a potentially hostile state court venue if it wants to try to compel arbitration?

Not so fast.  Normally, plaintiffs do not bring the arbitration claim in the first instance – and why would they, given that they never want to arbitrate?  So the arbitration claim will not become a part of the state tort claim unless the defendant wants it to.

And while the defendant will want to raise the arbitration issue at some point, there’s no reason that it has to be in the case and the court in which it was sued.  It’s normally perfectly acceptable to bring a new, affirmative lawsuit attempting to compel arbitration.  But why include the resident employee?  The saying is that a plaintiff is the master of his claim, and if a LTC facility doesn’t want to include the employee, it doesn’t have to.  Voila!  Now you have diversity jurisdiction.

It may seem unfair to let a state court defendant manufacture diversity jurisdiction to take the arbitrability question into federal court despite a pending tort case.  Maybe it is and maybe it isn’t, but the point is, courts let defendants do that sort of thing all the time.  This is not to say that federal courts automatically will hear a complaint seeking to compel arbitration; it is possible that the resident defendant might be held to be an indispensable party under Rule 19 of the Federal Rules of Civil Procedure, and if that’s the case, dismissal will be warranted.  But nursing home administrators seem not to fall in that category too often.

Arbitration is not a panacea, of course.  Many LTC facilities are (understandably) wary of participating in a alternative dispute resolution process with little formal standards or appeal rights.  In most cases, it may be preferable to stay in state court.  But most is not all.  There are certain jurisdictions where a LTC defendant will want to get out of the forum at all costs.  In those places, it might be helpful to get to federal court, even if it’s just on the arbitration issue.  (It’s also important to note that even if the federal trial court is skeptical of the arbitration petition, the LTC facility will have appeal rights pursuant to Section 16 of the Federal Arbitration Act, so there is even a safeguard against an unfriendly district court judge.)

Dotting Your “I”s and Crossing Your “T”s Is Really Important if You Want to Arbitrate Your Long Term Care Tort Claim, at Least in Oklahoma

This is going to be the first in probably a couple of posts on arbitration agreements in the long term care (LTC) context.  This decision from the Oklahoma Supreme Court was handed down last week.  It involves the death of an LTC resident at a Chickasha, Oklahoma facility.  The deceased resident’s daughter brought a wrongful death claim.

The facility moved to dismiss the litigation and compel arbitration, citing an arbitration provision in the admission agreement, which was signed by the daughter (and not the resident herself) under a General Power of Attorney.  The plaintiff responded by arguing that the Power of Attorney did not authorize the daughter/plaintiff to bind the resident to the arbitration agreement because it was superseded by a later-in-time Health Care Power of Attorney, which specified that the daughter could only make “health care decisions” on behalf of the resident if she was certified by a physician to be unable to make her own health care decisions (which was not the case upon admission.  The plaintiff further argued that because the arbitration agreement was a condition precedent to admission, it made signing it a “health care decision” – i.e., a decision that the plaintiff/daughter was unable to make.

The trial court agreed with the plaintiff.  The facility appealed, and on November 25, 2014, the Oklahoma Supreme Court handed down its decision.  The crux of the opinion concerned the issue of whether signing the arbitration agreement was, in fact, a “health care decision.”  The high court agreed, endorsing the plaintiff’s argument that when signing it is a requirement for admission to a LTC facility, it becomes such a decision.  It primarily cited and relied upon a 2010 Maryland high court decision reaching the same result.  The court also noted that the facts and circumstances surrounding the signing of the general and health care POAs indicated an intent to carefully delineate between the two duties.  (As an aside, this appears to be part of a recent trend in Oklahoma to disfavor LTC arbitration agreements.)

So what is the takeaway from this?  Well, in Oklahoma at least, it’s simple.  LTC facilities admitting new residents need to look at POAs before they accept the new resident’s representative’s signature on an arbitration agreement.  If there’s any question at all, try to have both the representative and the resident (if possible) sign.

Outside of Oklahoma, and even outside of the POA context, cases like these really emphasize the importance of making sure you have an ironclad arbitration agreement – and a similarly ironclad process for making sure that they are properly signed.  Oklahoma court are not the only state courts that really do not like arbitration agreements.  If there is any way for a state court to reject an arbitration provision, in many states, the court will bend over backward to do so.  There’s no foolproof method to eliminate that risk, but LTC facilities should do what they can to mitigate it.

This all raises an issue that I plan on covering in a future blog post – maybe a major goal should be to keep arbitration disputes out of the state courts in the first place.  But how do you do that?  Even if there is diversity jurisdiction based on the out-of-state citizenship and domicile of the facility, plaintiff’s counsel often includes the nursing home administrator or executive director as a co-defendant, which usually defeats diversity.  I’ll address this in my next post.