CMS Issues Final Rule Regulating Use of Binding Arbitration Agreements by Long-Term Care Facilities


On July 16, 2019, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule allowing use of pre-dispute arbitration agreements in the long-term care setting. This decision reverses CMS’s previous position under the Obama administration, which prohibited use of such agreements. Most significantly, a facility may enter into pre-dispute arbitration agreements with residents, but the facility cannot require a resident or his/her respective representative to sign a binding arbitration agreement as a condition of admission or as a requirement for continued provision of care.

The final rule also imposes a number of requirements for the arbitration agreement itself, including that each agreement must:
• Provide for the selection of a neutral arbitrator agreed upon by both parties;
• Allow for the selection of a venue that is convenient to both parties;
• Explicitly state that the resident or his/her representative holds the right to rescind the agreement within thirty calendar days of signing it; and
• Explicitly state that neither the resident nor his/her representative is required to sign the agreement as a condition of admission or in order to continue receiving care.

CMS does not offer specific guidance as to where the information should appear, how it should be communicated, or whether it should be distinguished from the other text. Commentary included in CMS’s publication indicates that the agency has not finalized proposed “transparency” components, which could require that the agreement be in “plain language” and that facilities post notice regarding use of arbitration agreements. Such components could be finalized and implemented in the future.

Facility personnel must explain the agreement in a form and manner that the resident or his/her representative understands and must ensure that they do in fact understand the agreement. CMS does not offer guidance on how the required information should be communicated or otherwise explained. In addition, the agreement cannot discourage a resident or anyone else from communicating with government agencies. Facilities must ensure that, after a dispute is resolved through arbitration, a copy of the signed agreement and the arbitrator’s final decision will be retained by the facility for five years and will be available for inspection upon request by certain government agencies.

The new rule becomes effective September 16, 2019, but it does not alter the validity of agreements executed prior to that date.

It is likely that legal challenges will be levied against the final rule, specifically targeting the ban against requiring a pre-dispute arbitration agreement as a condition for admission or continued care. Recent rulings by the United States Supreme Court and other federal courts indicate that regulations which “single out” arbitration agreements are improper as they violate the Federal Arbitration Act. This position will likely serve as the basis for future actions.

If you have any questions or if you would like assistance with this or any other matter, please do not hesitate to contact us.