Court Puts a “Hold” on New Federal Rule Banning Arbitration in Nursing Home Contracts

We recently blogged about a new rule issued by The Center for Medicare and Medicaid Services (CMS) which restricts nursing homes that receive federal funds from imposing arbitration agreements on their new residents. This new rule (Rule) was scheduled to take effect on November 28, 2016.  It would prevent such facilities from requiring that their new residents sign pre-dispute arbitration agreements as a condition of entry to the facility.  CMS believed the Rule was needed to protect new residents who might lack the mental competency to give informed and voluntary consent to such agreements.  A federal court in Mississippi, while agreeing that the Rule was based upon sound public policy, has nonetheless issued a preliminary injunction which, for the time being, will prevent CMS from enforcing the Rule.

The court’s injunction was issued in the context of a lawsuit commenced by several nursing homes and health care associations against CMS.  The court granted their request for an injunction enjoining enforcement of the Rule for two reasons.  First, the court found the Rule to amount to a blanket prohibition against arbitration agreements, contrary to the federal policy favoring arbitration as reflected by the Federal Arbitration Act.  Second, the court ruled that CMS lacked the statutory authority to issue the Rule. In the court’s view, if nursing homes are to be prohibited from requiring arbitration agreements from their new residents, such a ban must be enacted by Congress, not imposed by a federal agency.

CMS will still have an opportunity to present evidence to the court at trial, in order to persuade the court to lift the injunction.  For now, however, so long as the preliminary injunction remains in effect, CMS will likely be prevented from enforcing the Rule anywhere in the U.S.  That means that nursing homes and other long term care facilities may still require new residents to sign arbitration agreements when applying for admission at their facilities.

© 11/10/2016 Charles A. Ford of Hunt & Associates, P.C.  All rights reserved.

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