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Long-Term Care Facilities: Recent Developments on Use of Arbitration Agreements

By James A. Shannon
  • November 28, 2016

Three cases making their way through the courts demonstrate that the question of arbitration clauses in long-term care (LTC) facility admission agreements is an active and developing area of the law.

CMS Rule Case

The Centers for Medicare & Medicaid Services (CMS) had issued a final rule prohibiting LTC facilities from requiring individuals seeking admission to agree to mandatory arbitration for subsequent disputes. (For more on the rule, see our article, Long-Term Care Facilities: New Rule Imposes Significant Changes, including Bar on Pre-Dispute Arbitration Agreements.)

This prohibition was due to take effect on November 28, 2016, as one part of a much broader reorganization and revision of the regulations governing LTC facilities.

As expected, a group of health care associations and LTC facilities filed a complaint in the U.S. District Court for the Northern District of Mississippi just weeks after the final rule was issued, challenging the prohibition against pre-dispute arbitration agreements. On November 7, 2016, the court granted the plaintiffs’ motion for preliminarily injunctive relief and enjoined CMS from enforcing the arbitration prohibition in the final rule, pending the court’s entry of a final judgment in that action. American Health Care Association, et al. v. Burwell, et al., No. 3:16-cv-00233-MPM.

The court found that the plaintiffs were likely to eventually succeed on the merits of whether that portion of the final rule is barred by the Federal Arbitration Act and whether CMS lacks the requisite statutory authority under either the Medicare Act or Medicaid Act to prohibit the use of pre-dispute arbitration provisions by LTC facilities.

The preliminary injunction does not affect the implementation of the remaining provisions of the final rule, many of which are due to take effect as scheduled, on November 28, 2016.

Supreme Court Case

On October 28, 2016, the U.S. Supreme Court agreed to review a decision of the Supreme Court of Kentucky unfavorable to the use of arbitration by LTC facilities. Kindred Nursing Centers v. Clark, No. 16-32.

The Supreme Court of Kentucky held that the daughters of two former residents of a LTC facility, both of whom were the attorneys-in-fact for their respective parents pursuant to previously executed powers of attorney, lacked authority to waive their parents’ fundamental personal right to a trial by jury. Rather, the Supreme Court of Kentucky held that the power of attorney would need to explicitly grant such authority for an arbitration agreement to be effective.

The U.S. Supreme Court’s review of Kindred will provide greater clarity on the issue of who can sign an admission agreement and may foreshadow how the Court would rule on the issues raised in the challenge to the CMS prohibition on mandatory arbitration. Even if CMS were to prevail in that case, the prohibition would apply prospectively only — arbitration agreements between LTC facilities and their residents entered into before the effective date will remain in place. Therefore, Kindred will still be important to disputes involving pre-existing arbitration agreements.

New York Case

On November 17, 2016, the New York Court of Appeals, New York’s highest court, declined to review the 2015 intermediate appellate court decision holding valid a client’s arbitration agreement authored by the attorneys now forming the Jackson Lewis Health Law and Transactions Practice. Friedman v. The Hebrew Home for Aged at Riverdale, 2016 NY Slip Op. 91604 (Nov. 17, 2016). This decision provides greater support for the use of arbitration agreements in the State of New York, subject, of course, to the outcome of the challenge to the CMS prohibition.

***

These three cases show that the question of arbitration clauses in LTC facility admission agreements is not settled. Jackson Lewis will continue to monitor and provide updates.

©2016 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

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