Arbitration Clauses in Nursing Home Admission Agreements: Where We Stand
Updated: Oct 20
On May 15, 2017, the Supreme Court of the United States issued a significant ruling addressing the use of arbitration clauses in nursing home admissions agreements. In Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 1421 (2017), the Court decided whether binding arbitration clauses found within a nursing home admissions agreement were valid when signed by the residents’ legal representatives acting under the broad authority granted to such representatives via the residents’ written powers of attorney. In short, the U.S. Supreme Court sided with the nursing home, upholding the arbitration clauses.
Before reaching the U.S. Supreme Court, the Kentucky Supreme Court found otherwise, holding that the that the arbitration clauses were invalid because the general powers of attorney did not include a “clear statement,” or specific statement, authorizing the representatives (commonly known as attorneys-in-fact) to relinquish the residents’ right to go to court and receive jury trials. However, the U.S. Supreme Court overruled the Kentucky Supreme Court, stating that the “clear statement rule” violated the Federal Arbitration Act by singling out arbitration agreements for disfavored treatment. The U.S. Supreme Court stated that the Kentucky Supreme Court’s reasoning failed to put arbitration agreements on an equal plane with other contracts – something that is precluded under the Federal Arbitration Act and prior Court decisions.
Click through for the full text of the opinion in Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 1421 (2017). Upon writing, there are no Florida state or federal cases discussing Kindred in the nursing home context.
Shortly after Kindred, the Trump administration signaled a willingness to side with nursing homes on the arbitration issue. In a press release dated June 5, 2017 titled, “CMS Issues Proposed Revision Requirements for Long-Term Facilities Arbitration Agreements,” the Department of Health and Human Services, Centers for Medicare and Medicaid Services ("CMS") outlined proposed revisions to an Obama-era regulation, which, among other things, prohibited pre-dispute binding arbitration agreements. As an aside, the American Health Care Association and a group of nursing homes successfully sued to block CMS from enforcing that Obama-era regulation (found at 42 C.F.R. 483.70(n)) through a temporary injunction. Click through for the full text of the decision in Am. Health Care Ass'n v. Burwell, 217 F. Supp. 3d 921 (N.D. Miss. 2016). After the temporary injunction, CMS, through issuance of the June 5, 2017 memorandum, reconsidered the issue of nursing home arbitration agreements and proposed the following revisions:
Removing the prohibition of pre-dispute binding arbitration agreements;
Requiring that all agreements for binding arbitration be expressed in plain language;
Requiring that binding arbitration language be explained to the resident or legal representative in a form and manner understandable to the resident or legal representative;
Requiring an acknowledgment that the resident or legal representative understands the arbitration agreement;
Requiring that all such agreements omit any restrictions on a resident’s or legal representative’s ability to communicate 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;
Ensuring that when a facility resolves a dispute through arbitration, it retains a copy of the signed arbitration agreement and the arbitrator’s final decision so it can be inspected by CMS or its designee;
Requiring a nursing facility to post a notice regarding its use of binding arbitration agreements in an area that is visible to both residents and visitors.
CMS has not indicated how long it will take to review the public comments to the proposed rule and/or when a final regulation might be issued. However, the parties in the American Health Care Association case jointly agreed to stay the case pending the outcome of the latest proposal.
Among other things, Michael B. Kornhauser, Esq. consults nursing homes on the current state of the law regarding arbitration agreements and will continue to monitor developments in this area of law. If you have any questions, feel free to contact him.