Nursing Home Lawsuits Will No Longer Be Barred by Forced Arbitration Agreements

Under new rules designed to strengthen the safety and care of residents at long-term care facilities throughout the United States, individuals and families will no longer be required to limit their right to pursue a nursing home lawsuit under forced arbitration clauses that must be signed when moving into the facility.  

The U.S. Centers for Medicare and Medicaid Services (CMS) announced this week that new rules have been finalized, which will impact more than 1.5 million residents at 15,000 nursing home and long-term care facilities nationwide. One of the major provisions of the new rule gets rid of forced arbitration clauses in nursing home contracts.

The finalized Reform Requirements for Long-Term Care Facilities rule (PDF) will be officially published in the federal register on October 4, and will revise the requirements that long-term care facilities must meet in order to participate in the Medicare and Medicaid programs.

The rules include a host of new requirements ranging from a prohibition on hiring employees with a disciplinary action on their license as a result of nursing home abuse, to a host of new quality of care provisions. In addition, the rule targets pre-dispute arbitration clauses found in many contracts, which require residents and families to waive their ability to pursue a lawsuit for nursing home neglect injuries through the court system.

“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,” the new rule states. “Thus, we are prohibiting the use of pre-dispute binding arbitration agreements.”

Forced arbitration, also known as pre-dispute arbitration clauses, are commonly found in credit card agreements, loan paperwork, mobile wireless contracts, nursing home entrance agreements and other circumstances, often placing consumers are placed in a position where they have no alternative but to waive their right to go to court in order to obtain services.

Critics have long opposed forced arbitration clauses, indicating that they place consumers in a position where they are unable to negotiate and must sign the agreement to obtain critical services. Forced arbitration is generally found to favor nursing homes, powerful financial firms and other industries that require the clauses.

These agreements are also currently under attack in the financial sector. In May, the Consumer Financial Protection Bureau (CFPB) proposed a new rule banning the use of mandatory forced arbitration clauses used by financial institutions to avoid class action lawsuits. The CFPB called the clauses “contract gotchas” that allow banks, credit card companies and other financial institutions to avoid accountability.

Forced arbitration in the nursing home industry is often considered particularly odious, as families placing their loved ones in such institutions often do so reluctantly because of health or care availability issues and are often too distraught to truly understand the contracts they are required to sign during admissions.

The rulemaking is the first comprehensive update since 1991, according to CMS, and also includes provisions that require staff to be properly trained to care for residents with dementia and on how to prevent elder abuse, sets levels of staffing necessary to care for residents, increases care planning requirements, and updates infection prevention and control regulations.