On September 28, 2016, the Centers for Medicare & Medicaid Services (CMS) released a highly-anticipated final rule to strengthen requirements that long-term care (LTC) facilities must meet to participate in the Medicare and Medicaid programs. The sweeping rule – more than 700 pages – is intended to improve the safety, quality, and effectiveness of care delivered to facility residents. According to CMS, the final rule reflects nearly 10,000 public comments on the July 16, 2015 proposed rule. CMS adopted numerous changes from the proposed rule, including various revisions to staffing and training requirements, care planning rules, infection prevention and control program provisions.

Also notably, while CMS had proposed requiring facilities that ask residents to accept binding arbitration to meet certain criteria, the final rule instead prohibits the use of pre-dispute binding arbitration agreements. That is, facilities may not enter into an agreement for binding arbitration with a resident or their representative until after a dispute arises between the parties. Furthermore, an LTC facility cannot require the resident to sign a post-dispute arbitration agreement as a condition of the resident’s continuing to stay at the facility. CMS is retaining its proposed criteria for arbitration agreements, and adding a requirement for a copy of the signed agreement for binding arbitration and the arbitrator’s final decision to be retained by the facility for 5 years and be available for inspection upon request by CMS or its designee. CMS specifies that its new policy does not have any effect on existing arbitration agreements or render them unenforceable, nor does it impact LTC facilities that do not participate in the Medicare or Medicaid programs.

CMS estimates that the final rule will cost $831 million in the first year and $736 million annually in subsequent years, with a per-facility cost of $62,900 in the first year and $55,000 annually thereafter. The regulations are effective on November 28, 2016. Note, however, that CMS is implementing the rule over three years; certain provisions must be implemented upon the effective date, while others must be implemented by November 28, 2017 or November 28, 2019. In light of the significant impact this rule will have on the long-term care industry, Reed Smith is preparing a detailed analysis of the final rule.