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Court Order Stops Nursing Home Arbitration Ban

A federal court in Mississippi has granted a request from the American Health Care Association to temporarily stop the federal government from implementing its ban on nursing home pre-dispute arbitration agreements that was set to go into effect on November 28.  The court’s decision means nursing homes throughout the country may continue to use pre-dispute arbitration agreements to gain an advantage over residents when it comes to resolving disputes.  For more information about how arbitration agreements are used to the detriment of nursing home residents, please see CANHR’s “Don’t Sign” webpage.

The court’s decision actually takes a somewhat hostile position to pre-dispute arbitration agreements.  The court’s opinion begins with a ringing condemnation of nursing homes’ use of signed arbitration agreements as weapons to successfully drag out litigation and delay justice and that many agreements are signed by residents “in spite of grave doubts about their mental competency, or, more often, [nursing homes] will choose to have relatives of the residents sign the agreements, even when no power attorney has been executed.”  The court called arbitration agreements a “tool for pure delay.”

The court also stated its reservations about the overall fairness of using pre-dispute arbitration agreements in the nursing home context.  It noted that many residents and their relatives who are asked to sign the agreements are “at wit’s end” and are not knowingly and voluntarily waiving their rights.

Despite the court’s concerns about the use of pre-dispute arbitration agreements, it nonetheless held that the Centers for Medicare and Medicaid Services’ (CMS) move to ban them exceeded its authority to make rules governing the operations of nursing homes.  Essentially, the court ruled that CMS failed to generate or consider enough evidence that would create a “strong” case that arbitration agreements negatively affect the health, safety, and welfare of residents.  The court was critical of the lack of evidence that “proves” an arbitration ban is needed to protect residents, deriding CMS’s reliance on public comments (“anecdotes”) and its legal citations as “a handful of court decisions and law journal articles.”

The court’s decision exposed a couple of ironies.  Primarily, there is great irony to the fact the nursing home industry was able to stop a national rule within weeks of its adoption by going to court – all to protect its ability to keep its residents from ever being able to go to court to address critical issues affecting their rights, their health, and their lives.  Additionally, the court agreed with the nursing home industry that withholding Medicare and Medicaid payments from homes that used pre-dispute arbitration agreements (rather than a true prohibition) was “coercion” and “dragooning” while failing to relate that same concept to residents who are expressly forced to sign away important rights to receive vitally needed nursing home services.

Other parts of the court opinion are extremely disappointing.  The court treated pre-dispute arbitration agreements as if they concerned a trifling right, a technical matter only tenuously connected to anything meaningful for residents.  The court never once acknowledged that what’s at stake is certainly one of the most fundamental of all American rights: the right to seek justice in a court of law.  It seems elementary that if a federal agency is specifically empowered to protect and promote the rights of a particularly vulnerable part of the population, that would potentially include the right to seek justice.  That this twisted conclusion came itself from a court is especially disheartening.  Hopefully, the court of appeals will see things differently.