For years, many vulnerable residents of nursing homes and other long-term care (LTC) facilities have fallen victim to what are known as “binding arbitration clauses” that strip residents of their right to representation in a court of law. Now, the Centers for Medicare and Medicaid Services (CMS) has issued a ruling that will prevent nursing homes that receive federal funding from requiring residents to resolve issues, such as allegations of abuse or neglect, in arbitration instead of in court.
This new rule will affect up 1.5 million nursing home residents from being coerced into binding arbitration agreements. These (often difficult to spot) clauses have historically been used to deny injured residents and their families the right to litigate a case against the facility and responsible parties in a court of law.
Why Else is Binding, Pre-Dispute Arbitration Harmful?
- Arbitration often costs residents significantly more money than filing a legal action (abuse, neglect, malpractice, breach of contract, etc.).
- Both legal parties are usually expected to split the disproportionately high cost of the arbitrators, and these expenses often come out of the judgments awarded to the nursing-home patients.
- Families are usually already struggling emotionally when they move a loved one into a nursing home and should not be expected to decipher the fine print of such contracts.
The New CMS Rule:
“Binding Arbitration Agreements: We are requiring that facilities must not enter into an agreement for binding arbitration with a resident or their representative until after a dispute arises between the parties. Thus, we are prohibiting the use of pre-dispute binding arbitration agreements.”
Three Things to Keep in Mind:
- Under this new rule, arbitration agreements are voluntary, limiting pre-dispute arbitration only. Nursing homes and residents – or their representatives – can still agree to arbitration if both parties elect to, but the agreements cannot be written in a way that automatically compels both parties into arbitration before an issue arises.
- This rule will go into full effect on November 26, 2016, and only applies to arbitration agreements signed on or after that date. It is expected that many attorneys will attempt to challenge the enforcement of the arbitration agreements signed before that date by citing some of the language in the ruling.
- It is unclear if the CMS ruling will be applied to other LTC facilities. Citing only federally funded nursing homes, the ruling does not state that other types of LTC facilities that also utilize pre-dispute arbitration clauses are included.