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October 17, 2016

HHS Prohibits Long-Term Care Facilities from Using Pre-Dispute Binding Arbitration Agreements

By and Adelita Orefice

Effective November 28, 2016, Medicare and Medicaid-participating long-term care (“LTC”) facilities will no longer be permitted to enter into pre-dispute binding arbitration agreements with residents or their representatives, nor may a facility require that a resident sign an arbitration agreement as a condition of admission to the LTC facility. The rule, finalized by the Department of Health and Human Services (“HHS”) on September 28, 2016, only governs binding arbitration agreements entered into after the November 28 effective date. The new rule does not require LTC facilities to amend arbitration agreements that they have with residents prior to November 28, nor does it make them unenforceable.

Significantly, the new rule does not forbid arbitration agreements altogether. After a dispute arises with a resident, a Facility may ask the resident (or their legal representative) to enter into a binding arbitration agreement. To enter into a post-dispute arbitration agreement, the rule establishes certain requirements designed to protect the resident:

  • The LTC facility must explain the agreement to the resident in a clear and understandable manner and language understood by the resident.
  • The resident must then acknowledge his or her understanding of the agreement.
  • The resident must enter into the agreement voluntarily.
  • The facility cannot condition the resident’s right to continue living at the facility upon agreement to arbitrate.
  • The agreement must provide for the appointment of a neutral arbitrator agreed upon by the parties,
  • The agreement must also provide for selection of a venue convenient to both parties.
  • The facility must not prohibit or discourage the resident from contacting federal, state, or local officials, including surveyors, federal/state health department employees, and federal and state surveyors, other federal or state health department employees, and representatives of the Office of the State Long-Term Care Ombudsman.
  • When the facility and a resident resolve a dispute with arbitration, a copy of the signed agreement for binding arbitration and the arbitrator’s final decision must be retained by the facility for 5 years and be available for inspection upon request by CMS.

While HHS, in this rule making, declined to prescribe specific penalties for noncompliance with the new arbitration rule, surveyors will receive training regarding the new requirements. As of November 28, 2016, LTC facilities should remove binding arbitration language from future admission and other residency agreements (such as a separate pre-dispute arbitration agreement). After November 28, any effort to bind residents to arbitration prior to a dispute arising would be in violation of the new HHS rule. If a LTC facility intends to seek an arbitration agreement after a dispute has arisen, the facility should work with counsel and its compliance department to establish policies that promote compliance with the new rule and ensure proper documentation that residents are fully informed, that the arbitration agreement was entered into voluntarily, and that the facility complied with the new rule in all other manners.

About the Authors

Andrew Levine

Andrew Levine is the senior partner overseeing the firm’s Health Law Regulatory practice. He provides regulatory guidance, business and corporate legal services, as well as strategic advice to healthcare clients. You can find him on LinkedIn.

Crystal Bloom

Crystal Bloom is a partner and Chair of the firm's healthcare regulatory practice. She provides state and federal regulatory guidance and corporate legal services to healthcare providers. You can find her on LinkedIn.

Adelita Orefice

Adelita Orefice is an attorney in Barrett & Singal’s Providence office where she focuses on healthcare and corporate law.


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