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Nursing Homes Go to Court to Stop Residents from Going to Court

On October 17, nursing home industry group American Health Care Association (AHCA) and some individual nursing homes filed suit in Mississippi to stop a proposed federal ban on pre-dispute arbitration agreements.  The ban, which is to go into effect on November 28, was recently published in the Centers for Medicare and Medicaid Services (CMS) overhaul of the country’s nursing home rules.  Remarkably, AHCA concedes that nursing homes have to coerce residents into signing pre-dispute arbitration agreements at admission because no person in their right mind would sign one after a dispute has arisen.

AHCA’s lawsuit asserts ad nauseum that arbitration is superior to traditional courtroom litigation for resolving disputes between nursing homes and their residents.  If that were truly the case, it seems nursing homes would not need to impose binding agreements on residents likely in the most confusing and scary time of their lives.  If arbitration is indeed so great, why can’t nursing homes persuade residents to select it once an actual dispute between them has arisen?  To this question, the suit provides only one fleeting, absurd answer: it’s the lawyers!  AHCA claims “because lawyers are more comfortable in the court system, where cases take longer to resolve and legal fees typically are higher, they virtually always convince their clients to litigate in court.”  Thus, according to the nursing home industry, residents can be misled against their own best interests by persons with financial incentives to mislead them.  We couldn’t agree more!  But nursing home residents and the lawyers who represent them have similar, if not identical, interests in the outcome of nursing home-versus-resident disputes.  It’s nursing homes, by definition, that have completely divergent interests from residents in their disputes and therefore have significant incentives to mislead residents into actions counter to their interests - like signing a pre-dispute arbitration agreement.

Nursing homes can make all the claims they want about the superiority of arbitration.  And nursing home residents and their advocates and lawyers can counter those claims.  (For example, see the NY Times’ 3-part series on consumers’ arbitration horror stories.)  Federal treatment of pre-dispute arbitration agreements in nursing homes should not depend on whether arbitration is good or bad; rather, the issue is whether having residents unwittingly give up their constitutional right to justice before a dispute has arisen promotes their welfare.  CMS has rightfully found that it doesn’t.  We hope the court in Mississippi does too.

A couple other observations about the AHCA lawsuit:

  • The CMS ban does not prohibit nursing homes from entering into pre-dispute arbitration agreements - it prohibits nursing homes from entering into pre-dispute arbitration agreements and receiving taxpayer money.  If nursing homes want to participate in taxpayer-funded Medicare or Medicaid, they must follow the rules set forth by the government.  If they don’t like the rules, they are free to ignore them, they just won’t get federal funding.
  • The Federal Arbitration Act (which the lawsuit asserts prohibits a pre-dispute arbitration ban) only discusses the enforceability of arbitration agreements as written.  The CMS rule is not retroactive, so it does not impair any written arbitration agreement.  The rule simply says there shall be no such agreements going forward.

CANHR will closely follow this case and report on any major developments.