Skilled Nursing Arbitration Agreements Likely to Be Reinstated

Politicians, district attorneys and even celebrities are up in arms over the Trump administration’s plan to reinstate skilled nursing arbitration agreements, which critics say unfairly limit patients’ rights. However, an arbitration ban stands in direct violation of a Supreme Court ruling and is unlikely to stand, according to an attorney specializing in health law.

When the Centers for Medicare and Medicaid Services (CMS) proposed a rule that would ban skilled nursing arbitration, planned to go into effect November 28, 2016, the American Health Care Association (AHCA) sued CMS and the Department and Health and Human Services in October 2016, arguing that the rule overstepped federal authority and violated the Federal Arbitration Act.

In June, CMS responded by proposing revisions to its rule and the removal of the prohibition on pre-dispute arbitration agreements. CMS accepted comments on the proposed rule until August 7.


Representative Ted Lieu, a California Democrat, tweeted an objection to this reversal from CMS and condemned the Trump administration for its support of this change.

“With Muslim Ban, legal immigration proposed cuts & now this, @realDonaldTrump is going after grandparents. Why does Trump hate grandmothers?” Lieu tweeted.

Despite these loud objections, Neville M. Bilimoria, a partner in the health law practice group in the Chicago office of Duane Morris, says a ban on arbitration is unlikely to pass.


“I do not believe that any governmental ban on pre-dispute arbitration agreements in nursing homes will fly in light of the 7-1 US Supreme Court Decision on May 15, 2017 in the Kindred Nursing Centers L.P. v. Clark case,” Bilimoria told Skilled Nursing News in an email.

“In that case, the Court explicitly stated that even the Kentucky Supreme Court and its ‘Clear Statement Rule,’ which requires powers of attorney to specifically allow entrance into arbitration given that trial by jury is a ‘divine God-given right,’ could not defeat the supremacy of the Federal Arbitration Act (‘FAA’). The Supreme Court stated that the Kentucky Supreme Court’s invalidation of arbitration clauses for nursing home residents was exactly the type of ‘hostility to arbitration’ that led Congress to enact the FAA in the first place: to protect arbitration from discrimination.”

Those opposed to pre-dispute arbitration agreements say that they unfairly give skilled nursing facilities a method to reduce liability, and the clauses can be presented to elderly residents who may not understand their rights, Bilimoria explained in an article he contributed to the July issue of Chicago Lawyer.

The case with Kindred Nursing Centers came about after two of its residents had their power of attorneys sign admission agreements that included arbitration agreements, Bilimoria outlined in the Chicago Lawyer article. Relatives of the two later filed suit against Kindred in Kentucky state court, claiming that the residents had died due to substandard care. Kindred moved to enforce the arbitration clause, but the Kentucky Supreme Court ruled in favor of the relatives, finding that the arbitration provisions were invalid because the powers of attorney had not entitled the representatives to enter into an arbitration agreement, Bilimoria explained.

However, the U.S. Supreme Court overturned this ruling, citing the Federal Arbitration Act, which was enacted to prevent any state rule from discriminating against arbitration.

The deadline for public comments has passed, so CMS will next come forward with a final ruling.

“I do not believe CMS will backtrack because the Supreme Court decision in Kindred now makes virtually any attempt to discriminate against the use of arbitration a violation of the FAA,” Bilimoria said.

Written by Elizabeth Jakaitis

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