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CMS Imposes Ban on Pre-Dispute Binding Arbitration Agreements in Nursing Facilities

On September 28, 2016, the Centers for Medicare & Medicaid Services ("CMS") issued the final Requirements of Participation ("Final Rule") for nursing facilities. The Final Rule becomes effective on November 28, 2016. A key provision under the Final Rule is the ban on pre-dispute binding arbitration agreements. Nursing facilities that participate in the Medicare or Medicaid programs are prohibited from: (a) entering into a pre-dispute arbitration agreement with a resident or a resident's representative; and (b) requiring a resident to sign an arbitration agreement as a condition of admission. In light of the Final Rule, facilities that currently utilize a pre-dispute binding arbitration clause or agreement have a couple of potential options. One option is to wait and see if any litigation is filed by any providers supported by their representative trade association to challenge the regulation. In such event, an injunction most likely would be requested, and if granted, would stay the implementation date of the ban until a decision could be made on the merits of CMS' rulemaking. Another option is to develop a plan to amend your current arbitration clause or agreement to conform to the new rule. Facilities that utilize a separate stand-alone agreement would need to discontinue its use by the effective date. Facilities that have an arbitration clause within their admission agreement could either strike it out or remove it from the admission agreement.

Please note that the Final Rule does not prevent a resident and a facility from entering into a binding arbitration agreement after a dispute arises. The post-dispute arbitration agreement, however, is subject to certain requirements under the Final Rule. For example, the arbitration agreement must be entered into voluntarily and must be a separate agreement. It is also important to note that the Final Rule does not affect already-existing pre-dispute arbitration clauses and agreements, or those that are entered into prior to November 28, 2016.

The Final Rule was published for public inspection in the Federal Register on October 4, 2016, with an effective date of November 28, 2016. The implementation date for the ban on pre-dispute binding arbitration agreements is the effective date of the Final Rule. Our firm has been following this issue closely and will continue to do so as the effective date approaches. Between now and November 28, 2016, if a legal challenge is instituted as to the enforceability of the ban on pre-dispute binding arbitration agreements, we will issue a subsequent blog post regarding such developments.

In the interim, if you have any questions related to this matter, please contact Kimber L. Latsha, Esq., or Dayna E. Mancuso, Esq., at (717) 620-2424.

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