Nursing homes challenge new rule giving residents right to sue

The nursing home industry is fighting back against new rules from the Obama administration that would give patients at federally funded facilities the right to settle disputes in court.

Starting Nov. 28, nursing homes that accept Medicare and/or Medicaid funds will be banned from using pre-dispute arbitration clauses in resident contracts. The policy is being enacted under new rules from the Centers for Medicaid and Medicare services (CMS).

The arbitration language — often slipped into the fine print — forces residents to settle disputes privately with an arbitrator rather than through the courts.

In a lawsuit filed this week, the American Health Care Association and four other state and local health care groups argue CMS and the Department of Health and Human Services overstepped their authority in issuing the rule.

“Neither the Medicare Act nor the Medicaid Act says anything at all about arbitration agreements or alternative dispute resolution — let alone authorizes HHS or CMS to prohibit use of those agreements entirely,” the group said in it’s complaint.

AHCA said Congress has repeatedly rejected legislation to amend the Federal Arbitration Act and invalidate arbitration agreements between nursing home facilities and their residents.

“We are taking this step to stop what is a clear overreach by CMS. Federal law plainly prohibits CMS from issuing this arbitration regulation,” AHCA’s President and CEO Mark Parkinson said in a statement this week.

“The merits of allowing individuals in our centers and their families this legal remedy are clear: study after study shows that arbitration is fair and speeds judgments in a cost-effective manner that benefits those injured more than anyone else.”

Others argue arbitration is needed to ensure settlements are reasonable.

Harry Nelson, a Los Angeles health care attorney and founding partner of Nelson Hardiman LLP, said juries almost always favor the patient over the facility in cases involving nursing homes.

“Everyone can relate to elderly people,” he said. “We all have parents and grandparents and feel awful when things happen, so jury selection can be very difficult.”

He said facilities end up paying 30 percent to 35 percent more when a court settles an injury claim, even when the facility isn’t necessarily to blame.

While arbitration may be the cheaper option, patient advocates say the system is one-sided.

Lori Smetanka, executive director of The National Consumer Voice for Quality Long-Term Care, said the clauses give facilities the power to set the terms and choose the arbitrator.

“Often times arbitration is not done in person, it’s done over the phone, which is really challenging for the residents or family members and there’s not an opportunity to appeal the decision of the arbitrator,” she said. “There’s no other recourse then for the family members.”

Smetanka claims the rule is needed to protect residents when they are at their most vulnerable.
“When a resident goes into a nursing home it is a very stressful and emotional time and usually the selection of a facility is done very quickly,” she said.

“There’s a lot of emotions … then to go in and be handed a big admissions packet that includes arbitration clauses, families are not in a position to understand the weight of what they are signing away.“

In a statement, American Association for Justice President Julie Braman Kane said the nursing home industry has used forced arbitration clauses to cover up abuse and neglect for far too long.

“Rather than work to better protect residents and their families, these corporate nursing homes filed a lawsuit in a last-ditch effort to hang on to forced arbitration,” she said. 

“Ironically, the nursing home industry is using a lawsuit to try to deprive residents and their families of that same right.”

CMS said it could not comment on the pending litigation.

In a blog post last month, the agency said the rules do not prohibit facilities and residents from using arbitration on a voluntary basis, so long as the agreement is clearly explained to residents.

The ban on pre-dispute arbitration was only one provision in a host of new standards for long-term care facilities mapped out in the final rule.

The rules are expected to cost facilities about $831 million in the first year and $736 million a year after that. Individual facilities will spend an estimated $62,900 complying with the rule in the first year.

AHCA’s complaint asks the court to temporarily block the rule from taking effect while it’s under litigation.

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Nursing homes challenge new rule giving residents right to sue