The US Supreme Court this week refused to hear arguments that nursing homes should be able to require pre-dispute arbitration agreements, clearing the way for enforcement of stiff new arbitration rules to begin in earnest this fall.
The court’s decision not to accept a three-year-old Arkansas case is made more significant by recent regulatory developments, Mark E. Reagan, managing shareholder for Hooper, Lundy & Bookman, PC, told McKnight’s Long-Term Care News on Tuesday.
The case sprang from the Centers for Medicare & Medicaid Services’ 2019 rule prohibiting nursing homes from requiring residents to sign binding arbitration agreements as a condition of admission to the facility, or as a requirement to continue receiving care. Nursing homes can still request that residents consent to voluntary arbitration agreements.
The rule has not yet been enforced federally, whether due to COVID or because of the ongoing legal challenge. But that is set to change Oct. 24, when surveyors will begin using new guidance to check for compliance — not just currently, but dating back to the rule’s Sep. 16, 2019, effective date.
“I think many providers that, in particular, operate in states where arbitration agreements need to be presented in a voluntary nature are probably acting consistent with the 2019 rules,” said Reagan, who primarily represents trade associations and long-term care providers. “But they’re not necessarily acting consistent with the interpretive guidelines that were just issued. If you look at the guidance, you’ll see that the most significant thing that they’re focusing on is the voluntary vs. compulsory nature, but there are a lot of other things too.”
The guidance creates two new tags, F847 Enter into Binding Arbitration Agreements and F848 Select Arbitrator/Venue, Retention of Agreements. To avoid those, facility staff must explicitly inform a resident or family of their right not to sign an arbitration agreement and ensure that any agreement is explained in a “manner that he or she understands, including in a language the resident and his or her representative understands.” Facilities must also grant residents 30 days to rescind agreements.
“Surveyors should determine how the facility ensures residents or their representatives understood the terms of the binding arbitration agreement, and how this understanding is acknowledged,” CMS said in its June guidance. “Surveyors must verify through interview and record review, that the resident or their representative understood what they were signing. In situations where the resident may have cognitive impairment, surveyors should refer to the medical record to identify the resident’s health care decision-making capacity at the time the agreement was offered, explained, and entered into.”
Key enforceability sticking point
The agency also directs surveyors to investigate the basis for transfer or discharge of any resident who has refused to enter into a binding arbitration agreement.
These and other detailed requirements — including compliance in a look-back period during which no guidance existed — concern Reagan. While Northport Health Services’ case is now out of steam, Reagan expects new legal challenges to arise once the guidance is enacted.
In his view, the guidance moves beyond regulatory action to influence the enforceability of agreements themselves, a key sticking point that the courts viewed as unlikely as the Northport case worked its way through federal courts.
“With CMS’ issuance of the interpretive guidelines that, for example, say if we find there to be systemic problems with how you’re using arbitration, we’re going to expect you to demonstrate to us how you’re going to redo that process,” he explained. “How are you going to fix it? In other words, how are you going to go back and re-present these clauses?”
He said providers that have continued to use compulsory agreements should likely examine whether they need to update those for certain residents.
Arbitration ‘more stable’
Long-term care providers are strongly in favor of arbitration agreements, which they say result in quicker resolution times and at lower costs. But such clauses have faced a range of challenges over the last decade.
A 2016 Obama administration decision banned their use in long-term care facilities. That move was challenged legally and faced a subsequent injunction, leaving the question of how to handle arbitration up in the air until the 2019 rule, which once again allowed pre-dispute arbitration.
Several provider groups had weighed in on the Northport case through amicus, or friend of the court, briefs.
Among the last accepted was from the Alabama Nursing Home Association. President Brandon Farmer told McKnight’s Tuesday he was “disappointed” the Supreme Court passed on the case. He believes the CMS rule exceeds the rule-making authority of the Department of Health and Human Services.
“Arbitration offers patients and providers a simple, efficient and cost-effective way to quickly reach a resolution,” Farmer said in an email. “The HHS rule unfairly singles out our industry while virtually all other businesses can require their customers to use arbitration agreements. The use of arbitration agreements creates a more stable business environment for nursing home operators, which is very much needed when we face so much uncertainty related to staffing, the pandemic and other challenges.”