Overreaching or Underreaching? Comments on the CMS Proposed Rule on Arbitration Agreements in Long Term Care Facilities

During the 90-day public comment period on the Centers for Medicare & Medicaid Services (CMS) proposed rule entitled “Reform of Requirements for Long-Term Care Facilities” which closed October 14, 2015, CMS received nearly 9,000 comments, 773 of which (at last count) comment on CMS’s proposal to restrict the use of pre-dispute binding arbitration agreements. Very few (if any) comments applaud the proposed requirements, and nearly all are decidedly one way or the other: the proposed restrictions are overreaching, unnecessary and unhelpful, or the proposed restrictions should be strengthened to ban pre-dispute binding arbitration agreements altogether.

We previously discussed one comment by several senators that calls for a ban on pre-dispute arbitration agreements, and a later letter from 27 House of Representatives members that calls these agreements “forced arbitration.” However, the representatives’ letter suffers from the same problems as the senators’ letter. First, they attempt to circumvent the legislative process with the voice of not even 8% of Congress, and second, in an odd turn of events, seek to take the matter out of courts that are tasked with determining if a contract is enforceable and have already been advised by the Supreme Court of the emphatic federal policy in favor of arbitration. Also importantly, the representatives’ letter does not recognize that both the proposed rule and the current common practice in the industry is to present voluntary arbitration agreements that are not a precondition to admission to a facility – not “forced arbitration” as their letter suggests.

Another group of 15 state Attorneys General also submitted a comment with many of the same arguments, tied to emotional anecdotes about claimants who were forced to arbitrate their disputes (but still had their disputes heard), or arbitration agreements that were found invalid (and received proper scrutiny from the courts under common contract law).

Not surprisingly, one particularly strong-worded comment comes from a well-known nursing home plaintiff’s firm from Florida. This firm’s very livelihood comes from litigating hundreds of thousands of claims annually against large healthcare companies, yet it argues that arbitrators are biased because a claimant only participates in such an arbitration once, while the healthcare company may be a “repeat player.” The irony of a firm, that preys on healthcare companies and praises high jury awards, using the term “biased” in their recommendation to ban arbitration, is not lost.

On the other hand, several organizations devoted to the healthcare industry and to patient health and safety have noted that CMS does not have the legal authority to either prohibit pre-dispute arbitration agreements or even place the restrictions on arbitration that CMS proposed. The proposals do nothing more than what most long term care companies already do based on good business sense and established contract law, which includes ensuring arbitration agreements are fair and reasonable to all sides of a potential dispute. Finally, several comments note that the factual grounds for CMS’s proposals are plainly wrong; there is no need to regulate a parties’ decision to arbitrate, and the result would likely be an increase in insurance costs for healthcare companies and overall healthcare costs for everyone.

The CMS rules should not purport to be more than what they are, which are simply payor rules for programs that obtain payments from Medicare and Medicaid. They should not be used as a tool to cause wide scale changes to an entire industry and upend hundreds of years of contract law – a change better suited for the hands of the legislature.

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