Nursing home and patient advocates alike say a new proposed rule from the CMS forbidding such facilities from requiring residents to sign binding arbitration agreements is long overdue. But some say parts of the proposed rule might create legal gray areas for patients and nursing home facilities.
Industry group the American Health Care Association has long pushed for nursing homes to use only voluntary, rather than mandatory arbitration agreements, said Greg Crist, a spokesman for the association. Voluntary agreements help nursing homes avoid costly litigation but don't carry the same pressure as a mandatory agreement might for patients and families trying to make already-difficult decisions, he said.
Crist said mandatory agreements have become rare in the industry.
“If there was pressure of any sort in the past, that was unfortunate, and the trend is moving toward 'Hey, look, you have control here,' ” Crist said. “It puts the family and the individual in the driver's seat.”
Kimberly Valentine, a California attorney who often represents nursing home patients and families, also called the proposed change a good one. California already requires nursing homes to use only voluntary arbitration agreements.
Plaintiffs' lawyers generally agree that requiring residents to sign arbitration agreements can lead to trouble, she said.
“Every one of us could tell you horror stories about these arbitration agreements because they're used for the wrong reasons all the time,” Valentine said.
The proposed rule, however, still might not solve the issue of residents feeling as if they have no choice but to sign even voluntary agreements, some say.
The proposed rule attempts to make clear that if a nursing home asks a resident to sign a voluntary binding arbitration agreement, the facility must make sure the resident understands what he or she is signing first.
“While this can be a valid agreement when entered into by individuals with equal bargaining power, we are concerned that the facilities' superior bargaining power could result in a resident feeling coerced into signing the agreement,” according to the proposed rule.
To address that, the rule proposes that facilities be required to explain any binding arbitration agreement “to the resident in a form, manner and language that he or she understands, and have the resident acknowledge that he or she understands the agreement.”
But some say that wording seems to leave room for trouble.
“You can imagine the nursing home's witness giving his or her side of that story, and you can imagine the resident or resident's child giving his or her side of the story of that conversation,” said Stephen Ware, a law professor at the University of Kansas who focuses on arbitration.
Ware said it would likely help nursing homes to have a specific form or document they could give residents to make sure they're fulfilling such a requirement.
Valentine also worried about who might be assigned to explain the agreements to residents, saying detailed training would be needed.
And if the rule becomes reality and nursing homes don't explain the agreements in a neutral way, it could lead to fraud complaints.
In California, for example, even though mandatory arbitration agreements in nursing homes are illegal, many residents still feel like they have to sign the voluntary ones, said Michael Thamer, a California plaintiffs' attorney who works on elder-abuse cases, among others.
He said nursing homes insert the agreements into the general admissions paperwork and don't explain them further.
“Buried in there is the arbitration agreement, and I would say the average person looks at it and thinks it's all part of the admissions packet,” Thamer said. “That's kind of how they game it.”
In its proposed rule, the CMS said it believes “that any agreement for binding arbitration should not be contained within any other agreement or paperwork addressing any other issues.”
Valentine suspects that if nursing homes truly do explain the agreements to residents, far fewer residents will sign them.
Not everyone, however, agrees.
Drew Graham, a partner at Hall Booth Smith, a law firm that represents providers, including nursing homes, said his clients are largely already explaining the voluntary agreements to prospective residents.
“They're very careful about who signs it and careful to explain it,” Graham said. “In many cases, those things are already incorporated into practice now.”
Thamer estimates that about 65% to 80% of California nursing home residents sign the agreements. Crist, with the industry group, pegs that number at around 50% to 60% across the country.
Crist said that although the association is largely content with the proposed rule, it will likely submit some strong comments about one specific part of it. Though the rule doesn't propose prohibiting nursing homes from using even voluntary binding arbitration agreements, it does ask for comment on the idea.
Crist said it's important that voluntary binding arbitration agreements be allowed to continue.
“You want to have legal remedies available for the provider, as well as the individual families, and arbitration is a viable tool and one that can limit costs, sort of rein in those lawsuits that really pad more attorneys' pockets than really benefit families in any way, shape, or form,” Crist said.
He noted that even the U.S. Supreme Court upheld nursing homes' right to enforce binding arbitration agreements under federal law, related to allegations of personal injury or wrongful death, in a 2012 case out of West Virginia.
Thamer, however, said he believes the decision to enter into an arbitration agreement should be made after an incident occurs, not before.
“I don't think that the average person, at the outset, understands what they're doing when they enter that agreement,” Thamer said. A patient or patient's family might still want to enter such an agreement, even after an incident, because final resolutions can sometimes be reached more quickly through arbitration than through the courts, he said.
Valentine also said completely prohibiting binding arbitration agreements in nursing homes might be too restrictive and is not likely to happen. But she doesn't see the proposed rule, in general, being finalized.
This is not the first time the issue has come up.
The CMS issued a memo about nursing home binding arbitration agreements in 2003 saying, “Its primary focus should be on the quality of care actually received by nursing home residents that may be compromised by such agreements.” That memo said that nursing homes may not require current residents to sign new admissions agreements containing binding arbitration agreements.
At least a couple of federal bills also have been introduced in recent years seeking to invalidate binding arbitration agreements in nursing homes.
“There are going to be all these big, massive corporations who are going to pull their strings,” Valentine said. “I just don't see it happening.”