The Centers for Medicare & Medicaid Services (CMS), the federal agency charged with overseeing the quality of treatment in the nation’s 15,000 long-term care facilities, recently released a final rule heralding its first major regulatory reform in 25 years.
The rule is slated to be phased in over three years, beginning November 28, 2016. It mandates long lobbied-for changes in the care and protection of the 1.5 million residents living in long-term care facilities—primarily, nursing homes—that receive the federal funds. The new rule aims to reduce unnecessary hospital readmissions and infections, improve the quality of care, and strengthen safety measures. Among other changes, it specifies that the facilities must:
- Ensure that staff is properly trained in caring for residents with dementia and in preventing elder abuse
- Consider the health, goals, and preferences of residents when developing their care plans
- Update infection prevention and control programs, including antibiotic use protocols, and
- Provide “palatable” dietary options that meet residents’ preferences and nutritional needs.
Since proposing the rule in July of 2015, CMS received a boggling 10,000 comments from members of the public—including legislators, consumer and industry interest groups. But the change that garnered the most attention was a ban on requiring prospective residents to sign agreements requiring that disputes arising in long-term care facilities must be settled by arbitration rather than through the court system.
A Closer Look at the Clause
The final rule specifies that residents may not be required to sign pre-dispute binding arbitration agreements as a condition of being admitted to a facility. While such agreements have long been pondered and debated, in responding to submitted comments, CMS was unequivocal, declaring: “We believe that long-term care residents should have a right to access the court system if a dispute with a facility arises, and that any agreement to arbitrate a claim should be knowing and voluntary.”
Traditionally, prospective residents and involved family members are presented with a sheaf of paperwork to plow through and sign before any admission is made. That paperwork includes a standard admission agreement covering a dizzying gamut of topics—from supplies and services to be provided, to responsibility for paying costs and charges, to rights and responsibilities of all concerned. And most also included an agreement that should the resident have a future dispute with the facility about substandard care, it would be settled by an arbitrator—an individual hired to serve as an informal judge. The arbitrator’s decision would be “binding”—that is, the final, unappealable word on the matter. Those who signed could not sue the facility in a court, even for extreme abuse or neglect causing injury or death. Many arbitration decisions also specify that the results must be kept confidential.
Concerns over such arbitration clauses were raised decades ago—prompting many state legislatures to act to rein them in. Some states required that arbitration agreements had to be in a separate document from the standard admission agreement. Some required a bold warning that the agreement couldn’t be used as a condition of admission. Some state laws mandated both protections. Others mandated that the clause must be fully explained to prevent consumers from unwittingly becoming bound by them.
Consumer protection groups and individual advocates have urged the conventional wisdom of taking the time to read all the fine print or hiring a lawyer to review all documents before signing any of them. It’s wise-sounding advice, but begs the realities of nursing home admissions, which are usually hurried and emotionally fraught events, the paperwork presented as a pesky formality.
Even when the clauses contained the “safeguard” that they could be retracted by a written notice within a certain time—commonly, 30 days—the practical matters of settling into the new living arrangement meant that the clauses stayed in place. And many residents and family members were simply reluctant to raise questions or complaints about a facility’s paperwork for fear they might be labeled “troublemakers” and compromise the care received there.
Arguments All Around
Those in the long-term care facility industry have generally been strong proponents of mandatory arbitration clauses, claiming that resolving disputes through arbitration rather than costly litigation allows them to keep care affordable and that the new ban against it exceeds CMS’s authority, so is an illegal constraint that they intend to fight in court.
Consumer advocates contend that mandatory arbitration denies residents and family members their constitutional rights to a day in court and should be completely prohibited. Most say they’re particularly troubled by the secret nature of arbitration, which prevents the public from learning about the abuse and neglect that sometimes goes on behind closed doors—and also prevents real reforms from taking place.
And CMS representatives emphasize that “pre-dispute arbitration clauses are by their very nature unconscionable.” However, they underscore that the new rule is a compromise of sorts: While it bans “pre-dispute” arbitration agreements, once a dispute occurs, those involved are free to resolve it through arbitration if they choose to do so. CMS counters the claim that it has overreached its authority by underscoring that agreements between prospective residents and facilities are not “typical commercial contracts” in which both sides are free to bargain at arms’ length—and maintains it has a clear duty to protect the beneficiaries of federal Medicare and Medicaid funding.
Arbitration’s Pros—And Cons
Those who advocated for and against arbitration, along with those caught in the middle, generally agreed the process offers both advantages and disadvantages to those involved—with special resonance in the context of long-term care. Some of the views CMS considered while fashioning the new rule are summarized below.
Freedom of choice
All agreed that consumers have the right to know about and understand the documents that control their rights.
Industry advocates cited cases and rulings that make clear that the federal courts favor using arbitration to resolves disputes. They also argued that those who felt unfairly bound after agreeing to mandatory arbitration could later challenge the clause in court.
Consumer advocates emphasized that the arbitration agreements were rarely explained and typically presented to older people and family members as a “take it or leave it” condition of being admitted. For most, signing was neither “knowing” nor “voluntary.”
Time and money
Arbitration, in which an individual—often a retired lawyer or judge—is hired to decide a dispute rather than having it resolved through the court system, is one of the methods of “alternative dispute resolution,” designed to be faster and cheaper than litigation. Another method is mediation, in which a third party helps the people having a dispute reach a compromised solution together.
Industry advocates argued that arbitration is less expensive than litigation, and that the cost savings it provides is essential so that nursing homes can stay in business. They also highlighted that litigation is slow; it can take years to get a case to court, and time can be even more essential when dealing with older people.
Consumer advocates pointed out that arbitrators generally charge from $400 to $1,000 or more per hour for their services, so a tally may quickly add up in complicated cases. They also argued it’s not the long-term care facilities, but their insurance companies, that cover the costs. In addition, those who qualify for Medicaid, called Medi-Cal in California, might also qualify to have a court waive at least some of their fees if a case is litigated; waivers are not available for arbitration. And finally, they noted that most states provide that a case can be expedited if a litigant is older—usually, 70 or older—or in poor health.
Arbitrators are commonly described as “neutral decisionmakers” who have no stake in the outcomes of the matters that come before them.
Industry advocates contended this is a prime attraction of arbitration: that the process takes cases out of the hands of jurors who may be biased or easily swayed by heart-tugging descriptions of nursing home neglect.
Consumer advocates emphasized that while residents and family members would likely appear before a particular arbitrator once in their lifetimes, corporate defendants and their insurers are likely to be repeat performers and to prefer the arbitrators who have decided in their favor in the past—casting doubt on the neutrality of the process.
Arbitration is conducted in private. There is no public record of the proceedings, nor can the decisions be easily challenged.
Industry advocates argued that many people prefer that issues with the private matters of their care and housing are kept confidential and away from public probing.
Consumer advocates contended that the lack of transparency in arbitrated proceedings and decisions promotes a dangerous secrecy—preventing the press and public from learning about wrongdoing or shining the light on meaningful reform.