Ding Dong the Arbitration Ban Is Dead!
I vividly recall attending the Bronx Bar Association Dinner last fall when it was announced that the Centers for Medicare & Medicaid Services (CMS) would ban pre-dispute arbitration provisions in nursing home admission agreements as of November 28, 2016. This news was relayed to me by a Bronx Supreme Court judge who had denied my very first motion to compel arbitration under such a provision. That denial ultimately was reversed on appeal.
As I explained in my October 4, 2016, blog post, in enacting the ban, 42 CFR Sec. 483.70(n), the CMS regulators concluded in their commentary that requiring residents to sign pre-dispute arbitration agreements is “fundamentally unfair” because it is impossible for residents or their decision makers to give fully informed and voluntary consent to arbitration before a dispute has arisen. The opponents to pre-dispute arbitration obviously impressed upon the regulators that allowing nursing homes to include arbitration provisions in their admission agreements would somehow take advantage of the residents at the time of admission. They presumed that the residents would be frail, weak and incapable of understanding that they were waiving their right to trial.
In my view, the presumption that no person entering into a skilled nursing facility, whether for short-term rehabilitation or long-term care, has the capacity to enter into such an agreement is unfounded. In fact, most state laws allow a presumption of capacity until otherwise proven. The agreements are commonly signed by the resident’s designee, either with a Power of Attorney (POA) or as a result of the appointment by a court of a guardian or administrator.
Before its November 28, 2016, effective date, a United States District Judge in Mississippi issued an injunction against the enforceability of the ban in American Health Care Association et al. v. Burwell. The Kentucky Supreme Court had previously concluded that for an arbitration clause in a pre-dispute contract to be effective, the POA has to state explicitly that the attorney in fact has the right to bind the grantee to arbitration, and that the general provisions of a POA granting the attorney in fact the right to resolve disputes and enter into litigation are insufficient for that purpose. On May15, 2017, the United States Supreme Court reversed the Kentucky decision as contravening the provisions of the Federal Arbitration Act, which encourages the use of arbitration. Kindred v. Clark, et al. (US 2017).
Shortly after the Kindred Supreme Court decision, CMS proposed withdrawing its opposition to the injunction issued in Mississippi and to remove the pre-dispute ban on arbitration provisions in admission agreements. This outcome certainly can be seen as a victory for nursing homes across the country.
While the plaintiffs’ bar may see this as a major setback in nursing home litigation, in reality, arbitration has not negatively impacted their ability to seek and obtain fair and just compensation for their clients. In fact, they now have swifter justice. Additionally, I have found in those cases where I have successfully moved to compel arbitration or where a plaintiff has consented, the bigger challenge is finding a qualified and experienced arbitrator to hear these cases. Perhaps with this decision, more arbitrators with experience in either medical malpractice or skilled nursing facility cases will be willing and available to take them on.