[Senate Report 110-518]
[From the U.S. Government Publishing Office]
Calendar No. 1109
110th Congress Report
SENATE
2d Session 110-518
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FAIRNESS IN NURSING HOME ARBITRATION ACT
_______
October 1 (legislative day, September 17), 2008.--Ordered to be printed
_______
Mr. Leahy, from the Committee on the Judiciary, submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany S. 2838]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to which was referred the
bill (S. 2838) to amend chapter 1 of title 9 of United States
Code with respect to arbitration, having considered the same,
reports favorably thereon, without amendment, and recommends
that the bill do pass.
CONTENTS
Page
I. Background and Purpose of the Fairness in Nursing Home Arbitration
Act..............................................................2
II. History of the Bill and Committee Consideration.................16
III. Section-by-Section Summary of the Bill..........................16
IV. Congressional Budget Office Cost Estimate.......................17
V. Regulatory Impact Evaluation....................................18
VI. Conclusion......................................................18
VII. Minority Views of Senators Kyl, Sessions and Coburn.............19
VIII.Changes to Existing Law Made by the Bill, as Reported...........28
I. Background and Purpose of the Fairness in Nursing Home Arbitration
Act
A. SUMMARY
The purpose of S. 2838, the Fairness in Nursing Home
Arbitration Act, is to protect vulnerable nursing home
residents and their families from unwittingly agreeing to pre-
dispute mandatory arbitration, thus signing away their right to
go to court.
The bill would invalidate pre-dispute mandatory arbitration
agreements in long-term care facility contracts. It does so by
prohibiting the enforcement of arbitration agreements in cases
between residents and long-term care facilities when the
agreement to arbitrate was entered into prior to the dispute.
The Fairness in Nursing Home Arbitration Act has the
support of numerous advocacy groups including: the American
Association of Retired Persons (AARP); the Alzheimer's
Foundation of America; Consumer Action; Consumers Union; the
Center for Medicare Advocacy; the National Association of Local
Long-Term Care Ombudsman Programs; the National Association of
Social Workers; the National Senior Citizens Law Center;
NCCNHR: The National Consumer Voice for Quality Long Term Care;
the Service Employees International Union; Public Citizen;
Public Justice Center; U.S. Public Interest Research Group; and
the United Food and Commercial Workers International Union.
Many state organizations that advocate on behalf of senior
citizens, nursing home residents, consumers, and families also
believe that this is a critical issue, and they support the
legislation.
This legislation is prospective. It will take effect on the
date of enactment and will apply only to a dispute or claim
that arises on or after such date.
B. NEED FOR LEGISLATION
1. Background
Millions of Americans turn to professional long-term care
facilities when faced with the difficult decision of how best
to care for loved ones who can no longer care for themselves.
They do so expecting that nursing homes will provide adequate
care and a safe environment. Sadly, however, some elderly
nursing home residents suffer serious injuries as a result of
substandard care. It is not until such injuries occur, and the
injured residents attempt to hold a facility accountable in
court, that they realize they signed mandatory arbitration
agreements along with the admissions documents.
Many long-term care facilities use admissions contracts
that include pre-dispute mandatory arbitration agreements.\1\
By signing an arbitration agreement, residents and their
families agree to give up the ability to choose a venue for
resolving any future dispute with the facility. Instead, the
agreement requires that all disputes be resolved in a costly
and burdensome private arbitration proceeding. Thus, residents
must give up their right to seek redress in court before an
impartial judge or jury.
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\1\The American Health Care Association, representing more than
10,000 long-term care facility members, provides a ``model arbitration
agreement'' to its members. The agreement is a pre-dispute binding
mandatory arbitration provision which, when used, is signed at the time
of admission. Fairness in Nursing Home Arbitration Act: Hearing on S.
2838 Before Subcomm. on Antitrust, Competition Policy and Consumer
Rights of S. Comm. on the Judiciary and S. Special Comm. on Aging,
110th Cong. 4 (2008) [hereinafter ``Joint Hearing'' (statement of Kelly
Rice-Schild)].
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The nursing home admission process is emotional and
traumatic for prospective residents and their families. The
decision to enter a facility is made either immediately after a
medical emergency, when an elderly person is no longer able to
care for himself or herself, or when a family reluctantly
acknowledges that they are no longer able to provide the level
of care that their loved one needs. During the admissions
process, residents or their caretakers face a blizzard of forms
that must be signed in order to gain admission. Prospective
residents that suffer from cognitive or physical impairments
may have limited ability to read or understand arbitration
agreements, much less the significant consequences that those
agreements may have in the future. Family members admitting a
loved one are focused solely on finding the best possible care,
and not on the legal technicalities of arbitration.
Due to the nature of the admissions process, prospective
residents and their families cannot make, and should not have
to make, a decision about whether to forego their right to hold
the facility accountable in court for negligent care. This
principal is supported by the Commission on Health Care
Resolution, which consists of members of the American Medical
Association, the American Bar Association, and the American
Arbitration Association. These preeminent doctors, lawyers and
arbitrators unanimously agreed that ``in disputes involving
patients, binding forms of dispute resolution should be used
only where the parties agree to do so after a dispute
arises.''\2\
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\2\American Arbitration Association, American Bar Association and
the American Medical Association, Due Process Protocol for Resolution
of Health Care Disputes 28 (1998) available at http://www.ama-assn.org/
ama1/pub/upload/mm/395/healthcare.pdf. (last accessed Sept. 18, 2008).
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The ability of residents to hold poorly-performing
facilities publicly accountable in court for negligent care is
critical because government oversight of nursing facilities
does not fully safeguard patient safety. That is why S. 2838 is
necessary to protect residents and their families from being
forced to make a critical decision about their legal rights
during the stressful and emotional process of admission into a
nursing facility. By preserving the residents' option of
pursuing claims in court for negligent or abusive care, not
only will the public be able to make more informed choices of
nursing homes, but poorly-performing facilities will have a
greater incentive to prevent injuries and death. Importantly,
S. 2838 does not preclude the use of arbitration if it is
agreed to after the dispute occurs. Parties are also free to
use other forms of alternative dispute resolution, such as
mediation.
At a joint hearing of the Judiciary Subcommittee on
Antitrust, Competition Policy and Consumer Rights and the
Special Committee on Aging, David Kurth shared a tragic story
about his father that demonstrates the problem that S. 2838
will solve--nursing home residents and their families
unknowingly agreeing to give up their right to take a facility
to court for egregious injuries caused by negligent care.\3\
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\3\Joint Hearing (statement of David Kurth).
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At age 84, William Kurth, a World War II veteran, died as a
result of the poor care he received while he was a resident at
Mount Carmel Medical and Rehabilitation Center, a Kindred
Healthcare Inc., facility in Burlington, Wisconsin. His family
is trying to hold the facility accountable in court, but a
nursing home arbitration agreement is standing in their way.
When Mr. Kurth's wife of 63 years, Elaine Kurth, realized
that she could no longer care for her husband at their home,
she and her family made the difficult decision to admit him
into a nursing home. Mount Carmel was the only nursing home in
town and the only option that would permit Mrs. Kurth to visit
her husband on a daily basis, since she was unable to drive.
When Mr. Kurth sought admission, there were no available beds,
so he was placed on the waiting list. Mr. Kurth was placed in
another nursing home 20 miles away from his wife because of his
pressing medical needs. Not long after, a space opened up for
Mr. Kurth at Mount Carmel.
On October 29, 2004, Mrs. Kurth went to Mount Carmel to
help her husband with the admission process. When she arrived,
Mr. Kurth had not yet arrived at Mount Carmel from his previous
nursing facility. The admissions coordinator did not wait for
Mr. Kurth to arrive and began the admissions process. The
coordinator sped through about 50 pages of documents in one
hour. Instead of giving Mrs. Kurth time to read the numerous
pages of text herself, the admissions coordinator attempted to
explain the contract terms to her. At the end of the 50-page
admissions document, there was a mandatory binding arbitration
agreement, which the coordinator said was a necessary condition
of Mr. Kurth's admittance into the nursing home. Mrs. Kurth,
anxious to complete the admissions process and ensure a bed for
her husband, signed the agreement without understanding its
significance or why it was necessary.
Not long after entering Mount Carmel, Mr. Kurth broke his
hip and was hospitalized for surgery. When he returned to the
facility he was virtually immobile, putting him at risk for
pressure ulcers. The facility staff failed to update or change
Mr. Kurth's care plan, even though they knew that immobility
put him at high risk for additional complications, including
preventable pressure ulcers. As a result of their inaction, Mr.
Kurth lost a substantial amount of weight and developed 13
stage four pressure ulcers. The nursing home staff failed to
prevent and treat the ulcers, which were so severe that they
exposed his bone and organs.
Unknown to the Kurths, around this time, Mount Carmel's
corporate owner, Kindred Healthcare Inc., had reduced the wound
care team from multiple caretakers to a single wound care
nurse, responsible for the wound care of all 155 residents at
the facility. This nurse failed to treat any of Mr. Kurth's
pressure ulcers. Mr. Kurth suffered from untreated pressure
ulcers, dehydration, and malnutrition, all of which led to his
death because the nursing facility failed to supervise and
train a sufficient number of staff.
It was not until after the family filed a claim in Racine
County Circuit Court against Kindred that the nursing home
presented a copy of the arbitration agreement. This was the
first time Mrs. Kurth remembered hearing about arbitration or
the agreement. The nursing home moved to dismiss the lawsuit
and force the family into binding mandatory arbitration.
Relying on the signed arbitration agreement, the judge ruled
that the case must be arbitrated under the terms that Kindred
put in its contract. The Kurth family is currently appealing
this decision.
2. Nursing home residents unknowingly or unwillingly sign away their
right to go to court
Most nursing home residents and their families are
completely unaware that they have signed away their right to
sue a facility for substandard care. More than 40 percent of
nursing home residents are admitted to a nursing home because
they need immediate care following a medical emergency.\4\
Often, a nursing home choice is no choice at all, because there
is only one nearby facility with an open bed when the resident
is discharged from the hospital. Residents and their families
are solely focused on obtaining the care their loved one needs
so urgently, not on the many pages of documents they need to
sign to complete the admissions process, much less the legal
technicalities of an arbitration agreement.\5\
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\4\National Center for Health Statistics 2004 National Nursing Home
Survey, Current Nursing Home Residents, Table 4. Number of nursing home
residents by age, sex, race, and other selected resident
characteristics: United States, 2004. http://www.cdc.gov/nchs/data/
nnhsd/Estimates/nnhs/Estimates_Demographics_Tables.pdf#Table04 (last
accessed Sept. 18, 2008).
\5\Joint Hearing (statements of Alison Hirschel and Ken Connor).
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Nursing home residents have challenged arbitration
agreements in hundreds of cases.\6\ These cases describe the
difficulty residents and their families face during the
admissions process and how they are unaware that they had given
up their rights to go to court. For example, Linda Stewart
testified before the House Judiciary Committee Subcommittee on
Administrative and Commercial Law about her grandmother's
admission to a nursing home following an unexpected medical
emergency. She testified that her sister was rushed through
pages and pages of admissions forms when she sought to find
care from the only facility with a bed for her mother. The
admissions personnel made no mention of arbitration or giving
up her right to go to court. It was not until her grandmother
suffered serious, and ultimately fatal, injuries due to poor
care that she learned about the arbitration agreement.\7\ At
the joint Senate Judiciary Subcommittee and Aging Committee
hearing, even Senator Mel Martinez admitted that after hearing
the witnesses' testimony, he wondered whether he had agreed to
mandatory arbitration when he signed a thick stack of papers
during his father's admissions to a Florida nursing
facility.\8\
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\6\Lexis and Westlaw queries for challenges to nursing home
arbitration agreements reveal approximately 300 and 120 cases,
respectively. This search is limited to only published opinions.
Presumably many more challenges fail without opinion and without an
appeal.
\7\Fairness in Nursing Home Arbitration Act of 2008: Hearing on:
H.R. 6126 Before Subcomm. on Commercial and Administrative Law of the
H. Comm. on the Judiciary, 110th Cong. 2-3 (2008) (statement of Linda
Stewart).
\8\Joint Hearing.
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Not only does the need for care distract from consideration
of an arbitration agreement, nursing home residents and their
families do not adequately understand the far-reaching
ramifications of a pre-dispute mandatory arbitration agreement.
The effects of the emotional strain, in addition to pre-
existing cognitive or physical impairments, make it unlikely
that a nursing home resident will comprehend the meaning of an
arbitration agreement. The Alzheimer's Association estimates
that 69 percent of long-term care and 50 percent of assisted
living residents have some type of cognitive impairment.\9\
Sadly, many elderly people enter nursing facilities with no one
to assist them in signing the admissions documents.
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\9\Joint Hearing. (statement of the Alzheimer's Association) The
Alzheimer's Association also notes that caregivers for people with
dementia, who sometimes sign admissions documents, have a high rate of
emotional stress and may not fully comprehend the ramifications of
agreeing to mandatory arbitration.
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Nursing home residents, or their families, usually come
face-to-face with a contract for admissions after they have
decided to apply to a particular facility, and then, only at
the time of admission. As a result, they will not be familiar
with mandatory arbitration agreements, much less the
arbitration process and its legal consequences. This, on top of
the likelihood that admissions personnel themselves do not
understand or cannot explain the details of arbitration, makes
it unconscionable to require residents to decide whether to
sign a pre-dispute mandatory arbitration agreement prior to
admission. Finally, since nursing home admissions contracts are
take-it-or-leave-it contracts of adhesion, residents and their
families do not have the ability to negotiate the terms of the
agreement.\10\
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\10\Joint Hearing (statement of AARP).
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In the rare instances where an arbitration agreement is
explained and prospective residents have the opportunity to
read it, it is very unlikely that they understand the meaning
of the agreement and the consequences of giving up their right
to pursue a claim through the civil justice system.\11\ As
evidenced by public opinion for arbitration, when people learn
about the details of how disputes are resolved in arbitration,
they do not support mandatory arbitration. After learning that
binding pre-dispute arbitration agreements deny residents the
right to litigate even after serious injury, respondents in a
recent poll overwhelmingly disapproved of pre-dispute binding
arbitration agreements.\12\
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\11\Id.
\12\Press Release, American Association for Justice, New Poll:
Americans Say ``No Thanks'' to Binding Arbitration (May 19, 2008)
available at http://www.justice.org/PressRoom/PressReleases/2008/
may19.aspx, citing a survey by Peter D. Hart Research Associates, Inc.,
``Legal Arbitration and the Arbitration Fairness Act Poll,'' May 1,
2008 (Peter D. Hart Research Associates is an independent research firm
that since 1971 has been providing polling for a wide range of clients
from NBC to the Wall Street Journal to the Bill and Melinda Gates
Foundation. The poll indicated that when given accurate and
comprehensive information about the arbitration system, 81 percent of
the respondents disapproved of pre-dispute binding arbitration
agreements.).
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Even in cases where residents or their caregivers do not
want to agree to mandatory arbitration, they have little choice
but to sign the agreements. When nursing home residents and
their families come upon an arbitration agreement in the
admissions contract, they are often at the only facility that
offers the level of care needed with an open bed, or the only
facility that is close to their family. Thus, the resident
faces a Hobson's choice--waive your legal right to go to court
in the event of a terrible injury or refuse to sign and risk
not getting the urgent care you need. As a result, most
residents will sign the agreement out of fear that the facility
will find a way to deny them admission without attributing it
to their refusal to agree to mandatory arbitration.
The American Health Care Association, representing 11,000
member long-term care facilities, says that under their model
arbitration agreement, nursing home admission is not
conditional on agreement to mandatory arbitration.\13\ While it
may not be an explicit condition for admission, it is clear
from those who advocate on the behalf of America's senior
citizens and nursing home residents, that residents and their
families do not feel free to refuse an arbitration agreement.
Residents and their families do not want to risk being denied
admission or being perceived as troublemakers for not signing
documents that they think will never affect them. No one wants
to consider that the home they have chosen for their mother,
father, aunt or uncle is going to provide substandard care.\14\
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\13\Joint Hearing (statement of Kelly Rice-Schild).
\14\Joint Hearing (statement of Alison Hirschel).
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Written testimony from Linda Tripp, an Assistant Professor
at John Marshall Law School and a former attorney in the Office
of the General Counsel at the U.S. Department of Health and
Human Services, about an industry presentation on arbitration
agreements, suggests that nursing home admission is conditional
on signing a pre-dispute mandatory arbitration agreement. In
January of 2006, she attended a conference sponsored by the
Georgia Health Care Association, a group that represents many
Georgia nursing homes. At a presentation on arbitration
agreements, conducted by industry lawyers, an audience member
asked what they should do if a prospective resident did not
want to sign the arbitration agreement. The lawyer responded
with brazen advice--people who did not agree to arbitration are
troublemakers and should not be admitted. Ironically, he went
on to chastise a mandatory arbitration agreement presented to
him by a car dealer, which he refused to sign.\15\ Although
nursing homes have emphasized to Congress that pre-dispute
mandatory arbitration agreements are not required for admission
to a facility,\16\ this incident raises concerns about the
potential for coercion.
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\15\Joint Hearing (statement of Linda Tripp).
\16\Joint Hearing (statement of Kelly Rice-Schild).
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As the National Senior Citizens Law Center, a non-partisan
organization that has been working with and for nursing home
residents for more than 30 years, wrote to Senators Martinez
and Kohl, ``arbitration agreements are being signed at the time
of admission only because the resident or family member does
not even notice or understand the arbitration clause, or signs
the arbitration clause out of fear that otherwise the admission
will be jeopardized.''\17\
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\17\Joint Hearing (letter from the National Senior Citizens Law
Center).
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3. Pre-dispute mandatory arbitration of nursing home cases is unfair
Arbitration has been a cornerstone of dispute resolution,
as an alternative to courts, since the enactment of the Federal
Arbitration Act (FAA) in 1925. However, a decision to arbitrate
a nursing home dispute should be made only after a dispute
occurs so that both parties can properly evaluate the
ramifications of choosing arbitration versus the public court
system. When they are forced to decide whether to agree to
mandatory arbitration at the time of admission to a nursing
facility, prospective residents and their families do not know
the details of the arbitration process, or how the process will
impact their particular dispute, should one arise. They likely
do not know that by choosing arbitration they will have to pay
high upfront costs, give up rights and protections that would
otherwise be provided in a court proceeding, or that their
cases may be decided by an arbitrator who is repeatedly hired
by nursing homes and who depends on repeat business.
a. Cost
Arbitration of a nursing home case may be significantly
more costly than bringing the claim in court. Pursuing a claim
in arbitration may be cost prohibitive for many nursing home
residents and their families. As a result, they will either be
forced to drop their claims altogether or settle their cases
for significantly less than the amount they need for medical
care and other expenses.\18\
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\18\Joint Hearing (statement of Ken Connor).
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When nursing home residents sign arbitration agreements,
the agreements do not disclose the high fees they will have to
pay in order to file and adjudicate their claims. In addition
to a filing fee, arbitrators charge fees for every additional
process required, from hearings to discovery requests to
document review to subpoenas to written decisions.\19\ Typical
nursing home arbitration costs thousands of dollars. For
example, an Indiana family was forced into arbitration against
Beverly Healthcare in a negligent death case. In doing so, they
had to pay extensive arbitration fees totaling about $7,550
just to have their claims heard by an arbitrator. In contrast,
bringing a civil claim in Indiana costs less than $150.\20\
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\19\Public Citizen, Pub. No. B9028, The Cost of Arbitration 43
(2002), at 4-5.
\20\Interview with George Gray, attorney for the plaintiff (Sept.
18, 2008).
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The American Health Care Association's (ACHA) model
arbitration agreement requires the use of the National
Arbitration Forum (NAF) as the arbitration provider.\21\ The
NAF is one of the few providers that continues to hear pre-
dispute mandatory arbitration in nursing home cases, and its
fees are prohibitively costly. Public Citizen found that a
consumer claim for $80,000 filed in Illinois' Cook County
circuit court would cost a consumer $221, but if arbitrated by
NAF, the same claim would cost $11,625, 5,260 percent more
expensive than court.
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\21\``Resident and Facility Arbitration Agreement,'' model
agreement provided to Subcommittee staff by the American Health Care
Association.
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Under NAF's fee schedule, to simply file a claim for less
than $75,000, a nursing home resident would have to pay
approximately $250.\22\ Then, NAF charges additional fees for a
variety of procedural tasks, such as discovery requests,
subpoenas, hearings, writing findings, and written decisions.
These are all items for which courts do not charge.\23\ To file
a claim for $75,000 or more, which would include most of the
wrongful death and negligent injury claims brought by nursing
home residents, the claimant must pay a filing fee ranging from
$300 to $1,750, depending on the amount of the claim.\24\ Thus,
the more seriously injured a nursing home resident is, the more
money he or she will be required to pay up front to arbitrate
their claim. On top of filing fees, fees for procedural tasks
range from $500 to $1,500 each, and arbitrators bill their time
at an hourly rate.\25\
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\22\Public Citizen, supra n. 18, at 1-2.
\23\Id. at 2-5.
\24\Id at 6.
\25\Id. at 6-8.
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b. Unfair procedures
The procedural rules of arbitration are often unfair to
nursing home residents. Arbitrators, unlike judges and juries,
do not have to follow prior court or arbitral decisions.\26\
They are also not bound by statutory rules of evidence or
procedure.\27\ Most providers have some form of procedural
rules, but they are not mandatory and they are not reviewable
by a judge. Judges, on the other hand, must follow statutory
court rules and risk being overturned on appeal if they fail to
apply them properly. This accountability, unavailable in
arbitration, is critical to ensuring a predictable legal system
to prove complex negligence and wrongful death cases. In
addition, arbitrators and arbitration rules have been known to
limit the discovery process by limiting the number of witness
depositions, experts and subpoenas. These restrictions
significantly inhibit the ability of nursing home residents to
obtain information that is necessary for presenting and proving
their case.\28\
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\26\Joint Hearing (statement of AARP).
\27\``The Arbitrator shall determine the admissibility and weight
of evidence and shall not be bound by rules of evidence.'' NAF Code of
Procedure, available at http://www.adrforum.com/users/naf/resources/
20070801CodeOfProcedure.pdf; Peter B. Rutledge, Toward a Contractual
Approach for Arbitral Immunity, 39 GA. L. Rev. 151, 167 (2004).
\28\Joint Hearing (statement of Ken Connor).
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c. Arbitrator bias
The NAF has been criticized recently for the
disproportionate number of business wins in the arbitration
cases it oversees. Serious concerns have been raised about
arbitrators' ties to the industry that they service.\29\ Most
arbitration agreements specify which provider of arbitration
must be used. As mentioned above, AHCA's model agreement
requires the use of NAF. Arbitrators who work for NAF have a
personal financial incentive to favor nursing facilities
because the facility chooses NAF as the provider and the
individual arbitrators for each case. If NAF's arbitrators are
not favorable, the facility will either stop using a particular
arbitrator or find another arbitration provider.
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\29\Joint Hearing (statements of Ken Connor, Alison Hirschel and
AARP).
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Lawmakers, former arbitrators and advocates for nursing
home residents have expressed concerns about how the NAF's
procedures and rules create a bias in favor of large
corporations. Elizabeth Bartholet, a Harvard Law Professor and
former NAF arbitrator, testified at a Senate Judiciary
Committee hearing about her employment at NAF. In 17 of the 18
consumer cases in which she served as an arbitrator, she ruled
in favor of the corporate party. In her eighteenth and final
case, she awarded $48,000 in damages to a consumer. After that
decision, Dr. Bartholet was removed from the 11 other pending
cases that she was scheduled to arbitrate.\30\
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\30\Robert Berner, Brian Grow & Susann Rutledge, Banks vs.
Consumers (Guess Who Wins), Business Week, Jun. 16, 2008, at 72.
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Dr. Bartholet believes that because NAF and its arbitrators
depend on repeat business, the system is skewed in favor of the
corporations. She testified that ``there is a very real risk
that the NAF pool of arbitrators is overwhelmingly stacked
against the consumer, with arbitrators either being removed as
I was because they have decided a case for the consumer, or
arbitrators being pressured into always ruling for the repeat
player companies out of fear of being removed from cases.'' In
fact, she confronted two NAF administrators about her suspicion
that she was removed because of her one ruling in favor of a
consumer and neither denied it.\31\ Other former arbitrators,
including former West Virginia State Supreme Court Justice
Richard Neely, have criticized the NAF for lack of
impartiality.\32\
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\31\Courting Big Business: The Supreme Court's Recent Decisions on
Corporate Misconduct and Laws Regulating Corporations Before S. Comm.
on the Judiciary, 110th Cong. 5 (2008) (statement of Elizabeth
Bartholet).
\32\Id.
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Nursing home arbitration agreements that permit the
claimant to choose one of the arbitrators does not solve the
problem. Nursing homes have an inherent advantage in choosing a
favorable arbitrator because they are repeat players and have
access to insider information about arbitrators they have used
in previous cases. In contrast, residents have no prior
experience with any particular arbitrators and they cannot
access any of the arbitrators' decisions because they are not
made public. Therefore, the resident has little chance of
uncovering an arbitrator's potential bias.
d. Unfairness inhibits access to justice
The inherent unfairness in nursing home arbitration
ultimately results in preventing access to justice for one of
our most vulnerable populations. With its high costs, lack of
rules of evidence and procedure, and biased arbitrators,
nursing home residents' cases that are subject to mandatory
arbitration are doomed from the start. Residents and their
families will either not be able to afford the high cost of
pursuing arbitration on their own, or they will not be able to
find an attorney willing to take a chance on a process that
they know is substantially skewed against them, in favor of
nursing homes. Because of arbitration's inherent bias against
nursing home residents, lawyers feel that the deck is so
stacked against them that they turn down meritorious cases
because they are subject to arbitration.\33\
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\33\A plaintiff's lawyer, A. Lance Reins, represented the estate of
a woman who had died a day after her daughter took her to a hospital
because the nursing home refused to call an ambulance. Arbitration
awarded $90,000 to the family, but Mr. Reins' expenses outweighed costs
he spent working on the case. Nathan Koppel, Nursing Homes, in Bid to
Cut Costs, Prod Patients to Forgo Lawsuits, Wall Street Journal, Apr.
11, 2008, p. 1; Joint Hearing (statement and response to followup
questions of Ken Connor).
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4. Importance of the civil justice system to nursing home reform
Many long-term care facilities provide high quality care,
but there are also too many facilities that cause harm to
patients because of serious quality problems. While state and
Federal regulatory agencies work hard to oversee facilities,
enforce standards of care, and penalize for deficiencies, it is
impossible for them to investigate adequately every case
involving injury and death related to substandard care.\34\
Often, by the time a government entity is involved in an
instance of injury or death, they are unable to collect
information and evidence they need to reach a conclusion on the
cause. Thus, many incidents of abuse, neglect and harm go
unpunished.\35\
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\34\Joint Hearing (statements of Alison Hirschel and AARP).
\35\Joint Hearing (statement of Alison Hirschel).
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As Senator Martinez pointed out at the joint hearing:
``[T]he prospects of patients and their families being able to
file a complaint in the civil justice system may be the only
way of holding nursing homes accountable. . . . [I]t is a way
of forcing the industry to regulate itself because we do know
that the civil justice system complements the public regulatory
system in its efforts to improve the quality of care for all
residents.''\36\ The civil justice system provides an important
incentive for nursing homes without burdening the state and
Federal oversight agencies, funded by taxpayer dollars, with
fact intensive and time consuming investigations that are
required for complicated cases alleging negligent care.
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\36\Joint Hearing.
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Litigation in the civil justice system can lead to
significant changes in facilities' care practices and can
remove owners and managers that refuse to provide good care.
Ken Connor, an attorney who represents nursing home residents,
believes: ``[N]ursing homes are not likely to modify their
wrongful behaviors until they learn that it costs them more to
do business the wrong way than to do it the right way. . . .
Consequently, court awards are more likely to have a deterrent
impact on nursing home misconduct than awards in settings
dictated in an agreement for pre-dispute binding mandatory
arbitration.''\37\
---------------------------------------------------------------------------
\37\Joint Hearing (answers to followup questions of Ken Connor).
---------------------------------------------------------------------------
Some attorneys have used the civil justice system to ensure
permanent changes in facilities' practices in order to benefit
existing and future residents.\38\ For example, in a Texas
case, a resident died in a nursing facility when she was
strangled after being pinned between her bed and bedrail.
Settlement of the wrongful death case against the facility
included a lengthy written agreement requiring the facility to
establish extensive new policies and procedures to reduce its
use of physical restraints.\39\ The facility reduced its use of
restraints by more than 90 percent. Accountability in the civil
justice system would prompt improvement at nursing facilities
that consistently provide poor quality of care, or facilities
that go in and out of compliance with quality standards from
year-to-year.\40\
---------------------------------------------------------------------------
\38\Joint Hearing (statement of Center for Medicare Advocacy).
\39\Trew v. Smith and Davis Manufacturing Co., Inc., No. SF 95-354C
(N.M. Dist. Ct. Jul. 1996).
\40\Joint Hearing (statement of Center for Medicare Advocacy).
---------------------------------------------------------------------------
Finally, the civil justice system provides the public with
information about the performance of nursing homes. This is
critical in helping the public make informed decisions when
choosing a facility. Arbitration, in contrast, takes place in a
private setting with all documents and proceedings closed to
the public. No data is released or published about the nursing
home cases that have been arbitrated or settled.\41\ This lack
of transparency is particularly troubling since most of the
claims for abuse, neglect, and substandard care are occurring
at facilities that collectively receive billions of taxpayer
dollars. Almost 90 percent of all nursing homes receive funding
from Medicare and Medicaid. It is simply bad public policy to
allow these claims to disappear from the courts and the public
scrutiny they provide.
---------------------------------------------------------------------------
\41\Joint Hearing (statement of Linda Tripp); S. 1782, the
Arbitration Fairness Act of 2007, Hearing Before Subcomm. on the
Constitution of the H. Comm. on the Judiciary, 110th Cong. (2008)
(statement of Paul Bland).
---------------------------------------------------------------------------
5. Judicial review does not adequately protect nursing home residents
from unfair predispute mandatory arbitration agreements
Nursing home residents and their families should not bear
the burden of mounting costly and time consuming challenges to
unfair agreements. A bright line rule that prohibits pre-
dispute mandatory arbitration agreements would fully protect
one of the Nation's most vulnerable populations.
Both State and Federal law provide a mechanism to
invalidate an unfair arbitration agreement. However, the law
requires nursing home residents to overcome a very high legal
threshold which limits the ability of judges to invalidate
unfair arbitration agreements. Numerous cases demonstrate that
even in the most egregious cases where nursing home residents
or their families were forced, either directly or indirectly,
to sign an agreement, the law is not on their side.
In most jurisdictions, judges must enforce an arbitration
agreement unless the nursing home resident makes a valid
contract defense. Victims of nursing home abuse usually
challenge an arbitration agreement on the basis that the
agreement is unconscionable. The elements of an
unconscionability defense vary slightly from state to state,
but they generally require a showing of both procedural and
substantive unconscionability. Procedural unconscionability is
generally defined as an absence of meaningful choice on the
part of one of the parties.\42\ Substantive unconscionability
exists when the contract provisions unreasonably favor one
party over the other.\43\
---------------------------------------------------------------------------
\42\Raper v. Oliver House, LLC, 637 S.E.2d 551, 555 (N.C. Ct. App.
2006) (citing Martin v. Sheffer, 403 S.E.2d 555, 557 (N.C. Ct. App.
1991).
\43\Hill v. NHC HealthCare/Nashville, LLC, 2008 WL 1901198, 6
(Tenn. Ct. App. 2008), quoting Brenner v. Little Red Sch. House, Ltd.,
274 S.E.2d 206, 210 (N.C. 1981).
---------------------------------------------------------------------------
The standards for invalidating arbitration set a very high
bar for nursing home residents. For example, if a court does
not find both procedural and substantive elements of
unconscionability, then injured nursing home residents will
lose. This means that even when the circumstances surrounding
the agreement process were unfair, unless the terms of the
agreement are unreasonably one-sided, the court must compel
arbitration. Furthermore, an arbitration agreement must be
enforced even when provisions of the arbitration agreement
favor one party. It is only if the agreement unreasonably
favors one party or if it is so one-sided that a judge may
invalidate it, presuming there was also sufficient procedural
unconscionability. Thus, an agreement entered into under unfair
procedures can pass legal muster even when it is unfavorable to
a nursing home resident or one-sided in favor of the nursing
home.
Nursing home residents have challenged unfair arbitration
agreements, only to run into law that favors enforcement of
arbitration. Although some courts have invalidated nursing home
arbitration agreements, in many of the most egregious cases,
judges have been obligated by the law and legal precedent to
enforce arbitration agreements.
In an Ohio case, a court enforced an arbitration agreement
even though it had serious concerns about the procedural
fairness of the agreement. The court found that when the
nursing home resident entered the facility directly from the
hospital she was emotionally stressed and cognitively impaired.
At the time she signed the agreement, she suffered from bouts
of confusion and had no family, friends or counsel helping her
through the admissions process. The court found that she had
extreme physical difficulty signing the documents, suggesting
an inability to fully read and understand the contract.\44\ The
court recognized that: ``[F]or many individuals . . . admission
to a nursing home is the final step in the road of life . . .
In most circumstances, it will be difficult to conclude that
such an individual has equal bargaining power with a
corporation.'' Despite these serious reservations, the court
compelled arbitration because the agreement was not
substantively unfair.\45\ This means that as long as a facility
can draft an iron clad agreement that will pass the substantive
unconscionability test, it can coerce an unknowing nursing home
resident to sign the agreement and still get the court's
blessing.
---------------------------------------------------------------------------
\44\Manley v. Personacare, 2007 WL 210583 para.14 (Ohio Ct. App.
2007).
\45\Id. at para.42.
---------------------------------------------------------------------------
In some cases, courts will not even consider the substance
of an agreement if it does not find any procedural
unconscionability. In a Florida case, a court held that an
arbitration clause was not procedurally unconscionable, despite
the resident's daughter's contention that no one explained to
her what she was signing or what arbitration meant. The court
said that because both procedural and substantive
unconscionability would be required to find the agreement
unenforceable, the court declined to address the issue of
substantive unconscionability.\46\
---------------------------------------------------------------------------
\46\Raper v. Oliver House, LLC, 637 S.E.2d 551, 555 (N.C. Ct. App.
2006).
---------------------------------------------------------------------------
Even in the most egregious cases of procedural
unconscionability, courts have still enforced arbitration. In
Texas, a court enforced an arbitration agreement signed by the
resident's son who could not read or write in English. The
agreement was not fully explained to him and he was told that
in order to admit his mother into the facility, he must sign
the arbitration agreement.\47\ In another case, a court
compelled arbitration against the estate of a woman who died in
a nursing home. Although the woman was legally blind and could
not understand the contents of the papers she signed, the court
said that no one can argue against the enforcement of a
contract just because they signed it without reading it.\48\
---------------------------------------------------------------------------
\47\In re Ledet, 2004 WL 2945699 (Tex. App. 2004).
\48\Estate of Etting v. Regent's Park at Aventura, Inc., 891 So.2d
558 (Fla. Dist. Ct. App. 2004).
---------------------------------------------------------------------------
Several states have recognized the vulnerability of elderly
people during the nursing home admissions process and the
significance of foregoing the right to go to court by agreeing
to pre-dispute mandatory arbitration. States have enacted
legislation to limit or void the enforceability of pre-dispute
mandatory arbitration agreements in nursing home cases.\49\
However, these attempts to protect nursing home residents have
been thwarted by the Federal Arbitration Act (FAA).\50\ For
example, in Georgia, a Federal district court held that nursing
homes in the aggregate involve sufficient levels of interstate
commerce for the FAA to preempt a Georgia law.\51\ Thus, the
court upheld a pre-dispute arbitration agreement between a
nursing home and a resident while noting that the agreement
would be invalid under Georgia law.\52\
---------------------------------------------------------------------------
\49\Ga. Code Ann. Sec. 9-9-62 (West 2007); 210 Ill Comp. Stat. Ann.
45/3-601, 06-07 (West 2008); Okla Stat. tit. 63, Sec. 1-1939 (West
2008).
\50\See Owens v. Coosa Valley Health Care, Inc., 890 So.2d 983
(Ala. 2004); Washburn v. Beverly Enters.-Ga., Inc., 2006 WL 3404804
(S.D. Ga. 2006); Federal Arbitration Act, 9 U.S.C.A. Sec. 1-2 (West
2008).
\51\Washburn, 2006 WL 3404804.
\52\Id.
---------------------------------------------------------------------------
6. Regulating arbitration agreements does not mitigate the problems
with pre-dispute mandatory arbitration in nursing home cases
Efforts to remedy an inherently unfair system of pre-
dispute mandatory arbitration agreements in nursing home
admissions with regulation and reform do not address the
inherent unfairness of such arbitration. Critics of this bill
have proposed reforms such as printing the agreement in larger
or bolder print, or creating requirements for certain
explanations. These reforms would not be effective. Altering
the agreement's format or presentation will not change the fact
that it involves dozens of pages of technical legalese, or that
the admissions process is emotional, stressful, and often
involving people with compromised cognitive or physical
abilities.\53\ Additionally, even with reforms, residents and
their families are concerned about being denied admission and
they do not want to be viewed as troublemakers.\54\
---------------------------------------------------------------------------
\53\Joint Hearing (responses of Alison E. Hirschel to questions
from Sen. Kohl).
\54\Id.
---------------------------------------------------------------------------
A proposal to require that the arbitration agreement have a
30-day ``cooling off'' period after signing, during which a
resident may revoke the agreement, will not help injured
residents. Kenneth L. Connor, who has represented many victims
of nursing home abuse, testified that most residents or
families only learn of the arbitration agreement after an
injury has occurred.\55\ Unless an incident occurred within the
first 30 days, residents or their families would have little
reason to consult a lawyer regarding a contract that had
already been signed.\56\
---------------------------------------------------------------------------
\55\Id.
\56\Id.
---------------------------------------------------------------------------
C. EFFECT OF THE LEGISLATION
By prohibiting pre-dispute mandatory arbitration agreements
in nursing home contracts, S. 2838 will preserve the right of
residents and their families to hold facilities accountable in
court for neglect, abuse, and substandard care. Restoring
accountability for nursing homes will encourage poorly-
performing facilities to improve systematically care and save
taxpayers from the extra expense of medical care for injuries
caused by negligent or abusive care.\57\
---------------------------------------------------------------------------
\57\Joint Hearing (statement of the Center for Medicare Advocacy).
---------------------------------------------------------------------------
Post-dispute arbitration will remain an option for dispute
resolution because the bill only prohibits pre-dispute
mandatory nursing home arbitration agreements. If both parties,
the resident and facility, mutually and voluntarily agree to
proceed with arbitration after the dispute occurs, they will be
free to do so. However, post-dispute arbitration will likely
only be an option if the parties believe that the system is
fair. If the process is fair, residents and their lawyers will
view it as a viable alternative to court that is indeed more
timely, cost effective and less adversarial.
Critics of the bill argue that eliminating pre-dispute
mandatory arbitration agreements in nursing home contracts will
effectively eliminate all nursing home arbitration.\58\ This
suggests that the process is not as fair as its proponents
claim. If that is the case, then nursing facilities that want
to resolve disputes through arbitration will have an incentive
to use arbitration providers that will attract voluntary, post-
dispute agreements to arbitration. In turn, arbitration
providers will have an incentive to create a process that is a
cost effective and fair alternative to the court system for
both parties. If this occurs, then both parties will at least
consider, and many may choose, arbitration.
---------------------------------------------------------------------------
\58\Joint Hearing (statement of Stephen Ware).
---------------------------------------------------------------------------
Concerns have been raised about whether S. 2838 will have a
financial impact on nursing homes and their ability to stay in
business by making it more likely that cases against nursing
homes will be heard in court, rather than resolved through
private arbitration. Ms. Hirschel, an advocate for the elderly
and nursing home patients, responded directly to the concern of
how facilities will deal with cost: ``The first thing is
[facilities] can provide good care. There is no evidence of a
spate of frivolous lawsuits. In fact, the Harvard study in 2003
showed that in more than half the cases that were filed against
nursing homes, the resident died. So these are not--even
defense lawyers for the industry have acknowledged that these
cases are not frivolous. If you provide good care, you do not
get sued for those very expensive, egregious cases.''\59\
---------------------------------------------------------------------------
\59\Joint Hearing. (testimony of Alison Hirschel), citing David G.
Stevenson and David M. Studdert, The Rise Of Nursing Home Litigation:
Findings From A National Surveys Of Attorneys, Health Affairs, Vol. 22,
No. 2, 219, 222 (March 2003).
---------------------------------------------------------------------------
Ms. Hirschel's comment underscores data that show serious
quality of care problems in nursing facilities and the need for
greater accountability. A recent Department of Health and Human
Services report by the Department's inspector general found
that in 2007, 90 percent of nursing homes were cited for
violations of federal health and safety standards and 17
percent of nursing homes were found to have deficiencies that
caused ``actual harm or immediate jeopardy'' to patients.\60\
These deficiencies included infected bedsores, medication mix-
ups, poor nutrition, and abuse and neglect of patients.
Meanwhile, evidence suggests that this poor care is the result
of understaffing that has come in the wake of large private
investment groups buying major nursing home chains and making
large profits, which are hidden from public scrutiny. According
to data from the Centers for Medicare and Medicaid Services, 60
percent of homes bought by large private equity groups from
2000 to 2006 have cut the number of clinical registered nurses,
in some cases to below legal staffing requirements.\61\
---------------------------------------------------------------------------
\60\Robert Pear, Violations Reported at 94% of Nursing Homes, New
York Times, Sept. 29, 2008, A17.
\61\Charles Duhigg, ``At Many Homes, More Profit and Less
Nursing,'' New York Times, September 23, 2007.
---------------------------------------------------------------------------
Finally, the cost of hospitalization and medical care for
nursing home residents injured by negligent care strains the
Medicare system. Taxpayers pay for the costs of additional
patient care needed as a result of avoidable injuries due to
nursing home negligence. From 2004 to 2006, preventable
injuries and deaths in long-term care facilities cost the
Medicare program $8.8 billion.\62\ Since 2001, re-
hospitalization of Medicare residents for conditions related to
``worsening quality'' of care has increased 9 percent.\63\ By
holding facilities more accountable for their poor care,
facilities will have a greater incentive to improve care.
Improving care will benefit Medicare and Medicaid by reducing
costs.
---------------------------------------------------------------------------
\62\HealthGrades Annual Patient Safety in American Hospitals Study,
http://www.healthgrades.com/media/DMS/pdf/
HealthGradesPatientSafetyRelease2008.pdf (last accessed Oct. 1, 2008).
\63\MedPAC, Report to the Congress: Medicare Payment Policy,
Chapter 2D, March 2008.
---------------------------------------------------------------------------
II. History of the Bill and Committee Consideration
A. INTRODUCTION OF THE BILL
The Fairness in Nursing Home Arbitration Act was introduced
on April 9, 2008 by Senators Mel Martinez (R-FL) and Herb Kohl
(D-WI). On June 18, 2008, the Subcommittee on Antitrust,
Competition Policy, and Consumer Rights held a joint hearing
with the Special Committee on Aging, ``S. 2838, the Fairness in
Nursing Home Arbitration Act.'' Five witnesses testified at the
hearing: Mr. David Kurth, Ms. Alison Hirschel, Ms. Kelly Rice-
Schild, Mr. Ken Connor and Mr. Stephen Ware.
B. COMMITTEE CONSIDERATION
On September 11, 2008, the Judiciary Committee met in
executive session to consider S. 2838. No amendments were
offered and the committee approved the bill by voice vote.
Senators Coburn and Sessions were recorded as having voted
``no'', and Senator Grassley requested to be recorded as voting
``present''.
III. Section-by-Section Summary of the Bill
Section 1. Short title
This section provides that the legislation may be cited as
the ``Fairness in Nursing Home Arbitration Act.''
Section 2. Definitions
This section amends section 1 of the Federal Arbitration
Act (9 U.S.C. Sec. 1) to include a specific definition of
``long-term care facility.'' A ``long-term care facility'' is
defined as any skilled nursing facility, as defined in 1819(a)
of the Social Security Act;\64\ any nursing facility as defined
in 1919(a) of the Social Security Act;\65\ or any public
facility, proprietary facility, or facility of a private
nonprofit corporation that makes certain supportive services
available to adult residents who live on the premises. The
definition specifies that institutions whose primary purpose is
educational or drug treatment are not covered by the Act.
---------------------------------------------------------------------------
\64\42 U.S.C. 1395i-3 (2006).
\65\42 U.S.C. 1396r (2006).
---------------------------------------------------------------------------
Section 3. Validity and enforceability
This section amends section 2 of the FAA (9 U.S.C. Sec. 2)
to ban enforcement of pre-dispute arbitration agreements
between long-term care facilities and residents, or anyone
acting on behalf of the resident. This section also states that
disputes as to whether the Act applies shall be resolved by the
court, rather than through arbitration.
Section 4. Effective date
This section provides that the Act shall apply to claims
and disputes arising on or after the date of enactment.
IV. Congressional Budget Office Cost Estimate
The Committee sets forth, with respect to the bill, S.
2838, the following estimate and comparison prepared by the
Director of the Congressional Budget Office under section 402
of the Congressional Budget Act of 1974:
September 19, 2008.
Hon. Patrick J. Leahy,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 2838, the Fairness
in Nursing Home Arbitration Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Leigh Angres.
Sincerely,
Peter R. Orszag.
Enclosure.
S. 2838--Fairness in Nursing Home Arbitration Act
S. 2838 would make certain pre-dispute arbitration
agreements between the operators of long-term care facilities
and their residents not valid or enforceable. In a pre-dispute
arbitration agreement, the parties agree to arbitrate a
potential dispute rather than seek redress through the courts.
The bill would apply to any dispute or claim arising on or
after the date of the bill's enactment. Under current law, the
operators of long-term care facilities can include clauses in
contracts with residents that provide for mandatory arbitration
if a dispute should arise.
Under the bill, CBO expects that the majority of disputes
that could arise between a resident and a facility operator
would be litigated in state courts and, therefore, would not
substantially affect the caseload of the federal court system.
Cases challenging the nullification of a particular arbitration
agreement would be addressed in a federal court, but CBO
expects that any such cases would have an insignificant effect
on the overall workload of the courts. Therefore, CBO estimates
that implementing S. 2838 would have no significant cost over
the next five years. Enacting the bill would have no effect on
direct spending or revenues.
By restricting the provisions that could be included in
contracts between long-term care facilities and residents of
such facilities (or their representatives), S. 2838 would
impose an intergovernmental and private-sector mandate as
defined in the Unfunded Mandates Reform Act (UMRA). Based on
information from industry sources, CBO estimates that the
direct cost to comply with the mandate to state, local, and
tribal governments and the private sector would fall below the
annual thresholds established in UMRA for intergovernmental and
private-sector mandates ($68 million and $136 million,
respectively, in 2008, adjusted annually for inflation).
On September 2, 2008, CBO transmitted a cost estimate for
H.R. 6126, the Fairness in Nursing Home Arbitration Act of
2008, as ordered reported by the House Committee on the
Judiciary on July 30, 2008. The two versions of the legislation
are similar, and CBO's estimate of the federal costs are the
same. In addition, both H.R. 6126 and S. 2838 contain a mandate
by invalidating clauses in agreements made or amended after the
date of enactment. However, the mandate in S. 2838 would also
apply to existing agreements. The direct cost to comply with
the mandates in both bills would fall below the annual
thresholds established in UMRA.
The CBO staff contacts for this estimate are Leigh Angres
(for federal costs), Melissa Merrell (for the state and local
impact), and Paige Piper/Bach (for the private-sector impact).
This estimate was approved by Peter H. Fontaine, Assistant
Director for Budget Analysis.
V. Regulatory Impact Evaluation
In compliance with rule XXVI of the Standing Rules of the
Senate, the Committee finds that no significant regulatory
impact will result from the enactment of S. 2838.
VI. Conclusion
The Fairness in Nursing Home Arbitration Act, S. 2838, is a
bipartisan, narrowly targeted measure, that will ensure nursing
home residents and their families are not forced unknowingly
into arbitration when serious injuries or death result at the
hands of poor nursing home care.
VII. Minority Views
----------
MINORITY VIEWS FROM SENATORS KYL, SESSIONS AND COBURN
This bill is the second item that is straight from the
trial bar's legislative agenda that this committee has
dutifully reported to the full Senate this Congress. Last year,
the Judiciary Committee voted to gut arbitration contracts for
livestock and poultry growers. See S. Rep. 110-190, pp. 11-13
(Minority Views). Piece by piece, ATLA and its allies in the
Senate are dismantling the alternatives to litigation that have
sheltered many important American industries from a rapacious
trial bar, out-of-control jury awards, and a system that
delivers most of the proceeds of litigation to the trial
lawyers. This is the trial-lawyer agenda at work. The majority
even goes so far as to cite, as evidence that the American
people want to be relieved of the right to enter into
arbitration agreements--what else?--why, an ATLA press
release!\1\
---------------------------------------------------------------------------
\1\See footnote 12 of the draft majority committee report, citing
``Press Release, American Association for Justice, New Poll: Americans
Say ``No Thanks'' to Binding Arbitration'' (May 19, 2008). ``American
Association of Justice'' is the latest name used by ATLA, the
Association of Trial Lawyers of America.
---------------------------------------------------------------------------
This month, the Judiciary Committee is going after nursing
home operators. The bill that it has reported would subject
nursing homes to a litigation environment of trial-lawyer-
driven class actions and extreme jury awards, where a single
verdict could cripple a nursing home, or even a chain of
businesses. In many places, no liability insurer would even
offer coverage to nursing homes were this bill to be enacted.
Indeed, it is very likely that in several states, the
consequences of this bill would be that nursing-home chains
would withdraw from the state, and that some nursing homes
would simply shut their doors. Elderly people whose families
can no longer attend to their medical needs would have nowhere
to go to receive the care that they need. Some may find that
their only option is a nursing home in another state, far from
their family and loved ones.
One might think that a congressional committee charged with
oversight of judiciary matters might balk at a request from the
trial bar to pass legislation that will reduce the quality and
availability of nursing-home care, all so that trial lawyers
can collect more fees. But not in this Congress.\2\ The trial
lawyers are calling the shots, and they are getting what they
want.
---------------------------------------------------------------------------
\2\Lest any one suggest that S. 2838's fig leaf of Republican
sponsorship somehow makes it a bipartisan project in any meaningful
sense of the word, it should be noted that of the 29 sponsors of this
bill and H.R. 6126, its House companion, 27 are Democrats.
---------------------------------------------------------------------------
The 1990s litigation explosion and the need for arbitration
Shortly after this bill was first noticed for mark up,
Senator Kyl received a letter from Norman Estes, the operator
of NHS nursing homes, a chain of nursing homes in the
Southeast.\3\ The letter describes the litigation environment
that nursing homes began to encounter in the 1990s. It cites
jury awards, driven by passion rather than reason, that
repeatedly reached into the tens of millions of dollars, and
one that reached $78 million:
\3\The full letter from Mr. Estes is included as an attachment to
this statement.
---------------------------------------------------------------------------
In the early 90's, several states became venues for
extremely aggressive personal injury litigation against
nursing homes. Particular states saw drastic increases
in the number of lawsuits against nursing homes along
with extreme jury verdicts reaching tens of millions of
dollars. In the late 1990's and early part of this
decade, one law firm won a series of jury verdicts in
Florida ranging from $10 million to $20 million. In
2001, the same law firm received a jury verdict of $78
million from an Arkansas jury. Increased litigation in
these states had less to do with the quality of care
provided than with the extremely emotionally charged
cases and dominant legal and political standing of some
extremely talented plaintiff's attorneys.
Mr. Estes's account is confirmed by that of Kelley Rice-
Schild, the owner and manager of a small nursing home in Miami,
Florida that has been operated by her family for four
generations. Ms. Rice-Schild's testimony before this committee,
on June 18, 2008, also described a surge in litigation against
nursing homes that occurred in the 1990s:
In the late 1990's, the long term care profession was
subject to excessive liability costs, which were
exacerbated by an increasingly litigious environment.
As a result, operators of nursing facilities and
assisted living residences were forced into making
difficult decisions including potential closure or
divestiture of facilities, and corporate restructuring.
. . . This trend was especially true in states such as
Arkansas, Texas, and my home state of Florida, where
state laws fostered an exponential growth in the number
of claims filed against long term care providers--even
those with a history of providing the highest quality
care.
Mr. Estes and Ms. Rice-Schild described how the trial bar's
targeting of nursing homes led liability insurers to stop
offering insurance to nursing homes in some states. Ms. Rice-
Schild also noted in her committee testimony that insurers
began to charge her more for her policy than the policy itself
would cover:
[T]here was an explosion in the cost of obtaining
insurance to protect operators from the risks
associated with a tort environment that often
encouraged unsubstantiated claims against long term
care providers. This trend included significant
advertising--including highway billboards--to encourage
consumers to sue their long term care provider. Even
following the passage of tort reform legislation in
Florida in 2001, insurance is not widely available and
for most operators unaffordable, which forced several
companies to no longer provide care and services to the
frail elderly in my home-state. Today, my facility is
covered by a $25,000 General and Professional Liability
policy--for which we pay $37,000 annually. To carry
more insurance, even if I could afford to do so, simply
makes my facility a target for litigation--despite our
over-60 year history of providing nothing but the
highest level of quality care.
Similarly, Mr. Estes, in his August 20 letter, notes that:
In Alabama, Arkansas, Florida and Missouri, where our
facilities are located, many insurance underwriters
simply stopped offering liability insurance for nursing
homes. In Florida, there have been periods of time when
traditional liability insurance for nursing homes was
not available at all, from any company, at any price.
Throughout the industry, liability insurance became so
expensive that many nursing home operators simply could
not afford it.
Mr. Estes also describes the impact that a litigation-
driven absence of insurance has on both nursing homes and
patients. A lack of insurance not only threatens the viability
of the nursing home, it also means that patients who are
negligently injured will not receive compensation:
Insurance approaches that left nursing homes
underinsured or with practically no insurance fostered
an environment where one large claim was enough to
force a nursing home to cease operating. That same
environment also all but guaranteed that patients with
legitimate claims that should be covered by insurance
were left with little financial compensation, or even
none at all.
S. 2838 would retroactively gut state and federal arbitration
agreements
The majority defensively insists that ``[t]his legislation
is prospective.'' Not so. The bill clearly applies
retroactively--it not only prevents parties from entering into
enforceable arbitration agreements in the future, it also voids
arbitration agreements that were made years before this
legislation was even proposed. It simply takes pre-existing
contracts and tears them up.
Moreover, the bill's violence against private contracts is
not limited to agreements that are enforceable under federal
law. The bill also reaches into state jurisdiction, vitiating
contracts that were voluntarily entered into between parties
who reside in the same state and whose agreements would be
enforceable in state courts as a matter of state law. S. 2838
overrides the laws of all 50 states, preventing any state from
preserving enforceable arbitration as an alternative to
courtroom litigation.
The majority insists that S. 2838 would not gut
arbitration, because parties would still agree to arbitration
after a dispute arose. Stephen Ware, a professor of law at the
University of Kansas, put the lie to these claims in his June
18, 2008 testimony before the committee. He noted the obvious--
that ``S. 2838 would `gut' arbitration of nursing-home
disputes,'' and that ``enactment of this bill would largely end
arbitration of disputes between'' nursing homes and their
residents. As Professor Ware explained, ``arbitration almost
never occurs except as a result of pre-dispute agreements.'' He
went on to describe how once a dispute has arisen, either one
side or another is likely to reject arbitration for tactical
reasons:
Once a dispute arises, parties are unlikely to
contract out of the default process because of one
party's self interest in whatever tactical advantages
it can gain from litigation, whether from an easily-
impassioned jury or expensive and time-consuming pre-
trial discovery and post-trial appeals. Only a naively
simplistic view would deny that disputing parties and
their lawyers assess the case before them and try to
maneuver into a process that is expected to advantage
their side. That sort of self-interested maneuvering is
inherent in the adversary system and lawyers might not
be fully serving their clients if they did not engage
in it. (Emphasis added.)
Professor Ware also debunked the majority's repeated
characterization of arbitration agreements as ``mandatory
arbitration.'' As he noted, ``arbitration is not `mandatory'
but litigation is.'' Parties can refuse to agree to
arbitration, but they cannot refuse to agree to litigation once
they have been sued. He concluded that ``[t]o call arbitration
arising out of form contracts mandatory' is inaccurate
rhetoric.''
There is no hiding what this bill would do. It would
eliminate arbitration for the nursing-home industry. It would
carve an exception into the Federal Arbitration Act of 1925,
repealing part of a law that has been in place for over 80
years. It would retroactively void existing contracts. And it
would prevent even the states from enforcing arbitration
agreements between their own residents as a matter of state
law. This is an extreme bill that will do serious violence to
an established part of the American legal system. It will gut a
law that for many nursing homes in America has made the
difference between being able to continue to serve their
residents, and being driven out of business by trial-lawyer
greed.
The majority presents no competent evidence that the arbitration system
is unfair
Surely, one would suppose, that before this committee
embarked on a path of voiding thousands of private contracts,
driving nursing homes out of business, and making nursing-home
care inaccessible to thousands of Americans, the committee
would have amassed some evidence that this course of action is
necessary. It would be a reasonable supposition. But it would
be wrong.
Section 3 of the majority report devotes several pages to
``proving'' that nursing-home arbitration is unfair. The
majority first argues that arbitration is too expensive. Its
first two pieces of ``evidence'' of the costs of arbitration
come from: A trial lawyer who sues nursing homes and Public
Citizen, a fringe group that is financed by trial lawyers. Only
as its third piece of evidence does the majority finally cite
the actual fee schedule that is published by the National
Arbitration Forum, the arbitrator of choice of the American
Health Care Association. As the majority notes, this fee
schedule dictates that for filing a small-to-medium arbitration
claim the fee should be--brace yourselves!--$250. The majority
also notes that for higher claims, the fee first goes up to
$300 and can be as much as $1750 for the highest claims.
As Professor Stephen Ware notes in his written testimony to
this committee, in the analogous context of employment
lawsuits, trial lawyers typically demand retainers of $3,000 to
$3,600. Professor Ware also notes that these lawyers usually
won't even consider a case unless the damages amount to at
least $60,000 to $65,000. In other words, even for the most
expensive cases, the arbitration filing fee is less than half
of what a lawyer would charge as his initial retainer. But at
least for low-value cases, one could argue that S. 2838 would
reduce the up-front fees that an injured nursing-home resident
seeking redress will end up paying: Such a claimant will pay
zero, because he will be unable to find any lawyer at all to
take his case.
The next point in the majority's brief against arbitration
is that, under most arbitration procedures, discovery is more
limited than it is in judicial proceedings--arbitration allows
fewer depositions, subpoenas, and interrogatories. Well, yes.
The whole point of arbitration is to have a proceeding that can
resolve the case more quickly and with less expense to the
parties. And limiting discovery, by far the most expensive
element of most litigation, is an integral part of this
alternative. If the majority presented an argument that the
discovery limits typically imposed in arbitration prevent
claimants from being able to present their case--if it could
present at least one example of such a result--then it would at
least have some potential problem to address. But the majority
cites nothing. Nada. Zip. It simply notes that discovery is
more limited in arbitration. In effect, the majority argues
that arbitration is a faster, more efficient, and less
expensive means of resolving disputes.
The ultimate guarantee that the arbitration system will
generally be fair to claimants is the judicial review of
arbitration agreements. As Professor Ware noted in his
committee testimony:
The Federal Arbitration Act allows courts to
invalidate unconscionable arbitration agreements. And
this is not just a theoretical protection. Each year,
there are many cases in which courts hold particular
arbitration agreements unconscionable. Among these are
cases involving nursing homes.\4\
\4\In a footnote to this last sentence, Professor Ware cites the
following cases: Romano ex rel. Romano v. Manor Care, Inc., 861 So.2d
59 (Fla. Ct. App. 4 Dist. 2003); Howell v. NHC Healthcare-Fort Sanders,
Inc., 109 S.W.3d 731 (Tenn. Ct. App. 2003); Woebse v. Health Care &
Ret. Corp. of Am., No. 2D06-720, 2008 Fla. App. LEXIS 1446 (Fla. Dist.
Ct. App. Feb. 6, 2008).
---------------------------------------------------------------------------
And what evidence does the majority to cite to show that
the courts have abdicated their duty to supervise arbitration
agreements, and that they are allowing enforcement of
agreements that are unreasonable? Section 5 of the majority
report notes, in italicized outrage, that the courts have said
that they will only invalidate an arbitration agreement ``if
the agreement unreasonably favors one party.''
In other words, the courts themselves, to whom the majority
would consign all nursing-home injury claims, cannot be trusted
to preclude enforcement of unreasonable arbitration agreements
because they will only intervene if the agreement is
unreasonable. But what's so unreasonable about that?
The majority's next example of justice laid waste is an
Ohio case in which a court enforced a nursing-home arbitration
agreement. And what outrageous standard did the court apply in
order to reach such a result? Well, in the majority report's
words, ``the court compelled arbitration because the agreement
was not substantively unfair.'' Can you imagine that? How could
anyone oppose S. 2838 when, in the very heart of this country,
courts are enforcing arbitration agreements that ``[are] not
substantively unfair?''
The majority also cites two other cases, one from Texas and
another from Florida, but makes no effort to show that the
arbitration system at issue in either of those cases was
unfair.
It would be a rare system of adjudication for which, after
a period of review and analysis, one could not find some room
for improvement. We would be surprised if there were not at
least a few arbitration systems that are being used somewhere
in this country that have rules that are unfair, but that have
nevertheless been upheld by a court or have so far escaped
judicial review. Had this committee made an effort to review
nursing-home arbitration systems used across the United States,
we are certain that it would have found ways to improve some of
the systems that are in use.
But that is not the course upon which this committee has
embarked. S. 2838 is not an effort to fix arbitration, or to
improve the system of adjudication used by nursing homes and
their residents. This bill is designed to gut arbitration. And
it does so in the complete absence of any legislative record
that nursing-home arbitration procedures, arbitration outcomes,
or the judicial policing of the system are inadequate or
unfair.
This bill is a trial-lawyer sell out, plain and simple. It
is designed to enrich the trial bar--which collects more than
half of the value of all nursing-home-litigation awards--at the
expense of the public in general and nursing homes and their
residents in particular. It would subject nursing homes in many
states to an extortionate and out-of-control litigation system
that would destroy family businesses that have been built up
over generations. It would make it impossible for nursing homes
to obtain liability insurance, forcing many to operate without
insurance and leaving injured claimants with no compensation.
And it would inevitably reduce the availability of nursing home
care across this country, leaving many elderly people who need
nursing-home care with no option other than to go to a nursing
home that is far from their family and friends. This bill is a
travesty. We hope that it never sees the light of day.
Jon Kyl.
Jeff Sessions.
Tom Coburn.
------
[Attachment]
August 20, 2008.
Hon. Jon Kyl,
U.S. Senate, Hart Senate Office Building,
Washington, DC.
Dear Senator Kyl: I am respectfully writing to ask for your
serious consideration of the negative implications of proposed
legislation on the quality, accessibility, and even viability
of long-term care in America. The Senate is expected to mark up
S. 2838, the ``Fairness in Nursing Home Arbitration Act'' in
September. If nursing homes are denied the ability to include
pre-dispute arbitration agreements in admission contracts, many
of America's largest skilled nursing care providers could be
forced to cease operation in various areas throughout the
nation.
First, let me say, by way of introduction, that my family
has been in the nursing home business for three generations.
Today, we operate 41 facilities in four states, where we care
for 5,000 residents and employ 6,000 caregivers. We are still a
family owned enterprise committed to serving the local
communities we call home.
With this as a brief introduction, I want to relate to you
how our experience has convinced me that without the ability to
utilize arbitration as a form of dispute resolution, our
residents and the industry as a whole will suffer.
Let me begin by recounting for you how arbitration
agreements came to be used in nursing home admission contracts.
In the early 90's, several states became venues for extremely
aggressive personal injury litigation against nursing homes.
Particular states saw drastic increases in the number of
lawsuits against nursing homes along with extreme jury verdicts
reaching tens of millions of dollars. In the late 1990's and
early part of this decade, one law firm won a series of jury
verdicts in Florida ranging from $10 million to $20 million. In
2001, the same law firm received a jury verdict of $78 million
from an Arkansas jury. Increased litigation in these states had
less to do with the quality of care provided than with the
extremely emotionally charged cases and dominant legal and
political standing of some extremely talented plaintiff's
attorneys.
The leaders of the skilled nursing care profession do not,
and never will, condone the actions of those who do not strive
for the highest standards of care. Bad actions should be
punished. But during the 1990's, a feeding frenzy erupted that
changed the nursing home business forever.
In Alabama, Arkansas, Florida and Missouri, where our
facilities are located, many insurance underwriters simply
stopped offering liability insurance for nursing homes. In
Florida, there have been periods of time when traditional
liability insurance for nursing homes was not available at all,
from any company, at any price. Throughout the industry,
liability insurance became so expensive that many nursing home
operators simply could not afford it.
As insurance became either unavailable or unaffordable,
nursing home operators began restructuring and reorganizing
their businesses in an effort to keep the doors open and to
continue serving the elderly and infirmed in their care. Some
owners resorted to self-insurance programs that were little
more than cash accounts set aside to pay litigation claims if
they occurred. Other owners took steps to segment their
business operations so that a multi-million dollar claim, while
potentially fatal for the operation of one facility, did not
result in a catastrophic impact on other facilities, displacing
hundreds of residents, many of whom did not have a similar
facility in close proximity to their homes or that of their
families. These problems were faced by the entire nursing home
industry, regardless of the ownership structure. Single
facility family-owned operations as well as large corporate
operators faced the same issues.
A number of states took action to stem the rising cost of
litigation by passing tort reform measures to curtail multi-
million dollar jury verdicts. But for states where tort reform
has not been a political possibility, the use of arbitration
agreements has been the only tool available to help nursing
homes manage what had clearly become an impossible situation.
The rising cost of insurance and litigation had a direct
and lasting impact on the quality of care in nursing homes.
Hundreds of millions of dollars that could have been spent on
salaries for caregivers, modernization of aging buildings,
technological improvements, and enhanced programming to provide
a better quality of life for our patients was instead spent on
incredibly high insurance programs or in paying the cost of
record setting jury awards.
Under these conditions, both nursing home operators and
those for whom we care lacked the necessary protection
insurance is supposed to offer. Insurance approaches that left
nursing homes underinsured or with practically no insurance
fostered an environment where one large claim was enough to
force a nursing home to cease operating. That same environment
also all but guaranteed that patients with legitimate claims
that should be covered by insurance were left with little
financial compensation, or even none at all.
In the face of what was becoming a national crisis, some
nursing homes opted to simply shut their doors in those states
where they could no longer afford to operate. Others, like
myself, who wanted to continue serving the residents of these
communities, turned to the use of pre-dispute arbitration
agreements as a levy against the rising tide of insurance and
litigation costs. Since the institution of arbitration
agreements, states that were experiencing the highest frequency
of litigation and the greatest financial loses have seen an
incredible turn around. According to AON's 2008 study, loss
costs in Florida have decreased from $9,090 per bed in 1997 to
$1,680 per bed in 2007. Although loss costs in Florida have
dramatically decreased the frequency of lawsuits filed
continues to prohibit insurance providers from completely re-
entering the market with affordable traditional liability
coverage.
Arbitration has provided a critical tool for nursing home
operators resulting in better care for patients, because now
the hundreds of millions of dollars being siphoned off by
litigation can be redirected to improved patient care.
Arbitration provided this financial benefit without forfeiting
the protections guaranteed to our patients by law. As recently
as this year the United States Supreme Court made it clear that
entering into an arbitration agreement cannot alter any
protections or remedies granted to consumers under the law.
Arbitration agreements only change the venue in which disputes
about these protections are heard.
Arbitration has ended the days of jackpot justice lottery
awards and replaced them with a system of fair judicial
findings for all concerned. In our company's personal
experience, we have never won (had a defense verdict) in an
arbitration dispute. However, since the institution of
arbitration resolution procedures, the costs of dispute
resolution in the State of Florida have decreased drastically.
This has resulted in more dollars being available and used for
the care of residents. And while the frequency of claims in
Florida has decreased by 44% since 2000, the cost of claims has
decreased by 79%. This decrease does not mean patients with
legitimate claims are being denied. It does, however, reflect
the fact that most of the exorbitant jury awards have been
eliminated; total costs of dispute resolution have been
decreased; and fees to attorneys on both sides have gone down.
Senator, at a time when the rising cost of healthcare is
having a staggering affect on our economy, national policy
makers should look closely at the impact of nursing home
litigation on American taxpayers. Eighty-four percent of all
nursing home beds are funded by Medicaid and Medicare. AON
actuarial consultants estimate that 2.7% of all Medicaid
payments to nursing homes are used to cover the cost of
litigation. That means taxpayers are paying about $1.3 billion
a year to cover the cost of nursing home litigation. AON also
estimates that 52% of all litigation cost(s) are paid to
lawyers. That means American taxpayers are devoting $675
million a year to attorney's fees.
I am tremendously concerned about what will happen if
Congress turns back the clock to the 1990s and eliminates
arbitration as a means of dispute resolution. My experience
convinces me we must expect the worst. In states where there is
still a litigious climate, the frequency of lawsuits will
increase, just as they did then, and the jury verdicts in the
tens of millions of dollars will again make headlines. As in
the past, liability insurance will be either impossible to get
or too expensive for nursing homes to afford. Hundreds of
millions of dollars that should be spent on patient care will
be siphoned off to quench a renewed feeding frenzy of lawsuits.
And in the end, the American taxpayer will be faced with a bill
that reaches into the billions as state and federal Medicaid
budgets pick up their share of the tab.
Senator Kyl, three generations of my family have dedicated
their lives to the nursing home business. I have witnessed
first-hand some of the most radical changes in the history of
American healthcare. Some of these changes have made the
quality of life better for millions of Americans, while other
changes have threatened the quality of care that all Americans
deserve. I hope you'll work with your colleagues on the
Committee and in the Senate to preserve arbitration as a means
of dispute resolution in nursing homes. While well-intentioned,
passage of S. 2838 will reduce access to the kind of quality
care our nation's elderly deserve.
Thank you.
Sincerely,
J. Norman Estes,
President and CEO, NHS Management, LLC.
VIII. Changes to Existing Law Made by the Bill, as Reported
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 2838, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
UNITED STATES CODE
TITLE 9--ARBITRATION
Sec. 1. [``Maritime transactions'' and ``commerce'' defined; exceptions
to operation of title] Definitions
(a) As used in this chapter the term--
(1) ``[Maritime] maritime transactions'', as herein
defined, means charter parties, bills of lading of
water carriers, agreements relating to wharfage,
supplies furnished vessels or repairs to vessels,
collisions, or any other matters in foreign commerce
which, if the subject of controversy, would be embraced
within admiralty [jurisdiction;] jurisdiction;
(2) ``commerce'', as herein defined, means commerce
among the several States or with foreign nations, or in
any Territory of the United States or in the District
of Columbia, or between any such Territory and another,
or between any such Territory and any State or foreign
nation, or between the District of Columbia and any
State or Territory or foreign nation, but nothing
herein contained shall apply to contracts of employment
of seamen, railroad employees, or any other class of
workers engaged in foreign or interstate commerce[.];
(3) ``long term care facility'' means--
(A) any skilled nursing facility, as defined
in 1819(a) of the Social Security Act;
(B) any nursing facility as defined in
1919(a) of the Social Security Act; or
(C) a public facility, proprietary facility,
or facility of a private nonprofit corporation
that--
(i) makes available to adult
residents supportive services to assist
the residents in carrying out
activities such as bathing, dressing,
eating, getting in and out of bed or
chairs, walking, going outdoors, using
the toilet, obtaining or taking
medication, and which may make
available to residents home health care
services, such as nursing and therapy;
and
(ii) provides a dwelling place for
residents in order to deliver such
supportive services referred to in
clause (i), each of which may contain a
full kitchen and bathroom, and which
includes common rooms and other
facilities appropriate for the
provision of supportive services to the
residents of the facility; and
(4) ``pre-dispute arbitration agreement'' means any
agreement to arbitrate disputes that had not yet arisen
at the time of the making of the agreement.
(b) The definition of ``long-term care facility'' in
subsection (a)(3) shall not apply to any facility or portion of
facility that--
(1) does not provide the services described in
subsection (a)(3)(C)(i); or
(2) has as its primary purpose, to educate or to
treat substance abuse problems.
SEC. 2. VALIDITY, IRREVOCABILITY, AND ENFORCEMENT OF AGREEMENTS TO
ARBITRATE
SEC. 2. VALIDITY AND ENFORCEABILITY
[A written](a) A Written provision in any maritime
transaction or a contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter
arising out of such contract or transaction, or the refusal to
perform the whole or any part thereof, or an agreement in
writing to submit to arbitration an existing controversy
arising out of such a contract, transaction, or refusal, shall
be valid, irrevocable, and enforceable[, save upon such grounds
as exist at law or in equity for the revocation of any
contract] to the same extent as contracts generally, except as
otherwise provided in this title.
(b) A pre-dispute arbitration agreement between a long-term
care facility and a resident of a long-term care facility (or
anyone acting on behalf of such a resident, including a person
with financial responsibility for that resident) shall not be
valid or specifically enforceable.
(c) This section shall apply to any pre-dispute arbitration
agreement between a long-term care facility and a resident (or
anyone acting on behalf of such a resident), and shall apply to
a pre-dispute arbitration agreement entered into either at any
time during the admission process or at any time thereafter.
(d) A determination as to whether this chapter applies to
an arbitration agreement described in subsection (b) shall be
determined by Federal law. Except as otherwise provided in this
chapter, the validity or enforceability of such an agreement to
arbitrate shall be determined by the court, rather than the
arbitrator, irrespective of whether the party resisting the
arbitration challenges the arbitration agreement specifically
or in conjunction with other terms of the contract containing
such agreement.