In a clear turnabout from its previous position, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule on June 5, 2017 that would lift the agency’s ban on pre-dispute arbitration agreements in the long term care (LTC) setting. By contrast, less than nine months earlier, CMS prohibited LTC facilities from entering into pre-dispute arbitration agreements with residents, conditioning admission to a facility on the execution of such agreements, or making a resident’s continuing right to remain at a facility contingent upon a post-dispute arbitration agreement.
The industry’s response to the ban was swift and resolute—on October 17, 2016, the American Health Care Association and a group of nursing homes filed a lawsuit in federal court seeking a preliminary and permanent injunction to prevent CMS from enforcing the ban on pre-dispute arbitration agreements. The U.S. District Court for the District of Mississippi granted the request for preliminary injunction on November 7, 2016, stalling enforcement of the final rule’s arbitration provisions.
Since the preliminary injunction was issued, the U.S. Supreme Court has weighed in on the enforcement of arbitration agreements in the LTC setting. In Kindred Nursing Centers Limited Partnership v. Clark, the Supreme Court upheld application of arbitration agreements for tort claims alleging personal injuries suffered by residents of Kindred’s facilities. The Court held that the Federal Arbitration Act (FAA) “preempts any state rule discriminating on its face against arbitration,” including “any rule that covertly accomplished the same objective by disfavoring contracts that have the defining features of arbitration agreements.” The Court also highlighted the FAA’s key provision, which provides that “an arbitration agreement must ordinarily be treated as ‘valid, irrevocable, and enforceable.’”
These key legal wins undoubtedly influenced CMS’ policy reversal regarding arbitration agreements in the LTC setting. In fact, the proposed rule explains in no uncertain terms that the district court’s decision to grant the preliminary injunction to prevent enforcement of the arbitration ban caused CMS to reconsider its position on the use of arbitration agreements in LTC facilities. Also likely to have influenced the revised position is the Trump Administration’s stated goal to streamline federal regulations.
The new proposed rule does, indeed, streamline the regulations issued in October 2016, at least with regard to the arbitration provisions. It eliminates entirely the prohibition on pre-dispute binding arbitration agreements, and provides no limitations on the use of arbitration agreements as a condition of admission (or continuing admission) to a LTC facility. Instead, the proposed rule focuses on requirements that “provide for transparency” in order to “protect residents and alleviate many of the residents and advocates concerns about the arbitration process.” These requirements, some new and some of which were included in the October 2016 final rule with respect to post-dispute arbitration agreements, include the following:
- All agreements for binding arbitration must be in plain language;
- If signing the agreement for binding arbitration is a condition of admission, the language of the agreement must be in plain writing and in the admissions contract;
- The agreement must be explained to the resident and his or her representative in a form and manner they understand, including that it must be in a language they understand;
- The resident must acknowledge that he or she understands the agreement;
- The agreement must not contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state, or local officials, including federal and state surveyors, other federal or state health department employees, or representatives of the State Long-Term Care Ombudsman;
- If the facility resolves a dispute with a resident through arbitration, it must retain a copy of the signed agreement for binding arbitration and the arbitrator’s final decision so it can be inspected by CMS or its designee; and
- The facility must post a notice regarding its use of binding arbitration in an area that is visible to both residents and visitors.
The requirements, according to the proposed rule, do not purport to regulate the enforceability of any arbitration agreement, are consistent with the FAA, and do not impose the financial burdens that a ban on pre-dispute arbitration agreements would have imposed in requiring parties to litigate claims in court.CMS will accept comments on the proposed rule until August 7, 2017.
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 Kindred Nursing Centers Limited Partnership v. Clark, No. 16-32, 2017 WL 2039160 (U.S. May 15, 2017).
 Kindred, at *4.
 Id. at *5 (citing 9 U.S.C. § 2).