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Due to large judgments and increasing liability insurance costs, many nursing homes have incorporated arbitration agreements into their admissions contracts. Arbitration agreements are arguably a preferable method of dispute resolution because they provide for faster conflict resolution, are less expensive and have more flexible rules than litigation.

Long-term care facilities, however, should be aware that federal and state laws place limitations on arbitration agreements and under certain circumstances, some courts have held them unenforceable. As a result, it is important to become familiar with federal and state law developments regarding arbitration agreements and to take precautions in drafting them. 

Generally, the Federal Arbitration Act (FAA) preempts state law, and requires courts to enforce agreements to arbitrate. If an arbitration agreement becomes an issue in a federal court proceeding, the FAA will usually apply. In state courts, however, the FAA will apply only if the long-term care facility's business activities extend beyond state lines.

The Centers for Medicare & Medicaid Services defers to state law regarding the enforceability of arbitration agreements in nursing home contracts. Nursing homes must not attempt to enforce binding arbitration agreements in a way that violates federal requirements for participation under these programs. 

Helpful measures to protect arbitration agreements from findings of unenforceability include: providing arbitration agreements separate from the admissions contract; making it clear that the arbitration agreement is not a requirement to admission; specifically discussing the arbitration agreement with the resident; and ensuring that the person signing the arbitration agreement has the authority to do so.