Post Image
Feds Ban PDAAs in Nursing Home Admission Agreements for Facilities Receiving Federal Funding
Posted on Categories Arbitration Agreements, News, Non-FINRA ADR, RulemakingTags , , ,

The Centers for Medicare and Medicaid Services has issued final regulations banning nursing homes and long-term care facilities receiving federal funds from using mandatory predispute arbitration agreements.

We reported in SAA 2015-37 that, about a year ago, a group of 34 Democratic Senators, led by Senator Al Franken (D-MN), wrote to the Centers for Medicare and Medicaid Services (“CMS”), urging the federal agency to ban PDAAs in nursing home and long-term care facility admission agreements. The September 23, 2015 letter to CMS Acting Administrator Andy Slavitt observed that, while CMS had taken steps to ensure that arbitration agreements are knowing and voluntary, only a complete ban of PDAAs would adequately protect consumers.

PDAAs Banned; Post-Dispute Agreements OK

Apparently the agency was listening, because it issued a final regulation on September 28th doing just that. Section 483.70(n)(1), appearing on page 689 of the massive regulation, states: “A facility must not enter into a pre-dispute agreement for binding arbitration with any resident or resident’s representative nor require that a resident sign an arbitration agreement as a condition of admission to the LTC facility.” In case the point is not clear, the introduction says: “We are requiring that facilities must not enter into an agreement for binding arbitration with a resident or their representative until after a dispute arises between the parties. Thus, we are prohibiting the use of pre-dispute binding arbitration agreements." The rule is part of a comprehensive effort to curb elder abuse and, according to a CMS Press Release, would impact about 1.5 million individuals in over 15,000 facilities participating in Medicare and Medicaid. Adds the Release: “The policies in this final rule are targeted at reducing unnecessary hospital readmissions and infections, improving the quality of care, and strengthening safety measures for residents in these facilities.”

Part of a Campaign Against Arbitration?

As we’ve said many times before, this to us is more proof that the anti-arbitration forces are pursuing a “death by a thousand papercuts” strategy that aims to attack arbitration by targeting discrete areas where PDAAs are prevalent in consumer contracts. For example, we reported in SAA 2016-17 that Senate Democrats on April 28th introduced the Justice for Telecommunications Consumers Act – S. 2897 – which would amend section 2 of the Federal Arbitration Act to ban mandatory PDAAs in a wide range of telecommunications contracts involving consumers, such as cell phones, land lines and cable and internet service. There has been no action on this bill, but it has been read twice and referred to the Judiciary Committee. And in SAA 2016-33, we reported on an August 22nd Press Release and letter from Public Citizen, urging the Federal Trade Commission to ban mandatory PDAAs in solar leasing contracts. Also, we reported in SAA 2016-23 that the Department of Education on June 13th proposed regulations that would ban mandatory PDAAs and class action waivers in college enrollment agreements.

Suit Already Filed

Already the regulation is being challenged in court. On October 17th the American Healthcare Association and other groups filed a suit challenging the new rule. American Health Care Ass’n v. Centers for Medicare, Docket No. Not Assigned (N.D. Miss. Oct. 17, 2016), which seeks an injunction, asserts that CMS exceeded its statutory authority and that the regulation runs afoul of the Federal Arbitration Act. It is similar to one of the suits, Financial for Lutherans v. Perez, No. 0:16-cv-03289, that was filed September 29th in the District of Minnesota, brought by financial industry groups seeking to block implementation of Department of Labor’s new fiduciary standard rule.

(ed: *The CMS rule was published in the Federal Register October 4. It becomes effective November 28, 2016. **The FAA preemption argument is not specious in our view. Whereas the CFPB’s proposed reg barring class action waivers is based on a statute – Dodd-Frank section 1028 – giving the Bureau authority to act, we can’t say the same about this aspect of the CMS reg.) (SAC Ref. No. 2016-39-02)

Like what you see here?

Twice a week we present blog posts consisting of one write-up from each of our two flagship weekly online Alert services. Consider a subscription to these publications to receive the full array of coverage right on your desktop every week.  Give it a try and sign up for a free trial to the Securities Arbitration Alert and the Securities Litigation Alert.

Read Our Recent Blog