CMS Finalizes Reversal of Arbitration Ban in Nursing Homes, Proposes Partial Phase 3 RoP Delay

The federal government on Tuesday finalized a rule that allows skilled nursing operators to use arbitration agreements with their residents, while also proposing a new rule to reduce paperwork burdens that would delay certain aspects of the Requirements of Participation.

The Centers for Medicare & Medicaid Services (CMS) struck something of a compromise with the new arbitration rule, preventing operators from using them as a prerequisite for admission, while also requiring providers to inform residents of their rights to pursue additional methods of dispute resolution.

CMS will also bar operators from including arbitration language that bans residents or their families from contacting federal, state, and local authorities.


Arbitration in nursing homes has been a hot-button issue on the federal level, banned in 2016 by the Obama administration but then reinstated amid an injunction and legal disputes. The next year, the newly inaugurated Trump administration issued a proposed rule that would formally reverse the ban, which became final Tuesday.

“The CMS proposal supports patients and their caregivers by removing the ban on binding arbitration agreements while requiring nursing homes to ensure residents have the ability to choose the method of dispute resolution they want,” the agency wrote in a statement announcing the rule change.

The separate proposed rule, meanwhile, would seek to reduce reporting and paperwork burdens by bringing about a host of changes — including a key delay on certain aspects of the third phase of the new Requirements of Participation (RoP), set to take effect this coming November.


Among the changes, CMS floated the idea of reducing the frequency of facility assessments, eliminating certain prescriptive requirements from the Quality Assurance Program Improvement (QAPI) initiative, and easing the requirements for staffers that can serve as compliance and ethics officers at nursing homes.

“The Trump administration is helping nursing homes provide high-quality care by allowing them to focus their time and resources on residents — not unnecessary process and outdated regulations,” CMS administrator Seema Verma said in a statement. “We know our regulations work best when they are smart, targeted, and patient-focused, so we have taken a close look at our rules with patients and burden in mind. We’ve identified opportunities for reducing provider burden while maintaining high quality resident care.”

Should this rule become final, operators would have an extra year to prepare for certain aspects of the third RoP phase, specifically related to the QAPI program and ethics requirements. Rolled out in three parts beginning in November 2016, the RoPs were also subject to an enforcement delay on the second round, which was formally implemented in November 2017 under a one-year ban on any penalties.

All told, the government expects that SNFs will save $616 million annually under the new regulations.

“We believe that these changes would save time and resources for LTC facilities so they may focus on caring for residents,” the agency wrote.

Providers have until September 16 to leave comments on the rule, which remains a proposal until finalized by CMS.

The use of binding arbitration agreements was a prolonged source of controversy in the space, with the industry — and, on Tuesday, the federal government — positioning the contracts as less costly methods of dispute resolution for both operators and residents than lawsuits.

“CMS determined that resident rights must be protected by allowing them the ability to choose their method of dispute resolution, while preserving access to all possible choices, including arbitration, a method that often cost resident [sic] much less than litigation,” the agency said Tuesday.

When the initial ban took place, the American Health Care Association (AHCA) sued CMS and the Department of Health and Human Services, classifying the Obama administration’s actions as an overreach of federal authority. While it is still reviewing the final rule, the initial reaction from the nursing home trade group was cautiously positive.

“We are still reviewing and evaluating the final rule but we applaud CMS for allowing skilled nursing facilities to use pre-dispute arbitration agreements,” Mark Parkinson, the CEO of AHCA, said in a statement provided to SNN. “We are concerned about CMS adding any conditions or administrative requirements when Congress has spoken on this topic.”

Patient advocates, meanwhile, have criticized binding arbitration agreements as instruments that take away residents’ rights to pursue a trial by jury, with non-profit Public Citizen calling the then-proposed reversal as a “shameful setback for the rule of law and for elderly protection.”

While AHCA is still reviewing the proposed rule on the RoPs, the rule recognizes that more administrative work means less direct care time for nurses, David Gifford, senior vice president of quality and regulatory affairs and chief medical officer at AHCA said in a statement.

“We are pleased that CMS preserved important advances in these regulations such as those addressing infection control and prevention and resident rights,” Gifford said in the statement. “At the same time, CMS has recognized the need to eliminate regulations that result in unnecessary paperwork. Many of the changes in today’s proposed rule will allow caregivers to devote more time to resident care instead of completing paperwork that does not help keep residents safe and healthy.”

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