CMS on Tuesday finalized a rule that repeals a policy issued under former President Barack Obama that banned nursing homes from entering into pre-dispute binding arbitration agreements with residents, and instead prohibits long-term care facilities from forcing residents to sign them as a condition of residency, Modern Healthcare reports.

Background

Arbitration agreements require patients to forgo their right to sue facilities. Some consumer advocacy and trial lawyer groups have raised concerns about the agreements, saying they can obstruct residents' and family members' legal rights.

CMS in September 2016 issued a final rule that would have barred long-term care facilities that participate in Medicare and Medicaid from entering into such agreements with patients before a dispute arises. Under the rule, facilities still would have been allowed to offer arbitration as a voluntary option after a problem occurs. 

However, that rule was placed on hold as a result of a lawsuit filed by the American Health Care Association (AHCA), which represents most nursing homes in the United States. In 2017, the Trump administration proposed plans to repeal the ban.

CMS repeals ban and issues new arbitration rule

CMS in the final rule officially repealed the Obama-era regulation. Under the new rule, CMS said nursing homes can enter into binding arbitration agreements with patients, but the facilities cannot require patients to sign them in order to receive care or become a resident.

CMS in the new rule mandated that nursing homes explain the agreement to the resident "in a form and manner that he or she understands." However, CMS did not finalize a proposal that would have required nursing homes to ensure the agreements are written in "plain language" and to display a notice stating their use.

Under the rule, CMS also will require the agreements to contain language allowing for a neutral arbitrator that both parties must agree to, and the rule prohibits the agreements from containing language discouraging the resident or a third party from communicating with federal, state, or local officials.

In addition, nursing homes under the rule must retain copes of signed agreements for at least five years after a dispute is resolved, and they must ensure those documents are available for state, federal, or accrediting inspectors (Catellucci, Modern Healthcare, 7/16; Stein, Insider Health Policy, [subscription required], 7/16; CMS fact sheet, 7/16).