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New Rule Prohibits Use of Arbitration Clauses in Nursing Home Contracts

Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A.

The Department of Health and Human Services, Centers for Medicare and Medicaid Services, proposed a rule that will become effective on November 28, 2016, that prohibits the use of arbitration clauses in nursing home agreements.  The American Health Care Association (“AHCA”) opposed the arbitration rule change.  The AHCA’s President and CEO, Mark Parkinson, stated:  “That provision clearly exceeds CMS’s statutory authority and is wholly unnecessary to protect residents’ health and safety.  We are considering the appropriate steps to take in light of this unjustified action by CMS.” 


The rule prohibits facilities from entering into agreements that require binding arbitration with residents or other representative. The prohibition pertains only to pre-dispute binding arbitration agreements.  Thus, parties are free to enter into arbitration agreements after a dispute has arisen. 


The new rule came about after officials in 16 states and the District of Columbia pushed the federal government to cut funding to nursing homes that use arbitration clauses.  This new rule affects 1.5 million nursing home residents and has been referred to as the “most significant overhaul of the agency’s rules governing federal funding of long-term care facilities in more than two decades.”  A draft of a similar rule was announced in May of 2016 when a Consumer Financial Protection Bureau wanted to prevent credit card companies from using arbitration clauses.  This rule does not require congressional approval, and barring any challenges to the rule in court, is set to go into effect November 28, 2016.  Only future nursing home admissions will fall under the rule, that is, the rule will not be enforced retroactively.


Please contact Matthew R. Hunt (mhunt@kwgd.com) at 330.497.0700 with questions and to request assistance.


NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

 
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