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CMS Final Rule Overhauls Long-Term Care Facility Regulations & Federal Court Blocks Enforcement of Key Provision


The Centers for Medicare & Medicaid Services issued its long-awaited final rule on long-term care facility reform, which represents the first comprehensive change to long-term care conditions of participation since 1991. The policies in the Final Rule are designed to reduce unnecessary hospital readmissions and infections, improve quality of care and strengthen safety measures for residents and include elimination of pre-dispute arbitration agreements. A Mississippi federal judge temporarily blocked enforcement of the ban on mandatory arbitration.

In Depth

The Centers for Medicare & Medicaid Services (CMS) issued its long-awaited final rule on long-term care (LTC) facility reform (Final Rule), which represents the first comprehensive change to the LTC conditions of participation (CoPs) since 1991. The policies in the 713-page Final Rule, many of which were introduced in a proposed rule released in July 2015, are designed to reduce unnecessary hospital readmissions and infections, improve quality of care and strengthen safety measures for residents. The regulations are effective on November 28, 2016, but can be implemented in phases. Phase 1 must be implemented by November 28, 2016, Phase 2 by November 28, 2017, and Phase 3 by November 28, 2019. Compliance with the rule will require significant financial and human resources, with CMS projecting that the total cost of the Final Rule will be $831 million in the first year and $736 million per year for subsequent years. CMS estimates that the average costs per facility will be $62,900 in the first year and $55,000 per year for subsequent years, although those estimates may be overly optimistic given the extent of the changes in the regulations. The elimination of pre-dispute arbitration agreements, in particular, generated substantial industry commentary and concern and, on November 7, 2016, a Mississippi federal judge temporarily blocked enforcement of the ban on mandatory arbitration.

Pre-Dispute Arbitration Agreements

One of the most notable provisions in the Final Rule prohibits LTC facilities that participate in Medicare and Medicaid programs from requiring incoming residents to sign agreements compelling arbitration for any disputes that arise during the patient’s stay. The use of “pre-dispute” arbitration agreements in LTC facility admissions has been the subject of a number of legal challenges around the country. CMS’s position in the Final Rule is noteworthy as its original proposal allowed their continued use subject to satisfaction of certain criteria. CMS acknowledged opposition from provider facilities towards its proposal, but noted that state and federal officials, including members of Congress and state attorneys-general, took a variety of stances, some even calling for a complete ban on the practice. Ultimately, CMS decided that it was “unconscionable for LTC facilities to demand [that residents sign pre-dispute arbitration agreements] as a condition of admission.” CMS described this new CoP as part of implementing “basic protections” for residents, noting that its intent was to “implement a policy that strikes a balance between banning arbitration in all situations and allowing unfettered use of arbitration clauses with no restrictions on their terms or usage.” The Final Rule does not prohibit the use of post-dispute arbitration agreements, provided that the facility fully educates its residents about his or her options.

The provision was scheduled to go into effect on November 28, 2016, along with the other Phase 1 proposals. However, on November 7, 2016, a Mississippi federal judge temporarily blocked enforcement of the ban on mandatory arbitration. The order granted a preliminary injunction sought by the American Health Care Association, a trade group for nursing homes, and prevented the ban from taking effect on November 28.

Patient Rights and Person-Centered Care

The Final Rule creates new requirements for resident care and care planning, with an emphasis on providing person-centered care and engaging residents as partners in their care. Under the Final Rule, LTC facilities must develop and implement a baseline care plan for each resident within 48 hours of admission. Each person-centered care plan must include instructions for providing effective and person-centered care that meets professional standards of quality care. LTC facilities must also develop and implement a discharge planning process that focuses on effective transitions, post-discharge care, preventing re-admissions and the resident's discharge goals. The Final Rule also adds nurse aides and members of the food and nutrition services staff to the required members of the interdisciplinary team that develops residents’ comprehensive care plans.

New or strengthened rights for LTC residents are central requirements of the Final Rule. For example, LTC facilities will no longer be permitted to request or require residents or potential residents to waive potential facility liability for losses of personal property. They must also ensure residents are transferred or discharged with sufficient medical documentation, contact information and other documentation, as applicable, to effect a safe and effective transition of the resident’s care. LTC residents are also ensured greater rights regarding visitors and greater participation in their care planning process, including the right to receive the medically necessary services and items included in their plans of care. These requirements will begin implementation in Phase 1.

Quality and Compliance Measures

The Final Rule implements several new requirements for LTC facilities’ quality and compliance programs. As part of Phase 1, facilities will be required to ensure that residents are treated in alignment with professional standards of practice, their comprehensive person-centered care plan and their individual choices. CMS is also finalizing a requirement that each facility utilize residents’ comprehensive assessments and plans of care to provide services that allow each resident to attain or maintain the highest practicable physical, mental, and psychosocial well-being possible.

The Final Rule also requires LTC facilities to include new elements within their compliance programs. For example, LTC facilities must now investigate and report all allegations of abusive conduct, and cannot employ individuals who have had a licensure-related disciplinary action as a result of a finding of abuse, neglect, mistreatment of residents or misappropriation of their property. Facilities must also develop an Infection Prevention and Control Program (IPCP) in Phase I and designate at least one Infection Preventionist (IP) per facility in Phase 3. CMS also finalized a requirement for LTC facilities to develop, implement and maintain an effective comprehensive, data-driven Quality Assurance and Performance Improvement (QAPI) program. The QAPI program must focus on systems of care, outcomes of care and quality of life and would be designed to monitor and evaluate performance of all services and programs of the facility, including services provided under contract or arrangement. LTC facilities must also have policies and procedures to ensure facility compliance and written compliance and ethics standards. The majority of the QAPI and compliance program requirements would be implemented in Phase 3.

Assessments, Training and the Physical Environment

The Final Rule creates new requirements for LTC facilities regarding assessments, training and the physical environment created for their residents. In Phase 1, facility must conduct, document and annually review a facility-wide assessment to determine what resources are necessary to care for its residents during both day-to-day operations and emergencies. In the assessment, the facility must address the facility’s resident population (number of residents, overall types of care and staff competencies required by the residents and cultural aspects), resources (equipment, and overall personnel) and facility and community-based risk assessment. Additionally, facilities that are constructed, reconstructed or newly certified after November 28, 2016 must accommodate no more than two residents in a bedroom and have a bathroom equipped with at least a commode and sink in each room. The Phase 1 regulations also require abuse, neglect and exploitation training for all facility employees.

In addition to such subject-specific training, in Phase 3 facilities must develop, implement and maintain a broader effective training program for all new and existing staff, individuals providing services under a contractual arrangement, and volunteers, consistent with their expected roles. The Final Rule also requires that facilities determine the overall amount and types of training necessary after conducting the required facility assessment above.

Services Provided

The Final Rule imposes requirements on the services provided to residents of LTC facilities. Beginning in Phase 1, physicians may delegate dietary orders to qualified dietitians or other clinically qualified nutrition professionals and delegate therapy orders to therapists in accordance with state law. The regulations include a competency requirement for determining the sufficiency of nursing staff, based on a facility assessment, which includes the number of residents, resident acuity, range of diagnoses and the content of individual care plans. Regulations will be imposed upon pharmacists operating within LTC facilities to reduce or eliminate the need for psychotropic drugs. In Phase 1, facilities will be prohibited from charging Medicare residents for loss or damage of dentures when it is determined that such loss or damage is the LTC facility’s responsibility, and to implement a policy identifying instances when the loss or damage is the facility’s responsibility. Nursing facilities are also required to assist residents who are eligible to apply for reimbursement of dental services under the applicable Medicaid state plan.

Phase 1 also requires facilities to provide each resident with a nourishing, palatable, well-balanced diet that meets his or her daily nutritional and special dietary needs, taking into consideration resident preference. Facilities must employ sufficient staff, including a director of food and nutrition service, to carry out the functions of dietary services while taking into consideration resident assessments and individual plans of care, including diagnoses and acuity, and the facility’s resident census.

In Phase 2, facilities must provide necessary behavioral health care and services to residents, in accordance with their comprehensive assessment and plan of care. Pharmacies will be required to review a resident’s medical chart during each monthly drug regimen review.

CMS published the Final Rule in the October 4, 2016 Federal Register, which can be found here.

© 2022 McDermott Will & EmeryNational Law Review, Volume VI, Number 351

About this Author

Monica Wallace regulatory counseling lawyer McDermott Will Emery Law Firm

Monica A. Wallace is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  She focuses her practice on complex regulatory and transactional counseling to health care organizations such as health systems, hospitals, physician groups, integrated delivery systems, durable medical equipment prosthetics and orthotics suppliers, home health agencies, and other health care providers. Monica’s regulatory practice focuses on the Anti-Kickback and Stark laws; Medicare and Medicaid reimbursement and billing; legal assessments and compliance...


Joel C. Rush is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office. He focuses his practice on transactional and corporate matters affecting health care organizations, including mergers and acquisitions, affiliations, joint ventures and venture capital investments.  Joel has extensive experience working on hospital and health system mergers and acquisitions. Previously, Joel was an associate in the healthcare and corporate services groups in the Washington, D.C. office of a national law firm. Joel graduated...

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Patrick Callaghan, Health Care Attorney, McDermott Law Firm

Patrick Callaghan is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  He focuses his practice on health law matters.

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Chelsea M. Rutherford is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  She focuses her practice on matters affecting a wide range of clients in the health care industry.

Chelsea received her J.D., cum laude, from the Boston University School of Law, and graduated with honors from the health law concentration.  While in law school, she served as the Editor-in-Chief of the American Journal of Law and Medicine and was named an Edward F. Hennessey Distinguished...

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