On July 18, 2019, the Centers for Medicare & Medicaid Services (CMS) issued a final rule repealing the agency’s ban on the use of pre-dispute arbitration agreements in the long-term care (LTC) setting.1 This final rule follows CMS’s proposed rule, issued on June 8, 2017, reversing course on CMS’s initial ban on pre-dispute, binding arbitration agreements in October 2016.2 (See CMS Reverses Course in Pre-Dispute Arbitration Agreement Ban for additional background and analysis on the June 8, 2017, proposed rule.)

As you may recall, CMS’s proposed rule offered to eliminate entirely the prohibition on pre-dispute binding arbitration agreements and provided no limitations on the use of arbitration agreements as a condition of admission (or continuing admission) to a LTC facility, provided certain “transparency” requirements were met. CMS received over 1,000 comments in response to the proposed rule and, in turn, delivered a final rule that makes concessions for both the proponents of a ban on pre-dispute arbitration agreements and the opponents seeking to preserve the legal right of the LTC facilities to freely contract with their residents. CMS explained in the final rule: “Although we are not finalizing a prohibition on pre-dispute, binding arbitration agreements, we believe that the requirements we are finalizing in this rule will provide the protections residents and their representatives will need to avoid being compelled to arbitrate disputes with LTC facilities without voluntarily and knowingly choosing to do so.”3

Specifically, the final rule confirmed the following requirements:

  • The LTC facility must not require any resident or his or her representative to sign an arbitration agreement as a condition of admission to, or as a requirement to continue receiving care at, the facility (arguably the most significant change from CMS’s proposed rule);
  • The LTC facility must “explicitly inform the resident or his or her representative that signing the agreement is not a condition of admission and ensure that this language is also in the agreement”;4
  • The LTC facility must explain the agreement to the resident or his or her representative “in a form and manner that he or she understands,” and the individual must acknowledge that he or she understands the agreement;5
  • The LTC facility must “grant to residents a 30 calendar day period during which they may rescind their agreement to an arbitration”6 (an added requirement);
  • The agreement must not “contain language that prohibits or discourages the resident or anyone else from communicating with federal, state or local officials, including federal and state surveyors, other federal or state health department employees, or representatives of the State Long-Term Care Ombudsman”;7 and
  • If the LTC facility resolves a dispute with a resident through arbitration, it must retain a copy of the signed arbitration agreement and the arbitrator’s final decision for five years after the resolution “and make them available for inspection by CMS or its designee.”8

According to CMS, “the policies set forth in this final rule better balance the need for resident protections with the potential burden on LTC facilities’ need for efficient and cost-effective operation.”9 The regulations are scheduled to go into effect on September 16, 2019