CMS Bans Nursing Homes' Use of Pre-Dispute Arbitration Agreements

In the first major overhaul of federal nursing home regulations in a quarter-century, the Centers for Medicare and Medicaid Services (CMS) has issued a final rule prohibiting binding pre-dispute arbitration agreements in facilities that accept Medicare and Medicaid patients. 

The final rule goes a giant step further than the draft rule proposed last year, which simply required nursing homes that included binding arbitration agreements in their admission contracts to explain the agreements and ensure that patients acknowledge their understanding of them.  

CMS said it received a “significant number” of comments on its proposed rule, with commenters from the long-term care facility industry asking the agency to withdraw the proposal, while members of the public, advocates, and members of the legal community, predominantly wanted a blanket prohibition on pre-dispute arbitration agreements. Those supporting an outright ban included 34 senators and 16 state attorneys general.

Ultimately, CMS determined that there “is a significant differential in bargaining power between LTC facility residents and LTC facilities,” and went with a total ban. After a dispute arises, the resident and the LTC facility may still voluntarily enter into a binding arbitration agreement if both parties agree.

“With its decision,” the New York Times wrote in its coverage, “[CMS] has restored a fundamental right of millions of elderly Americans across the country: their day in court.”

“The sad reality is that today too many Americans must choose between forfeiting their legal rights and getting adequate medical care,” Sen. Patrick Leahy (D-Vt.) said in a statement.

The nursing home industry has countered that the new rule will trigger more lawsuits that could increase costs and force some homes to close.  Mark Parkinson, the president and chief executive of the American Health Care Association, said that the change “clearly exceeds” CMS’s statutory authority. 

Although the rule could be challenged in court, for now it is scheduled to take effect on November 28 and will affect only future nursing home admissions; pre-existing arbitration agreements will still be enforceable.

Other provisions of the final rule are targeted at reducing unnecessary hospital readmissions and infections, improving the quality of care, and strengthening safety measures for long-term care facility residents.

To read the final rule, click here.

For CMS's press release on the final rule, click here.