October 2016 – Arbitration Update

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October 7, 2016 – Nursing Home arbitration clause rejected by the Centers for Medicare and Medicaid Services (“CMS”).

As some of you may know, many nursing homes require patients seeking admission to agree to resolve disputes through binding arbitration, eliminating a person’s 7th Amendment right to a jury trial.  Thankfully, CMS has issued new standards that prohibit mandatory arbitration in admissions agreements.  The new rule bars any nursing home that receives federal funding from forcing its residents to proceed with arbitration, in place of the court system.  CMS determined that residents should not give up their constitutional right to a jury trial just because they need nursing home care.

For many years forced arbitration clauses have permitted nursing homes to hide ineffective care and abuse.  These clauses have prevented residents harmed by poor care in a nursing home from having their day in court, sometimes even in extreme cases like intentional assault and battery, or worse.

Private arbitration has been discussed a great deal lately. In an article in The New Republic, it compares nursing homes with forced arbitration by banks.  It notes that arbitration agreements force victims of nursing homes out of the legal system when seeking redress. They also give them no ability to appeal rulings. Nursing homes can use the same arbitrators repeatedly, while an aggrieved family only sees them once; this biases the system, as arbitrators have incentives to rule in favor of the nursing home if they want to be chosen again for future meditations. The costs of the arbitration are often split between both parties, which places a disproportionate burden on the plaintiffs as well. (Most families, after all, are not as wealthy as your average nursing-home chain.)  This is appalling, given that one deals merely with money and the other with people lives – loved ones who deserve the utmost care and respect toward the end of their days.

Why would a nursing home force arbitration? Easy – money! In 2009 the American Health Care Association found that plaintiff awards are 35% lower through arbitration than through the courts.  The use of forced arbitration incentivize nursing homes to allow substandard care because they can offer poor care but, not be held fully responsible. Quite a business model.

The Inspector General of the Department of Health and Human Services has reported that 22% of Medicare patients suffered “adverse events” resulting from the medical care in nursing facilities, and another 11% experienced temporary harm; more than half were preventable and due to failures in treatment or monitoring.  To see the Federal Register rule please click here.