U.S. Supreme Court upholds arbitration agreements for nursing homes

The U.S. Supreme Court ruled on Monday that Kindred Healthcare could enforce a binding arbitration agreement with the families of two former residents of its nursing homes.

In a 7-1 decision, the justices overturned a Kentucky Supreme Court decision that refused to enforce the arbitration agreements. The U.S. Supreme Court said the Federal Arbitration Act protects Kindred's right to use arbitration rather than litigation to settle disputes with nursing home residents and their families.

The ruling is in line with previous decisions from the Supreme Court related to arbitration agreements. Since the mid-1980s the high court has ruled against any state laws that appear to preempt the Federal Arbitration Act.

"(The ruling) is not a surprise ... it is precedent," said Imre Szalai, a professor at Loyola University New Orleans with an interest in arbitration agreements.

In the case at hand, Kindred is fighting the relatives of two former residents of one of their nursing facilities. Although the women—Janis Clark and Beverly Wellner—signed admission paperwork for their family members, Kentucky's Supreme Court said the arbitration agreements in those contracts violated the residents' "God-given" right to litigate any disputes. The women sued Kindred for negligence and wrongful death after their relatives died at a facility in Winchester, Kentucky.

The state's Supreme Court ruled that the contracts the women signed granting them power of attorney didn't specifically mention an arbitration agreement.

Justice Elena Kagan's majority opinion said that the Kentucky high court "singles out arbitration agreement for disfavored treatment." The justices determined that the Kentucky court was discriminatory towards arbitration because although the Kentucky court said the ruling can be applied to any contract related to an individual's constitutional rights, such a ruling was never used before now.

"The Kentucky Supreme Court's clear-statement rule ... fails to put arbitration agreements on an equal plane with other contracts," wrote Justice Kagan.

Justice Clarence Thomas was the sole dissenter, echoing his long-held opinion that the Federal Arbitration Act should only apply to federal matters, not state laws. "No one is questioning that old decision except Justice Thomas," Szalai said.

In a statement on the Supreme Court ruling, Kindred Healthcare said, "We are gratified that the Supreme Court reaffirmed Congress's protection of the use of arbitration agreements because we believe arbitration provides all parties with fair, quicker, and more efficient resolution of disputes."

The decision is disappointing for elderly patients and their families who thought the Supreme Court might break precedent and rule against arbitration because the case involved people instead of companies, Szalai said.

The Supreme Court's has previously ruled on arbitration agreement cases involving technology companies like DirecTV, not people. This seemed to be an important distinction for Justice Samuel Alito when the justices heard oral arguments for the Kindred case in February. But the majority opinion didn't mention the human aspect of this case.

"There is an argument that the Federal Arbitration Act doesn't apply to wrongful death or personal injury ... but that argument wasn't addressed (by the justices)," Szalai said.

Newly appointed Justice Neil Gorsuch didn't participate in the ruling. But Szalai noted given the 7-1 outcome, his opinion wouldn't have made much of an impact.

Citing legal challenges to arbitration agreements, the CMS in January delayed enforcement of a rule that bars nursing homes from entering the binding contracts before a dispute arises.

In September, a federal judge in Mississippi granted a request for an injunction by the American Health Care Association, an industry group for post-acute care providers, and four other state and local healthcare groups.

The nursing home industry has widely opposed the CMS rule. They argue arbitration offers a less costly alternative to court. The Trump administration has hinted it's in favor of repealing the Obama-era regulation because of the burden it would impose on the nursing home industry.