W&M implores federal officials to keep rule that protects rights of seniors and nursing home residents

August 6, 2017 – Firm Announcement

The Center for Medicare and Medicaid Services (CMS) is accepting public comments until Aug. 7, 2017, on whether it should keep a rule that prohibits pre-dispute arbitration clauses in nursing home and long-term care contracts. Pre-dispute arbitration clauses, typically buried in the admission paperwork, require seniors to waive their rights to go to court to resolve any dispute with a nursing home should one arise, and instead forces them to go through private arbitration. 

CMS issued the rule prohibiting such clauses in October 2016; however, afterward the American Health Care Association (a national organization that supports nursing homes and assisted living facilities) and a group of nursing homes filed a lawsuit against the regulation. By June 2017, and in response to the AHCA lawsuit, CMS proposed reversing the rule and removing the prohibition on pre-dispute arbitration clauses. 

At Wilkes & McHugh, we know from experience how detrimental arbitration agreements can be for long term care residents. We submitted a formal comment expressing our concerns. You can read the complete submission below or find it on the Regulations.gov website here.

Submission

Centers for Medicare & Medicaid Services,
Department of Health and Human Services,
Attention: CMS-3342-P
Submission by: Wilkes & McHugh, P.A.

Re:       Public Submission Regarding CMS-3342-P

Dear Sir or Madam:

Imagine that one afternoon you receive a phone call that your mother suffered a stroke and has been hospitalized.  After spending several days in the hospital, the doctor advises you that your mother can no longer care for herself and will require full-time care.  Worse yet, the doctor informs you that your mother is being discharged tomorrow and you will need to select a long-term care facility by the morning.  The hospital staff presents you with two options.  You hurriedly do a search of both facilities and decide.  But when you call the facility that is your first choice, you are told there are no beds available.  Fortunately, the second nursing facility does have a bed available and you make arrangements to admit your mother the next morning.[1]

When you arrive at the facility, you are met by a staff member that informs you that there is paperwork you need to complete prior to your mother’s admission.  As you are flipping through the large stack of papers that make up the admission agreement, you begin reading and signing where the staff member has marked an X for your signature.  Believing that all of this paperwork is necessary for your mother’s admission, you sign where instructed.  After all, this is the only nursing facility available that can provide your mother with the care she needs.  Completely unbeknownst to you, one of those documents is an arbitration agreement.   

Six months later your mother has suffered her third fall at the nursing facility.  Concerned that she is being neglected and abused, you consult a lawyer.  Only then do you learn that you signed a document waiving your mother’s constitutional right to a jury trial and that you cannot pursue her claim in court.[2] 

Unfortunately, this narrative is a reality for most nursing home residents and their loved ones.  All too often, vulnerable nursing home residents or their representatives unwittingly sign pre-dispute arbitration agreements or do so under the belief that they will be denied admission to the nursing facility if they refuse.  The CMS final rule issued on October 4, 2016 was intended to protect nursing home residents from this reality.[3]  There, CMS concluded the following: 

The resident’s immediate need for nursing care and lack of experience with arbitration means that residents are unlikely to ask for time to seek legal advice concerning the agreement for binding arbitration.  We believe that this unequal bargaining power cannot be alleviated with the protections we initially proposed.  Thus, in this final rule, in response to a significant volume of public comment, we are prohibiting the use of predispute binding arbitration agreements between residents and the facilities.  After a dispute arises, residents or their representatives will have the time to seek legal advice, if they choose to, and evaluate the option to arbitrate the dispute with the facility.[4] 

Under this rule, nursing home residents are protected from unknowingly or mistakenly sacrificing their constitutional rights by entering into contracts they do not fully understand.  And should a dispute arise, residents or their representatives are afforded the opportunity to make a rational and informed decision about arbitration.[5] 

CMS, however, in an unexplainable and unjustifiable about face, has proposed a new rule that seeks to strip all of these protections.[6]  Even more troubling, the Proposed Rule not only seeks to eliminate the ban on pre-dispute arbitration, but permits long-term care facilities to demand—as a condition of admission—that residents sign a pre-dispute arbitration agreement.  For the first time ever, CMS is now blessing the very practice that less than one year ago it deemed manifestly unconscionable.[7] 

Under the Proposed Rule, nursing home residents will be forced to decide between accessing much needed care or giving up their constitutional right to a jury trial.  Take for example, the narrative above.  Imagine, your mother is in desperate need of long-term care and there is a single nursing facility with a bed available.  As you are admitting your mother into the facility you learn that there is an arbitration agreement in the admission paperwork.  After reading the agreement, you are unconvinced that it is in your mother’s best interest, however, you are told that your signature is mandatory before your mother can be admitted.  You are left with a Sophie’s Choice.  You must choose between getting your mother the care she needs or surrendering her constitutional right to a jury trial.  Knowing that this is the only nursing facility with a bed available, you sign the agreement.  So while the proposed rule purports to “enabl[e] residents to make informed choices about important aspects of his or her healthcare,” in reality nursing home residents will be forced to sacrifice either their healthcare or their constitutional rights.[8] 

In an attempt to justify this radical policy change, CMS now claims “this revised approach is consistent with the elimination of unnecessary and excessive costs to providers.”[9]  Even if this unsubstantiated claim were true, this “revised approach,” removes all incentives for nursing facilities to provide quality care to their residents.[10]  Indeed, when the Senate Judiciary Committee was contemplating the Fairness in Nursing Home Arbitration Act, it not only rejected the notion that banning pre-dispute arbitration agreements would jeopardize nursing homes ability to stay in business, it also expressed that the ban was necessary due to the need for greater accountability.[11]  CMS also concluded in its October 2016 Final Rule that pre-dispute arbitration clauses are directly connected to the health and safety of nursing home residents.[12]  In doing so, it noted one comment from a healthcare provider who had previously treated long term care residents, and expressed that “they had personally witnessed resident neglect and attributed it to facilities believing that they were immune to any legal consequences for their mistreatment because of the likelihood that they would prevail in binding arbitration.”[13]  Now, by condoning mandatory pre-dispute arbitration, CMS has unequivocally prioritized nursing home providers’ profits over the health and safety of residents. 

If nursing homes are not held fully accountable, the quality of care provided to their residents will surely deteriorate as nursing home chains will continue to cut costs by understaffing their facilities.[14]  But now, they will have the luxury of diverting all disputes to a forum beholden to their interests.  While a resident may participate in arbitration only once—the nursing home industry represents a vast pool of potential clients.  As such, there is a tremendous potential for arbitrators and arbitration administration companies to favor “repeat players” (i.e., long term care providers) to secure their business for future arbitrations.  Such companies certainly would not want to rule against their industry clients too often or order them to pay large damage awards, even when such awards are justified.  As a result, nursing home residents will be deprived of their right to civil redress and nursing homes will be undeterred from continuing to engage in reckless conduct at the expense of resident care.

Moreover, when the quality of care in nursing homes deteriorates, it is ultimately the Medicare system (i.e. taxpayers) that bears the cost.  Indeed, a significant and growing problem with the Medicare program is the cost of re-hospitalizations resulting from substandard care in nursing homes.  One study by the Department of Health and Human Services revealed that “[i]n FY 2011, nursing homes transferred one quarter of their Medicare residents to hospitals for inpatient admissions, and Medicare spent $14.3 billion on these hospitalizations.[15]  These costs are sure to increase under the Proposed Rule.   

Further, the cost of implementing and enforcing the Proposed Rule will impose an additional financial burden on CMS.  Indeed, CMS will now be tasked with expending time and resources to ensure that arbitration agreements used by providers comply with the “plain writing” requirement—which of course, provides zero protection to those residents who are forced to sign the agreement or forgo medical care.  Thus, while the Proposed Rule may save medical providers money, it will no doubt impose additional financial burdens on our already strained Medicare system.

In conclusion, the Proposed Rule fails not only to protect vulnerable nursing home residents from exploitation, but encourages it by forcing residents to choose between their healthcare and their constitutional right to a jury trial.  As nursing home residents are forced to acquiesce to mandatory pre-dispute arbitration agreements in exchange for care, providers will be less accountable for their conduct, and the quality of care in our nation’s nursing homes will inevitably decline.  Surely, if CMS understands the consequences of this draconian proposal—as set forth above—it will reject it.

Respectfully submitted,

Wilkes & McHugh, P.A.
1 North Dale Mabry Hwy., Suite 800
Tampa, FL 33609
Phone: (813) 873-0026
Fax: (813) 286-8820
 

[1] A recent study published in the Journal of American Geriatrics Society regarding the transition from hospitals to skilled nursing facilities (“SNF”) concluded that “SNF placement is a stressful transition, occurring at a time when people are physically vulnerable and often without significant help or guidance from experienced professionals such as hospital discharge planners and physicians.”  The study also revealed that most people choose a nursing facility based on location, rather than the actual quality of the facility.  Id.  In our experience, these conclusions hold true.  See Emily A. Gadbois, PhD, et. al., Selecting a Skilled Nursing Facility for Postacute Care: Individual and Family Perspectives, J. of the Am. Geriatrics Soc’y., available at http://onlinelibrary.wiley.com/doi/10.1111/jgs.14988/abstract. 

[2] A recent study on consumers’ understanding of arbitration agreements revealed “a profound lack of understanding about the existence and effect of arbitration agreements among consumers.”  When presented with a sample contract, 43% of the respondents recognized that the contract included an arbitration clause, however, 61% believed that they would, nevertheless, be entitled to have a court decide a dispute too large for a small claims court.  See Jeff Sovern, et. al., “Whimsy Little Contracts” with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements, 75 Md. L. Rev. 1, 5 (2015). 

[3] See Medicare and Medicaid Programs: Reform of Requirements for Long-Term Facilities, 81 Fed. Reg. 68688 [hereinafter October 2016 Final Rule] (Oct. 4, 2016).

[4] Id. at 68797.

[5] The concerns surrounding pre-dispute arbitration are evidenced quite clearly by the fact that the American Arbitration Association (“AAA”) announced in 2003 that it would no longer administer healthcare arbitration between patients and healthcare providers unless it was a post-dispute agreement to arbitrate.  In 2008, AAA backtracked on this promise, however, and has since returned to administering these types of disputes.  See AAA, Healthcare Policy Statement, available at http://www.adr.org/sp.asp? id=32192 (Oct. 24, 2008).

[6] See Medicare and Medicaid Programs; Revision of Requirements for Long-Term Care Facilities: Arbitration Agreements, 82 Fed. Reg. 26649 [hereinafter “Proposed Rule”] (June 8, 2017). 

[7] In direct contradiction of this proposed rule, CMS previously concluded in its Final Rule published on October 4, 2016, that “it is unconscionable for LTC facilities to demand, as a condition of admission, that residents or their representatives sign a pre-dispute agreement for binding arbitration that covers any type of disputes between the parties for the duration of the resident’s entire stay, which could be for many years.”  October 2016 Final Rule, supra note 3, at 68792.

[8] See Proposed Rule, supra note 6, at 26651.

[9] Id.

[10] This is particularly true in light of the recent study regarding the transition between hospitals and skilled nursing facilities, and the fact that the quality of the facility is not typically a determining factor in the selection process.  See supra note 1.

[11] S. Rep. No. 110-518, at 15 (2008) (report of Senate Judiciary Committee), available at https://www.congress.gov/congressional-report/110th-congress/senate-report/518/1.

[12] October 2016 Final Rule, supra note 3, at 68793.

[13] Id.

[14] According to CMS, 69.5% of nursing homes (72.2% of nursing home beds) are owned by for-profit companies.  Additionally, the mean number of deficiencies that occur in for-profit nursing homes is 6.0 compared to 4.7 for non-profit, and 5.5 for government owned facilities.  See CMS Nursing Home Data Compendium (2015 ed.), available at https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/CertificationandComplianc/Downloads/nursinghomedatacompendium_508-2015.pdf; see also Jordan Rau, Poor Patient Care at Many Nursing Homes Despite Stricter Oversight, N.Y. Times (July 5, 2017), available at https://www.nytimes.com/2017/07/05/health/failing-nursing-homes-oversight.html.

[15] Department of Health and Human Services Office of Inspector General, OEI-06-11-00040, Medicare Nursing Home Resident Hospitalization Rates Merit Additional Monitoring at 10 (Nov. 2013).

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