Nursing Home Arbitration Clauses May Limit Residents’ Rights, Following Trump Admin. Policy Change

In an apparent effort to prioritize the interests of nursing home companies ahead of consumer protections, the Trump Administration has proposed withdrawing a ban on nursing home forced arbitration clauses, which was designed to protect the elderly from exploitation. 

In the last months of the Obama administration, the U.S. Centers for Medicare and Medicaid Services (CMS) issued new reform requirements for nursing homes, determining that forced arbitration clauses contained in many nursing home contracts were often signed under duress, by families desperate to place their loved ones in a care facility. However, on June 6, CMS issued proposed revisions to the reforms, indicating that the new administration is pulling back from the rule, saying that the ban would cost nursing homes too much in legal expenses.

The walk-back of the prohibition also comes after a federal judge placed a hold on the regulations in November, saying that CMS may have overstepped its authority. However, in a federal register notice (PDF) posted by CMS, the agency said the ban on forced arbitration placed undue burden on nursing homes.

“We believe that a ban on pre-dispute arbitration agreements would likely impose unnecessary or excessive costs on providers,” CMS said in the notice.

Instead of a ban, the new rule requires that the clause be written in plain language, and that if agreeing is a condition of admission to a nursing home, it must be written in the admissions contract and must be explained to the resident in a manner the resident or their representative can understand, and they must confirm that they understand the agreement.

The new Reform Requirements for Long-Term Care Facilities rule, announced in late September, would 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 rule was slated to go into effect on November 29, 2016, but was blocked by a federal judge following industry lawsuit filings.

The nursing home reform requirements included 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. However, the focus of the lawsuit was on a rule that 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.

The other aspects of the reform rule have been placed on hold for review.

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.