[Federal Register Volume 84, Number 138 (Thursday, July 18, 2019)]
[Rules and Regulations]
[Pages 34718-34736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14945]
[[Page 34717]]
Vol. 84
Thursday,
No. 138
July 18, 2019
Part IV
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 410, 482, 483, et al.
Medicare and Medicaid Programs; Revision of Requirements for Long-Term
Care Facilities: Arbitration Agreements; Final Rule
Medicare and Medicaid Programs; Requirements for Long-Term Care
Facilities: Regulatory Provisions To Promote Efficiency, and
Transparency; Proposed Rule
Federal Register / Vol. 84 , No. 138 / Thursday, July 18, 2019 /
Rules and Regulations
[[Page 34718]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 483
[CMS-3342-F]
RIN 0938-AT18
Medicare and Medicaid Programs; Revision of Requirements for
Long-Term Care Facilities: Arbitration Agreements
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule amends the requirements that Long-Term Care
(LTC) facilities must meet to participate in the Medicare and Medicaid
programs. Specifically, we are repealing the prohibition on the use of
pre-dispute, binding arbitration agreements. We are also strengthening
the transparency of arbitration agreements and arbitration in LTC
facilities. This final rule supports residents' rights to make informed
choices about important aspects of their health care.
DATES: These regulations are effective on September 16, 2019.
FOR FURTHER INFORMATION CONTACT: LTC Regulations Team: Diane Corning
and Sheila Blackstock at (410) 786-6633.
SUPPLEMENTARY INFORMATION:
I. Background
Prior to October 2016, the requirements for Long-Term Care (LTC)
facilities to participate in the Medicare and Medicaid programs, found
in 42 CFR part 483, contained no provisions specific to the use of pre-
dispute, binding arbitration agreements between LTC facilities and
their residents. Then, on October 4, 2016, we published in the Federal
Register a final rule entitled ``Reform of Requirements for Long-Term
Care Facilities'' (81 FR 68688) (2016 final rule), that, among other
revisions, established several requirements regarding the use of
binding arbitration agreements by long-term care facilities.
Specifically, the 2016 final rule amended 42 CFR 483.70(n) to
prohibit LTC facilities from entering into pre-dispute, binding
arbitration agreements with any resident or his or her representative,
or requiring that a resident sign an arbitration agreement as a
condition of admission to the LTC facility. It also required that an
agreement for post-dispute binding arbitration be entered into by the
resident voluntarily, that the parties agree on the selection of a
neutral arbitrator, and that the arbitral venue be convenient to both
parties. The arbitration agreement could be signed by another
individual only if allowed by the relevant state's law, if all of the
other requirements in this section were met, and if that individual had
no interest in the facility. In addition, a resident's right to
continue to receive care at the facility post-dispute could not be
contingent upon the resident or his or her representative signing an
arbitration agreement. The arbitration agreement could not contain any
language that prohibited or discouraged the resident or anyone else
from communicating with federal, state, or local officials, including
but not limited to, federal and state surveyors, other federal and
state health department employees, and representatives of the Office of
the State Long-Term Care Ombudsman. In addition, when a LTC facility
and a resident resolved a dispute through arbitration, a copy of the
signed agreement for binding arbitration and the arbitrator's final
decision was required to be retained by the facility for 5 years and be
available for inspection upon request by the Centers for Medicare &
Medicaid Services (CMS) or its designee.
On October 17, 2016, the American Health Care Association (AHCA)
and a group of affiliated nursing homes filed a complaint in the United
States District Court for the Northern District of Mississippi, Oxford
Division seeking a preliminary and permanent injunction enjoining
agency enforcement of the prohibition on pre-dispute, binding
arbitration agreements, as provided in the regulation (Sec.
483.70(n)(1)) (AHCA litigation). On November 7, 2016, the district
court preliminarily enjoined enforcement of that regulation prohibiting
the use of pre-dispute, binding arbitration agreements (Civil Action
No. 3:16-CV-00233).
As a result of the court's decision, on December 9, 2016, we issued
a nation-wide instruction to State Survey Agency Directors, directing
them not to enforce the 2016 final rule's prohibition of pre-dispute,
binding arbitration provisions during the period that the court-ordered
injunction remained in effect (S&C: 17-12-NH) https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-17-12.pdf).
In addition, we determined that further analysis of the arbitration
provisions was warranted. We re-evaluated the provisions to determine
if a policy change would achieve a better balance between the
advantages and disadvantages of pre-dispute, binding arbitration for
residents and their providers and to ensure that the requirements
complied with the terms of the January 30, 2107 Executive Order
``Reducing Regulation and Controlling Regulatory Costs'' (E.O. 13771).
Based on this further analysis, we developed a revised regulatory
approach to the use of arbitration agreements by Medicare and Medicaid
participating LTC facilities.
On June 8, 2017, we published in the Federal Register a proposed
rule entitled ``Revision of Requirements for Long-Term Care Facilities:
Arbitration Agreements'' (82 FR 26649) (2017 proposed rule). The 2017
proposed rule would remove the provision prohibiting pre-dispute,
binding arbitration agreements and strengthen requirements regarding
the transparency of arbitration agreements in LTC facilities. The
proposal would support the resident's right to make informed choices
about important aspects of his or her health care.
Statutory Authority
The agency has statutory authority to issue these rules under the
authority granted by the Congress in the Nursing Home Reform Act, part
of the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), (Pub. L.
100-203, 101 Stat. 1330 (1987)). That statute added sections 1819 and
1919 to the Social Security Act (the Act), authorizing the agency to
promulgate regulations that are ``adequate to protect the health,
safety, welfare, and rights of residents and to promote the effective
and efficient use of public moneys'' (Sections 1819(f)(1) and
1919(f)(1) of the Act). In addition, sections 1819(d)(4)(B) and
19199(d)(4)(B) of the Act authorizes the Secretary to impose ``such
other requirements relating to the health and safety [and well-being
\1\] of residents as [he] may find necessary''. This final rule does
not purport to regulate the enforceability of any arbitration
agreement, and, assuming that it limits the right of the Secretary to
protect the rights of Medicaid beneficiaries, in our view, this rule
does not pose any conflict with the language of the Federal Arbitration
Act (FAA).
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\1\ Section 1819 only.
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II. Provisions of the Proposed Regulations
In the 2017 proposed rule, we proposed to revise the provision
related to pre-dispute, binding arbitration at Sec. 483.70(n). We
proposed to remove provisions that we believed on reconsideration did
not strike the best balance between the advantages and
[[Page 34719]]
disadvantages of pre-dispute, binding arbitration. Specifically, we
proposed to:
Remove the requirement at Sec. 483.70(n)(1) precluding
facilities from entering into pre-dispute, binding agreements for
binding arbitration with any resident or resident's representative;
remove the provisions at Sec. 483.70(n)(2)(ii) regarding
the terms of arbitration agreements; and
remove the prohibition at the root statement and Sec.
483.70(n)(2)(iii) banning facilities from requiring that residents sign
arbitration agreements as a condition of admission to, or as a
requirement to continue to receive care at, a facility.
We proposed to retain provisions important to transparency of
arbitration agreements. Specifically, we proposed to retain that:
The agreement be explained to the resident and his or her
representative in a form and manner that he or she understands,
including in a language that the resident and his or her representative
understands; and require that the resident acknowledge that he or she
understands the agreement,
the agreement must not contain any language that prohibits
or discourages the resident or anyone else from communicating with
federal, state, or local officials, including but not limited to,
federal and state surveyors, other federal or state health department
employees, and representatives of the Office of the State Long-Term
Care Ombudsman, in accordance with Sec. 483.10(k), and
when the facility and a resident resolve a dispute through
arbitration, a copy of the signed agreement for binding arbitration and
the arbitrator's final decision must be retained by the facility for 5
years and be available for inspection upon request by CMS or its
designee.
Finally, we proposed to add two transparency requirements.
Specifically, we proposed to require that:
The facility ensure that the agreement for binding
arbitration is in plain language, and
the facility must post a notice in plain language that
describes its policy on the use of agreements for binding arbitration
in an area that is visible to residents and visitors.
In response to the 2017 proposed rule, we received over 1,000
comments concerning the changes to the requirements regarding
arbitration. Many comments were submitted by organizations that
advocate for the rights of older adults, residents in nursing homes, or
people with disabilities, including State Offices of the Long-Term Care
Ombudsman.
III. Responses to Public Comments
We have reviewed all of the comments received and considered the
concerns raised by all stakeholders. As a result, we have made some
revisions to the proposed rule in response to public comments.
Specifically, as discussed in detail below, we are finalizing our
proposals to remove the requirement at Sec. 483.70(n)(1) precluding
facilities from entering into pre-dispute, binding agreements for
binding arbitration with any resident or his or her representative, and
the provisions at Sec. 483.70(n)(2)(ii) regarding the terms of
arbitration agreements. We are not finalizing the proposed removal of
the provision at Sec. 483.70(n)(2)(iii) banning facilities from
requiring that residents sign arbitration agreements as a condition of
admission to a facility. Therefore, facilities will continue to be
prohibited from requiring any resident or his or her representative to
sign an agreement for binding arbitration as a condition of admission
to the facility. In addition, to address commenters' concerns that
facilities may still coerce or intimidate the resident and his or her
representative into signing the agreement, the facility must explicitly
inform the resident or his or her representative that signing the
agreement is not a condition of admission and ensure that this language
is also in the agreement. We are finalizing provisions requiring that
arbitration agreements be in a form and manner that the resident
understands. However, we are not finalizing the proposed transparency
related provisions that the facility must ensure that the agreement for
binding arbitration is in ``plain language'' and that the facility post
a notice regarding the use of agreements for binding arbitration in an
area that is visible to residents and visitors. We are not finalizing
the proposed removal of the provision specifying that a resident's
right to continue to receive care at the facility must not be
contingent upon signing an arbitration agreement. Finally, based on
comments, we are adding a requirement that facilities grant to
residents a 30 calendar day period during which they may rescind their
agreement to an arbitration agreement. Our rationale for these changes,
as well as our responses to comments we received on these issues is
discussed below in detail.
A. General Comments
Comment: The overwhelming majority of commenters were opposed to
our proposal to remove the prohibition on pre-dispute, binding
arbitration agreements and recommended that we keep the requirements
established by the October 2016 final rule. These commenters included
consumer advocates, legal organizations, health care providers and
practitioners, and members of the public. Some commenters believed that
the current requirements contained long overdue improvements and the
proposed rule was ``reversing course'' on those improvements. They
agreed with the reasoning in the October 2016 final rule and often
quoted the language in that rule. Some commenters favored the proposed
revisions and supported finalizing the revisions as proposed. Others
supported the proposed revisions but recommended specific changes. One
commenter stated that they would support arbitration agreements, if
they were properly structured. The commenter recommended requiring a
rescission period, changes in the agreement terms, and even the
creation of a governmental arbitration agency. Another commenter, a
non-profit, long-term care provider, favored allowing voluntary, pre-
dispute, binding arbitration agreements. Although the majority of
commenters expressed support for the 2016 final rule, we also received
comments from associations representing the LTC industry supporting the
use of pre-dispute, binding arbitration agreements.
Response: In light of this broad spectrum of opinions, we have
decided to revise Sec. 486.70(n) by removing the prohibition on pre-
dispute, binding arbitration agreements and creating protections
against the abuses associated with arbitration agreements. Most
significantly, arbitration agreements must not be used as a condition
of admission to, or as a requirement for a resident to continue to
receive care at, the facility. The agreement must explicitly grant
residents the explicit right to rescind the agreement within 30
calendar days of signing it. The recommendation that there be the
creation of a government arbitration agency is beyond the scope of this
rule.
Comment: Some commenters stated that any regulations addressing
arbitration are unnecessary. They stated that, under current law,
residents, as well as all consumers, are already protected against
fraud, unfairness, duress, and other types of overreaching in contracts
by state contract and consumer protection law. For example, they
contended that state laws already require the party seeking to enforce
a contract, in this case the LTC facility
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seeking to compel the resident or his or her representative to
arbitrate a dispute, to demonstrate that the other party consented to
the agreement. They asserted that a fundamental concept of contract law
is a `meeting of the minds' and `a manifestation of mutual assent.'
Thus, if the agreement is not in a language the resident understands or
he or she does not understand the agreement for some other reason, it
could be held invalid or unenforceable. Some commenters also pointed
out that allowing LTC facilities to make signing an arbitration
agreement a condition of admission might conflict with some states'
laws. Another commenter pointed out that state courts would routinely
invalidate unfair arbitration provisions on generally-applicable
unconscionability principles for a variety of reasons, such as
limitations on a consumer/resident's substantive rights to recover
certain types of damages permitted to them by federal and state law, an
unreasonably shortened statute of limitations, and unfair selection or
excessive fees associated with selection of the arbitrator, arbitration
venue, or access to an arbitral forum. Since residents can already
challenge arbitration agreements in court under state law, these
commenters believed residents' rights are already being protected and
the arbitration requirements in the 2016 final rule are unnecessary.
Some commenters even asserted that there should be no arbitration
provisions in the LTC requirements because CMS has no expertise in this
area and there is no evidence that state law is failing to adequately
protect its citizens, including residents, regarding arbitration. Many
commenters requested that, if we finalized our proposal to remove the
prohibition on pre-dispute, binding arbitration agreements, CMS should
remove all provisions discussing arbitration requirements. They stated
that having no requirements regarding arbitration would be better for
the residents than having any. Another commenter stated that, since
much of the reimbursement received by these facilities is from the
Medicare and Medicaid programs, which are funded by taxpayers, there
should never be any limitations on the rights and remedies provided by
state law.
Response: We agree with the commenters that many states' contract
and consumer protection laws offer residents, as well as others,
protections from unfair contracts, including pre-dispute, binding
arbitration agreements that are unconscionable or are otherwise
unenforceable under state contract law. This is why we revisited the
protections promulgated in the October 2016 final rule. However, even
though state law may provide some protection for residents, commenters
raised a number of concerns that convinced us that these protections
are limited and do not protect the unique needs of Medicare and
Medicaid beneficiaries. Commenters pointed out that state laws differ
and would likely offer varying levels of protection to residents. The
requirements in this final rule offer consistent levels of protection
to all residents in LTC facilities that are certified by the Medicare
and Medicaid programs. Commenters also stated that many residents would
find it difficult, if not impossible, to challenge these agreements in
court. The resident or his or her family would generally have to retain
an attorney. Since most residents' care is being paid for by either
Medicare or Medicaid, some residents may not have the resources to pay
an attorney. Many commenters also noted that engaging an attorney to
challenge an arbitration agreement is also difficult because, should
the challenge prove unsuccessful, the damages awarded through
arbitration are generally lower than those awarded through judicial
proceedings. If the award is smaller, the attorney's fee would likely
also be smaller if the attorney took the case on a contingency basis.
In addition, one commenter presented evidence of several instances
indicating that challenging an arbitration agreement, even if
successful, could result in years of delay before the claim could be
resolved. The commenter cited 14 cases involving claims of abuse or
neglect where the resident or their family successfully challenged the
enforceability of an arbitration agreement. The commenter noted that it
required between two and four years to resolve the issue of the
enforceability of the binding arbitration before addressing the
underlying abuse and neglect claim. Commenters said that some attorneys
could determine that the delay associated with a particular case did
not justify the resources and time needed to challenge the
enforceability of a binding arbitration agreement. Some commenters were
concerned that facilities could make it more difficult for residents to
challenge arbitration agreements. Thus, some residents or their
representatives would find it difficult, perhaps almost impossible, to
retain an attorney to challenge the arbitration agreement in court.
State law protections would be meaningless to residents if, as a
practical manner, they did not have the ability to challenge these
agreements in court. Thus, we believe that relying solely on state
contract or consumer protection law, enforced primarily by private
action, could in fact result in little to no real protections for the
residents.
We believe the LTC requirements finalized in this rule are
essential to ensure that arbitration agreements are not barriers to the
resident receiving care and that there is no interference with federal,
state, or local officials investigating quality of care issues.
Therefore, in this final rule, we are retaining the existing
requirement at Sec. 483.70(n)(1), which prohibits the facility from
using an arbitration agreement as a condition of admission. We are also
retaining the requirement that an arbitration agreement cannot be used
as a condition of admission to, or right to continue to receive care
at, the facility. In addition, facilities must explicitly inform the
resident or his or her representative that it is his or her right not
to sign the agreement and this language must also be in the arbitration
agreement. This provision will ensure that no resident or his or her
representative will have to choose between signing an arbitration
agreement and receiving care at the LTC facility. Although we are not
finalizing a prohibition on pre-dispute, binding arbitration
agreements, we believe that the requirements we are finalizing in this
rule will provide the protections residents and their representatives
will need to avoid being compelled to arbitrate disputes with LTC
facilities without voluntarily and knowingly choosing to do so. The LTC
facility must not require the resident or his or her representative
sign an agreement for binding arbitration as a condition of admission
to, or as a requirement for the resident to continue to receive care
at, the facility. The facility must also ensure that the agreement is
explained to the resident or his or her representative in a form and
manner that he or she understands, and that individual(s) must
acknowledge that he or she understands the agreement. The agreement
must also explicitly grant the representative or his or her
representative the right to rescind the agreement within 30 calendar
days of signing it. This allows the resident to seek legal advice, if
he or she chooses to do so. These requirements ensure that a decision
on whether to sign the agreement is made only after the resident or his
or her representative understands what he or she is agreeing to and
that there is time to reconsider a decision to sign the agreement and
seek legal advice, if he or she chooses
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to do so. We believe that these protections address the concerns of the
commenters who contended that LTC facilities were taking advantage of
or coercing residents to sign these agreements.
We are also finalizing Sec. 483.70(n)(2), which specifies that the
agreement cannot contain any language that prohibits or discourages the
resident or anyone else from communicating with federal, state, or
local officials, including federal and state surveyors, other federal
or state health department employees, and representatives of the Office
of the State Long-Term Care Ombudsman. This is the same requirement
that was located at Sec. 483.70(n)(2)(iv) in the 2016 final rule.
Commenters informed us that a significant number of claims subjected to
arbitration address quality of care issues. They also stated that it is
quite often the case that the arbitral forum itself does not provide a
way for the beneficiaries to seek full redress for their injuries.
Commenters further stated that, when this happens, many substandard
nursing homes continue providing poor care because the consequences for
their conduct are insignificant. In light of these comments, we have
concluded that the Secretary's statutorily-mandated duty to protect the
health and safety of residents mandates that we create protections that
assist LTC residents in knowingly and willingly entering into
arbitration agreements that provide a neutral and fair arbitration
process.
Comment: Several commenters were concerned about the effect that
federal rules on arbitration might have on state laws addressing
arbitration. They expressed particular concern that a federal
regulation might be viewed as superseding state arbitration laws that
are designed to protect residents and their families. State courts have
invalidated arbitration agreements due to, among other reasons,
unconscionability, fraud, and duress. Other state laws protect
consumers from one-sided or cohesion contracts. The commenters claimed
that these protections could not be overridden by the FAA because they
apply to all consumer contracts and not arbitration agreements
specifically. They expressed concern that a facility might argue that
being in compliance with the current regulation would demonstrate that
the arbitration agreement in question was not unconscionable. Other
commenters believed that the arbitration requirements could conflict
with the current consumer protection laws in some states and result in
facilities avoiding or believing that those protections would no longer
apply to residents, perhaps even those designed to prevent elder abuse.
Some commenters were concerned that facilities would argue that their
arbitration agreements were fair and that the court should compel
arbitration because they complied with the arbitration requirements in
the federal LTC requirements. This could make it more difficult for
residents and their families to challenge an arbitration agreement in
court. Other commenters also pointed out that, since it was against LTC
facilities' interests to get residents or their families to sign
arbitration agreements that could be struck down by a state court, they
would not do so.
Response: We understand the commenters' concerns; however, we do
not believe the requirements finalized in this rule will be detrimental
to residents. These protections are in no way designed to supersede or
interfere with state laws or other state contract and consumer
protection laws. Many of these state laws provide for more protections
than are set forth in the LTC requirements, and we believe it is in the
best interests of the residents to have maximum protection afforded by
law to protect their rights. This regulation is not intended in any way
to preempt these state laws except to the extent any such laws are
actually in conflict with this regulation. This regulation provides
additional protections, and it is our hope that state court judges will
understand this when deciding whether an arbitration agreement complies
with any protections afforded residents under state law. In addition,
the purpose of our LTC facility requirements are to protect the health,
safety, welfare, and rights of residents. CMS establishes these minimum
requirements that LTC facilities must meet to receive payment
reimbursement from the Medicare and Medicaid programs. Hence, we do not
believe that the arbitration requirements finalized in this rule would
negatively impact any challenge to an arbitration agreement in state
court.
Comment: Some commenters asserted that the confidential nature of
arbitration could result in LTC facilities being able to hide, or avoid
the consequences of, providing substandard or poor care. Commenters
stated that since arbitration proceedings and the arbitrator's final
decision are not matters of public record, that by allowing pre-
dispute, binding arbitration agreements, LTC facilities could avoid
some of the consequences of poor care, such as larger jury awards than
those generally awarded in arbitration proceedings and a bad reputation
that could dissuade potential residents from seeking admission to a
facility.
Response: As discussed above, commenters have raised a variety of
concerns about the confidential nature of arbitration. We share their
concerns, and we are therefore finalizing the requirements mandating
that LTC facilities retain copies of the signed arbitration agreement
and the arbitrator's final decision for each dispute resolved through
arbitration. They must retain these documents for 5 years after the
resolution of the dispute, and make them available for inspection by
CMS or its designee. This will allow us to gather data on how
arbitration is being conducted in LTC facilities. We note the sincere
concerns of many individual commenters that residents are not being
treated fairly in facilities that use pre-dispute, binding arbitration
agreements and that quality of care is negatively impacted by the use
of these agreements. We believe that collecting these data would play a
part in helping us determine the validity of these allegations on
quality of care. For more information on our efforts to improve the
quality of care in nursing homes, please see the Nursing Home Quality
Initiative web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/index.html.
Comment: Some commenters agreed with our proposal to rescind the
prohibition on pre-dispute, binding arbitration agreements. One
organization stated that there was no policy justification for the
prohibition or even regulating arbitration in any way because
arbitration does not affect a resident's health, safety, or welfare.
Another commenter disagreed with some of our statements in the 2016
final rule. This commenter noted that non-profit LTC providers are
mission-driven and focus on providing the highest quality of care to
their residents. The commenter noted that studies show that non-profit
providers consistently provide the quality of care and service that
exceeds that of for-profit LTC providers, because they do not have
shareholders, investors, or owners that could pressure the facility to
increase profits. The commenter also noted that there was no identified
widespread deficiency in the care provided by non-profit LTC providers
that would justify or be addressed by the prohibition of voluntary pre-
dispute, binding arbitration agreements between the facility and its
residents. The commenter stated the threat of excessive jury verdicts
was unnecessary to provide incentive for non-profit
[[Page 34722]]
providers to either maintain or improve the quality of care they
provide to their residents. A non-profit provider that served, and was
set up to accommodate the Jewish community was concerned that a blanket
prohibition on voluntary, pre-dispute, binding arbitration agreements
would violate exercise of freedom of religion in violation of the
Religious Freedom and Restoration Act. The commenter noted that under
some interpretations of Talmudic law, disputes are not to be settled in
secular courts. The commenter was concerned that if a resident either
dies or another individual has authority to act for them, such other
individual could file a lawsuit against the facility, and that such
suit could conceivably be contrary to the deceased/incapacitated
resident's beliefs. Essentially, they asserted that the relationship
between the residents of their facility and the facility itself was not
merely a commercial transaction since both the provider and the
resident share mutual goals, aligned interests, and trust. However,
they also stated that they did not object to common sense requirements
that ensure that the agreement was voluntary. The commenter indicated
that they would not object to requiring that the agreement be in plain
language, explained to the resident in a form and manner he or she
understands, and the resident must acknowledge that he or she
understands the agreement.
Response: We appreciate that some data like the Nursing Home Data
Compendium 2015 Edition (NHDC), indicate that non-profit LTC facilities
tend to provide a better quality of care than some for-profit
facilities, as evidence by fewer health deficiencies found on surveys.
See https://www.cms.gov/Medicare/Provider-Enrollment-and-certification/CertificationandComplianc/Downloads/nursinghomedatacompendium_508-2015.pdf) (Accessed May 25, 2018). However, all ownership types of LTC
facilities, including non-profits, have been cited for health
deficiencies, sometimes very serious ones that result in a finding of
actual harm or immediate jeopardy (NHDC, pp. 92-97). We agree with the
commenters that completely prohibiting the use of pre-dispute, binding
arbitration agreements could be too burdensome for some LTC facilities,
regardless of whether they are non-profit or for-profit LTC facilities,
because it would deny facilities a method of dispute resolution that
can be faster and more economical than resolving the dispute in court.
Thus, as we have noted previously, we are modifying the original rule
to provide a balance between LTC facilities' desire for arbitration and
the need for protections for LTC facility residents.
Regarding the commenter that was concerned that prohibiting a LTC
facility from entering into pre-dispute, binding arbitration agreements
with its residents could violate a resident's wishes, especially if
they pass away or become incapacitated, we acknowledge that situation
could happen. Since we have finalized the removal of that prohibition,
we believe the commenter's concern has been addressed.
Comment: Some commenters stated that the proposed changes to the
2016 final rule were contrary to the evidence we presented and the
comments we received when promulgating the 2016 rule. One commenter
stated that the 2017 proposed rule did not address the evidence upon
which we based the LTC facility requirements in the 2016 final rule.
They asserted that the 2017 proposed rule was improper because it
constituted a complete reversal of the policy in the 2016 final rule
and, as such, CMS could not modify the 2016 rule without identifying or
citing new evidence that justified the proposed changes. This commenter
believed that the 2016 final rule presented an extensive literature
review and an analysis of public comments that overwhelmingly
demonstrated that pre-dispute, binding arbitration agreements should be
prohibited. They insisted that the 2016 final rule constituted a
carefully considered policy and should not be reversed on weak or non-
existent evidence. Another commenter stated that, since the
overwhelming number of comments opposed the use of pre-dispute, binding
arbitration agreements because of the dangers they pose to the health,
safety, and welfare of residents in LTC facilities, there is no
reasonable basis for reversing the policy in 2016 final rule. The
commenter stated that the 2016 final rule was clearly well justified by
the evidence, the comments, and solid legal authority. They asserted
that the modifications to the 2016 final rule contained in the 2017
proposed rule lacked the same level of support that underpinned the
2016 final rule. One commenter cited Federal Communications Commission
v. Fox Television Stations, Inc. (566 U.S. 502, 129 S.Ct. 1800 (2009))
(FCC vs. Fox), in which the U.S. Supreme Court addressed the legal
standard governing whether an agency's reversal of a prior action is
arbitrary and capricious. Based upon this opinion, the commenter stated
that the critical protections in the 2016 final rule could not be
rescinded without supplying a reasoned, record-based explanation for
reversing its assessment of the evidence and comments that demonstrated
the negative impact of forced arbitration on LTC residents.
Response: In the 2017 proposed and this final rule, we have
provided a rationale for the requirements that are being finalized. As
we noted earlier, the vast majority of commenters from the LTC industry
have argued for the continued use of arbitration agreements for reasons
of cost and efficiency. This regulation is designed to strike a balance
between those concerns and protecting the needs of LTC residents.
Furthermore, one court has preliminarily enjoined the agency from
enforcing the prohibition against pre-dispute, binding arbitration
agreements. Given our reconsideration of the available evidence and
based on our review of the comments we received, as well as the
comments received for the 2017 proposed rule, we believe the policies
set forth in this final rule better balance the need for resident
protections with the potential burden on LTC facilities' need for
efficient and cost-effective operation. The court in FCC vs. Fox
clearly indicated that an agency action would not be subject to
heightened scrutiny simply because it changed its policy. It need only
demonstrate that--(1) it is changing its position; (2) the new policy
is permissible under the statute; (3) it has good reasons for the new
policy and for the change of policy; and (4) that it believes the new
policy is better. (FCC v. Fox, 566 U.S. 502, 515, 129 S.Ct. 1800,
1811.) We have explained our reasoning for the changes to the
requirements and believe that these finalized requirements constitute a
better policy. Concerning the ``evidence'' and comments referred to by
the commenter, there was very little statistical data (although a great
deal of anecdotal evidence and reportage) upon which we made our
decisions that supported this provision of the 2016 final rule. Many
comments were based upon anecdotal or personal experiences, and some
commenters provided articles published in various general and legal
periodicals. However, there was little solid social science research
evidence to support these assertions. In light of the lack of
statistical data, we believe the best way to strike a balance between
the stakeholders supporting arbitration and residents having a complete
understanding of the consequences of entering into an arbitration
agreement is to issue regulations that ensure that these agreements not
be used as a condition of admission to, or as a requirement for a
resident to continue to
[[Page 34723]]
receive care at, the facility and the arbitration process is
transparent to the resident and his or her representative. In addition,
the requirement to retain copies of the arbitration agreement and the
arbitrator's final decision will allow us to learn how arbitration is
being used by LTC facilities and how this is affecting the residents.
Comment: Some commenters believed that the proposed changes to the
arbitration requirements were politically motivated. Some believed that
the motivation for these changes, which they believe benefit the
providers at the detriment of the residents' rights, resulted from the
change in administrations. One commenter noted the sudden and
remarkable change between allowing pre-dispute, binding arbitration
agreements in the 2017 proposed rule as compared to the 2016 final
rule, which prohibited these agreements, despite CMS having earlier
stated that ``there is significant evidence that pre-dispute
arbitration agreements have a deleterious impact on the quality of care
for [nursing home] patients'' in the 2016 final rule (81 FR 68791). One
commenter even stated that they thought these changes would personally
benefit some in the current administration.
Response: While there has been a change in Administration since the
2016 Final Rule was published, we disagree that change was the sole or
primary reason for the proposed changes. As discussed above, at least
one district court has rendered a decision that preliminarily enjoins
us from enforcing the prohibition against pre-dispute, binding
arbitration agreements. Following that ruling, we undertook a re-
evaluation of the arbitration-related requirements in order to
determine if a different approach would better serve both residents and
facilities. That approach is reflected in this final rule, which
includes some of the requirements in the 2016 Final Rule.
Comment: Some commenters that are opposed to pre-dispute, binding
arbitration agreements asserted that post-dispute, binding arbitration
agreements could be appropriate in a LTC setting. Since the agreement
would be signed after the circumstances of the dispute had occurred,
the resident could make an informed decision about settling the dispute
with the facility through binding arbitration. However, other
commenters were in favor of our proposal to remove the prohibition or
ban on pre-dispute, binding arbitration agreements because they
believed it was the equivalent of banning all arbitration. These
commenters contended that parties often are unwilling to consider
arbitration after a dispute arises. After a dispute arises, parties
often have an emotional investment in resolving the dispute solely in
their favor. This emotional investment often results in the parties not
being able to evaluate the dispute logically or rationally. They may
also believe that a willingness or offer to negotiate or submit the
dispute to arbitration may appear as weakness. As a result, at least
one of the parties would virtually always reject arbitration in favor
of judicial proceedings, while another commenter asserted that pre-
dispute, binding arbitration agreements were the most efficient way to
ensure that parties do, in fact, arbitrate their disputes.
Response: As the comments make clear, there are strong arguments
both for and against pre-dispute, binding arbitration agreements. This
is a key reason why we are modifying this rule in an attempt to create
a balance between both sides. As discussed above, we are finalizing our
proposal to remove the prohibition on pre-dispute, binding arbitration
agreements. Facilities and their residents will be able to enter into
both pre-dispute and post-dispute binding arbitration agreements as
long as facilities comply with the requirements that we are finalizing
in this rule.
Comment: Some commenters were opposed to our proposal to remove the
requirements at Sec. 483.70(n)(2)(ii)(A), (B), and (C) in the 2016
Final Rule. Those requirements were that the agreement must: (A) Be
entered into by the resident voluntarily, (B) Provide for the selection
of a neutral arbitrator agreed upon by both parties, and (C) Provide
for selection of a venue convenient to both parties. Commenters
contended that these protections were critical for residents as they,
at least partially, addressed the unequal bargaining power between the
resident or his or her representative and the facility. Another
commenter said that the selection of a neutral arbitrator was a key
component of the LTC facility's accountability and consumer protection.
One commenter pointed out that since residents have explicit rights to
select their pharmacist and doctor, residents should also have a voice
in the selection of the arbitrator and the location of the arbitration.
Response: We agree with the commenters. We believe these components
are standard elements of arbitration and expect that these elements
would be covered in the arbitration agreement. To ensure that the
resident or his or her representative has the benefit of these
components, this final rule retains the requirement that the facility
provide for the selection of a neutral arbitrator agreed upon by both
parties and provide for the selection of a venue convenient to both
parties. However, we will remove the requirement that the resident or
his or her representative sign the agreement voluntarily as we believe
this provision is redundant. Other requirements in this section ensure
that the agreement is explained and the resident or his or her
representative knows that he or she does not have to sign the agreement
as a condition of admission to, or as a requirement to continue to
receive care at, the facility. In addition, we are finalizing a right
for the resident or his or her representative to rescind the agreement
within 30 calendar days of signing it. This provides the resident or
his or her representative an opportunity to reconsider the agreement
or, if they choose, seek legal advice. We believe that this right to
rescind the agreement, as well as the requirements to provide for a
neutral arbitrator agreed upon by both parties and the selection of a
venue convenient to both parties, provide sufficient protection against
an agreement that does not treat the resident fairly.
Comment: Some commenters appeared to interpret the district court's
holding in the AHCA litigation as a ban on all arbitration agreements
or other arbitration-specific requirements. Another commenter contended
that the district court said that the forum for the dispute, whether
resolved through judicial proceedings or arbitration, had no meaningful
effect on the health, safety, and well-being of residents.
Response: We disagree with the commenter. As noted above, in our
discussion of the relevant litigation, the only issue before the court
was whether CMS could enforce Sec. 483.70(n)(1)'s prohibition of pre-
dispute, binding arbitration agreements. The court did not address
issues beyond the arbitration prohibition.
Comment: Some commenters were against our proposal to remove the
prohibition on pre-dispute, binding arbitration agreements because they
believe the agreements are inherently unfair. They did not believe that
any LTC facility requirements could overcome that inherent unfairness.
They pointed to the imbalance of power between the resident and the
facility, the facility having drafted the agreement with terms that
would be favorable to the LTC facility, not the resident. In addition,
staff rarely have the authority to re-negotiate the terms of the
agreement with an individual prospective resident. Most residents and
their representatives are likely unfamiliar with the implications of
the
[[Page 34724]]
use of arbitration as a form of alternative dispute resolution and the
consequences of signing the agreement. In addition, many commenters
noted that residents would likely not seek legal advice before they
sign the agreement. Other commenters contended that the inherent
unfairness in using pre-dispute, binding arbitration agreements in LTC
facilities is demonstrated by policy statements issued by various
national legal and arbitration associations opposing the use of these
agreements in health care disputes.
Response: We believe that the LTC requirements finalized in this
rule will address the concerns identified by these commenters. We
further acknowledge that various legal and arbitration associations
have issued policy statements opposing the use of these agreements in
health care disputes. In the 2016 final rule, we noted that three major
legal or arbitration associations have made policy statements opposing
continued use of pre-dispute, binding arbitration agreements (81 FR
68797). We believe these requirements address many of the concerns upon
which those policy statements were based. As discussed below, the
facility must not require the resident to sign one of these agreements
as a condition of admission to, or as a requirement to continue to
receive care at, the facility. The facility must also explicitly inform
the resident or his or her representative that he or she is not
required to sign the agreement as a condition of admission to or a
requirement to continue to, or as a requirement to continue to receive
care at, the facility; this language must be included in the agreement.
This requirement will ensure that the resident or his or her
representative is not placed into the position of deciding between
signing an arbitration agreement or potentially the resident not
receiving the care at the facility that he or she needs. The facility
must ensure that the agreement is explained to the resident or his or
her representative and he or she acknowledges that he or she
understands the agreement. These requirements ensure that the facility
has explained the agreement and should provide the resident or his or
her representative with the opportunity to ask questions before he or
she acknowledges that they understand the agreement. The agreement must
also now explicitly grant the resident or his or her representative the
right to rescind the agreement within 30 calendar days of signing it.
This will provide the resident with the opportunity to reconsider the
agreement and, if they chose, seek legal advice within that 30-day
rescission period. The right to rescind must also be explained by the
facility when it explains the rest of the agreement and the resident or
his or her representative must acknowledge that he or she understands
the right to rescind the agreement, as well as the remaining provisions
in the agreement. We believe that the right to rescind the agreement
within 30 calendar days of signing it addresses the commenters' concern
that the requirements finalized in this rule are insufficient to
protect residents' rights. We believe that the transparency
requirements, the requirement that an arbitration agreement must not be
used as a condition of admission, and that the facility must explicitly
inform the resident or his or her representative of his or her right
not to sign the agreement, will address the resident's ability to
negotiate with the facility as well as provide residents, their
representatives, and their families with the protections they need to
ensure that they understand the agreement and can make a voluntary
decision on whether to sign the agreement. They will further ensure
that residents will not be forced to sign arbitration agreements to
receive the care they need.
Comment: One commenter pointed out that in proposed Sec.
483.70(n)(2)(i) the agreement had to be explained to the resident and
his or her representative in a form and manner that he or she would
understand, including a language that the resident or his or her
representative would understand. However, in proposed Sec.
483.70(n)(2)(ii), we stated that only the resident would have to
acknowledge that he or she understands the agreement.
Response: We agree with the issue that the commenter pointed out.
Section 483.70(n)(2)(ii) should also provide for the resident's
representative to be able to acknowledge that he or she understands the
agreements. Therefore, we have revised the language of that section to
provide for the representative to acknowledge he or she understands the
agreement.
B. Authority To Regulate Arbitration in LTC Facilities
Comment: Some commenters, particularly an association that
represents LTC facilities, stated that the Secretary had no legal
authority to regulate arbitration in any manner. They indicated that
section 2 of the FAA provided that arbitration agreements are ``valid,
irrevocable, and enforceable save upon such grounds as exist at law or
equity for the revocation of any contract'' (9 U.S.C. 2). The last
section of this clause, ``save upon such grounds as exist at law or
equity for revocation of any contract'' is commonly referred to as the
savings clause. The savings clause holds that arbitration agreements
can be invalidated by generally applicable contract defenses, such as
fraud, duress or unconscionability. Thus, the commenters stated that
arbitration agreements or contracts should be treated as any other
contract, and that the FAA's mandate could only be overcome by these
generally applicable contract defenses. Some of these commenters also
cited the district court's conclusion that the prohibition on pre-
dispute, binding arbitration clauses was inconsistent with the
requirement to treat arbitration contracts equally with all other
contractual arrangements and that prohibition could not fit into the
savings clause. Other commenters, however, strongly disagreed with the
district court's decision in the AHCA litigation.
One commenter stated that the current LTC requirements already
contain other limitations on the admissions contract. Specifically, the
facility's contract cannot: (1) Request or require residents to waive
their rights set forth in the federal regulations or in applicable
state, federal or local licensing or certification laws; (2) request or
require oral or written assurance that the resident is not eligible
for, or will not apply for, Medicare or Medicaid benefits; (3) request
or require residents to waive potential facility liability for losses
of personal property; (4) request or require a third-party guarantee of
payment to the facility as a condition of admission or expedited
admission, or continued stay in the facility; and (5) charge, solicit,
accept or receive, in addition to any amount otherwise required to be
paid under the State plan, any gift, money, donation, or other
consideration as a precondition of admission, expedited admission or
continued stay in the facility (42 U.S.C. 1395i-3(c)(5), 1396r(c)(5),
and 42 CFR 483.15(a)). The commenter stated that since federal law
already targets multiple specific contract provisions for more
stringent treatment, the 2017 proposed requirements actually provide
special deference to arbitration agreements and as a result contradict
and ignore the entire regulatory purpose and context of the LTC
requirements. This commenter, in other words, claimed that since there
are already restrictions on what can be in the admission contract, by
removing the current restrictions on binding arbitration, we are
actually giving
[[Page 34725]]
preferential treatment to arbitration agreements. In addition, the
commenter appeared to be encouraging us to continue pursuing the AHCA
litigation. Another commenter believed that the analysis contained in
the 2016 final rule provided strong support for the Secretary to
regulate arbitration agreements in LTC facilities.
All of these commenters stated there was Supreme Court precedent
that the FAA mandate could only be overcome by a specific contrary
congressional command. Since both the Medicare and Medicaid statutes
are silent on arbitration, these individuals stated there was no
contrary congressional command that gives the Secretary the authority
to regulate arbitration. These commenters also stated that the district
court properly rejected the arguments that the Secretary had authority
based on her right to establish ``rights'' under the Medicare and
Medicaid statutes and that she had authority to regulate these
agreements, if the Secretary believed the regulation was necessary for
the health, safety, and well-being of LTC residents.
Response: We recognize that the FAA is the overall federal statute
addressing arbitration agreements. However, the FAA is concerned with
general commercial contracts, whereas these rules arise under the
Medicare and Medicaid statutes. The Medicare and Medicaid statutes
explicitly grant the Secretary authority to ensure the protection of
Medicare and Medicaid beneficiaries. Thus, this rule addresses a set of
concerns that are unrelated to the reasons behind the FAA, as well as
the statutory provisions contained within the FAA. Thus, while this
rule modifies the original provisions regarding pre-dispute, binding
arbitration clauses, we remain mindful of the comments claiming that
these agreements potentially harm residents. We will, therefore,
continue monitoring whether there is an effect on beneficiaries and, if
we determine that the use of arbitration agreements poses a risk to the
well-being of Medicare and Medicaid beneficiaries, we may revisit and
revise the current policy. After reexamining the issue and reviewing
public comments we received, at this point we believe that a balance
can be struck that accommodates the use of arbitration agreements while
also protecting the rights of LTC facility residents. Thus, we are
finalizing the removal of the prohibition on pre-dispute, binding
arbitration agreements and the provisions regarding the content of the
agreement and implementing requirements we believe will provide greater
transparency in the arbitration process.
Comment: Some commenters stated that CMS did not have the authority
to change the arbitration requirements established by the 2016 final
rule because removing or modifying the 2016 rule's prohibition of pre-
dispute, binding arbitration agreements would harm residents' rights.
These commenters pointed to the authorities contained in the Medicare
and Medicaid statutes that the agency cited as authority for
promulgating the 2016 Final Rule. Specifically, they agreed with the
2016 final rule's conclusions that the Medicare and Medicaid statutes
provided the Secretary: (1) Authority to promulgate regulations that
are adequate to protect the health, safety, welfare, and rights of
resident and to promote the effective and efficient use of public
moneys (42 U.S.C. 1395i-3(f)(1) 1396r(f)(1)); (2) Authority to
establish such other requirements relating to the health and safety and
well-being of residents as the Secretary may find necessary (42 U.S.C.
1395i-3(d)(4)(B), 1396r(d)(4)(B)); and (3) Authority to establish other
rights(s) for residents, in addition to those set forth in statute to
protect and promote the rights of each resident (42 U.S.C. 1395i-
3(c)(1)(A)(xi), 1396r(c)(1)(A)(xi)) and the 2017 proposed rule (82 FR
26651) for a list of authorities). Based upon these authorities, these
commenters stated that the Secretary lacked authority to remove
requirements that would re-establish practices that are detrimental to
residents, especially when one of the stated reasons for the changes is
to reduce burden on providers. Another commenter added that the policy
changes were contrary to the ``person-centered care'' framework
established by federal law, policy, and regulation.
Response: While these commenters have reiterated concerns we raised
in the 2016 final rule, other commenters have asserted that there are
ways to protect the rights of residents without placing a complete
prohibition on pre-dispute, binding arbitration agreements. The
requirements we are finalizing in this rule are designed to accomplish
the same goals as the 2016 rule, namely, protecting resident's rights
in matters concerning the arbitration process. We believe the concept
of ``person-centered care'', a crucial concept in the 2016 final rule,
continues to be addressed in the requirements finalized in this rule.
The facility must explain the agreement to the resident or his or her
representative in a form and manner that the individual understands,
and the individual must acknowledge that they understand the agreement.
The agreement cannot be used as a condition of admission to, or as a
requirement to continue to receive care at, the facility, so that the
resident is not forced or coerced into signing the agreement to obtain,
or continue to receive, the care that he or she needs. The facility
must also explicitly inform the resident and his or her representative
that they are not required to sign the agreement as a condition of
admission and that this language in the agreement. The requirement that
facilities retain copies of the signed agreements to binding
arbitration and the arbitrators' final decisions will allow CMS to
ensure that arbitration agreements are not used in a manner detrimental
to quality of care concerns. We believe that these regulations will
protect residents.
C. Impact on Health & Safety
Comment: Some commenters insisted that allowing LTC facilities to
enter into pre-dispute, binding arbitration agreements would have a
negative effect on residents because LTC facilities would be able to
avoid some, or perhaps all, of the consequences of providing poor or
inadequate care to their residents, including responsibility for
illegal or even criminal acts. They stated that the threat of
litigation was necessary to provide adequate incentive for the
facilities to provide adequate care and a safe environment for the
residents. When facilities use these agreements, their insurance
premiums are lower since arbitration awards are usually lower than
those received through judicial proceedings. Other commenters pointed
out that there are also no public records of the arbitration
proceedings. The public, including potential residents and their
families, would likely not be aware of or even have the ability to
learn of instances of poor care. Without the threat of lawsuits, some
facilities might believe they are less accountable for the care they
provide, which could result in substandard care and worse health
outcomes for the residents. At best, binding arbitration would not
provide sufficient incentive to improve resident care. One commenter
stated that LTC facilities were already understaffed and the staff they
do have are poorly trained. Since settling disputes through arbitration
lowers the costs to the facilities, arbitration provides no incentive
for facilities to increase the number of staff or improve their
training. However, another commenter pointed out that the financial
burden of LTC facilities being potentially subject to liability for
damages determined by jury verdicts are spread out among the various
nursing homes via standardized insurance premiums. Since the burden
[[Page 34726]]
associated with poor or substandard care is spread among all insured
nursing homes, there is little incentive for any particular home to
improve its care even if the facility is potentially exposed to the
risk of jury-imposed damages. Another commenter pointed out that if LTC
facilities provided appropriate care to their residents, they would not
need to be so concerned with pre-dispute, binding arbitration
agreements. Some commenters were also troubled about what they believed
was an emphasis on eliminating unnecessary burden to providers over
protecting LTC facility residents and ensuring that they receive proper
care.
Response: While some commenters state that the existence of pre-
dispute, binding arbitration agreements leads to a lower quality of
care for residents, a significant number of other commenters have
stated that there is, in fact, no link between arbitration and quality
of care. At this point, all sides of the issue have credible arguments
supporting their position. However, while both sides have good
arguments, as noted earlier, there is little solid social science
research evidence demonstrating that arbitration agreements necessarily
have a negative effect on quality of care. As a result, we have
determined that the best solution is to implement a regulation that
accommodates arbitration while also protecting LTC facility residents
from unfairly coerced agreements. We agree with the commenters that
litigation and damage awards provide a way to hold LTC facilities
accountable for substandard care. At the same time, however, it is not
the only way to hold LTC facilities accountable for the quality of care
they deliver.
We believe that these final regulations also hold facilities
accountable in several additional ways. Specifically, we are finalizing
the requirement that LTC facilities retain copies of the signed
arbitration agreement and the arbitrator's final decision for each
dispute resolved through arbitration for 5 years after resolution of
that dispute. We also note that Sec. 483.10(j) gives residents the
right to voice grievances to the facility or any other agency or entity
that hears grievances without discrimination or reprisal and without
fear of discrimination or reprisal. These grievances could involve care
and treatment received or not received, the behavior of staff or other
residents, as well as any other concerns regarding the nursing home.
LTC facilities must make prompt efforts to resolve the grievance.
Section 483.12 requires, among other things, that residents be free
from abuse, neglect, and exploitation. In accordance with section 1150B
of the Act, 42 U.S.C. 1320b-25, any reasonable suspicion of a crime
against a resident of an LTC facility must be reported to CMS and to
one or more relevant law enforcement entities. All LTC facilities that
are eligible to be paid through the Medicare and Medicaid programs must
be certified and comply with our LTC facility requirements. One of
those requirements, Sec. 483.35, requires facilities to have
sufficient nursing staff with the appropriate competencies and skill
sets to provide nursing and related services to assure resident safety
and attain or maintain the highest practical physical, mental, and
psychosocial well-being of each resident. Specifically, we are
finalizing the prohibition that facilities must not require any
resident or his or her representative to enter into an agreement for
binding arbitration as a condition of admission to the facility. We are
also retaining the prohibition on facilities requiring a current
resident or his or her representative to sign an agreement in order to
continue to receive care at the facility. The facility must also
explicitly inform the resident or his or her representative of these
prohibitions and this language must be included in the agreement. This
holds the facility accountable by ensuring that the facility cannot
coerce or apply unreasonable pressure on a resident or his or her
representative by implying the resident would not receive the care he
or she needs without signing the agreement. We are also finalizing the
requirements that the facility ensure that the agreement is explained
to the resident and his or her representative, and that the resident or
his or her representative acknowledge that he or she understands the
agreement. This holds the facility accountable by ensuring that the
agreement is explained to, and understood by, the resident or his or
her representative before the agreement is signed. We are also
finalizing the requirement that the agreement explicitly grant the
resident or his or her representative the right to rescind the
agreement within 30 calendar days of signing it. This holds the
facility accountable by ensuring that the resident or his or her
representative has the opportunity to reconsider his or her decision
and seek legal advice, if they choose to do so. We are also finalizing
the requirement that the agreement not contain any language that
prohibits or discourages the resident or anyone else from communicating
with federal, state, or local officials, including but not limited to,
federal and state surveyors, other federal or state health department
employees, and representative of the Office of the Long-Term Care
Ombudsman. This requirement holds the facility accountable by ensuring
that neither the resident nor anyone else could be intimidated or
discouraged from discussing the circumstances around the dispute with
surveyors or others responsible for evaluating the quality and safety
of the resident's care and the facility's compliance with regulatory
requirements. In addition, we are finalizing the requirement that LTC
facilities retain copies of the signed arbitration agreement and the
arbitrator's final decision for 5 years after any dispute is resolved
through arbitration and make these documents available for inspection
upon request by CMS or its designee. This holds LTC facilities
accountable because it allows surveyors to review the issues raised in
the arbitration and to determine if they raise concerns about the
quality and safety of the resident's care and the facility's compliance
with regulatory requirements. Surveyors can then incorporate problems
identified through arbitration into the current survey in order to
determine if the LTC facility has taken steps to prevent the problem
from reoccurring. The LTC requirements are enforced through both
routine and complaint surveys and certification process. We note that
the survey and certification provisions set forth in sections
1819(g)(2)(A)(iii) and 1919(g)(2)(A)(iii) of the Act and in 42 CFR
488.308 require that each skilled nursing facility and nursing facility
be subject to a standard survey no later than 15 months after the last
day of the previous standard survey and that the statewide average
interval between standard surveys of skilled nursing facilities and
nursing facilities not exceed 12 months. As part of the standard Long
Term Care Survey Process, surveyors ask for and review the facility's
admission packet, which would include arbitration agreements presented
to residents. If violations of these requirements are found, LTC
facilities could face, among other things, being cited with
deficiencies, being put on a correction plan, or even losing or not
obtaining certification in the Medicare program. For more information
on CMS' efforts to improve the quality of care in nursing homes, please
see the Nursing Home Quality Initiative web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/index.html.
Comment: Some commenters agreed with our proposal to remove the
[[Page 34727]]
prohibition on pre-dispute, binding arbitration agreements. They
claimed that the prohibition of these agreements would substantially
increase the cost of resolving disputes which, in turn, would reduce
the financial resources available for resident care. In addition to the
increased costs of judicial litigation, these commenters claimed their
insurance premiums will rise if disputes cannot be resolved through
arbitration. This, too, they claim, would reduce the resources a
provider could use for improving the quality of care. These commenters
further asserted that rising insurance premiums would either cause some
nursing homes to cease operations or bear an additional substantial
financial burden. Since Medicare and Medicaid compensation rates are
fixed, according to the commenter, nursing homes could be forced to
make cuts that could affect resident care and would likely have to
increase costs to those who are not on one of these government
programs. This could make care unaffordable for families without
improving the quality of care. Instead of being beneficial to
residents, prohibiting pre-dispute, binding arbitration agreements
could actually result in being detrimental to all residents, regardless
of payor. However, other commenters pointed out that facilities also
have a burden associated with using pre-dispute, binding arbitration
agreements and that prohibiting them would reduce burden for the
providers. Using pre-dispute, binding arbitration agreements for every
resident is both a time-consuming and unnecessary process if the
facility is providing appropriate care for its residents.
Response: While there is little empirical evidence supporting the
consequences claimed by these commenters, we also agree that
prohibiting pre-dispute, binding arbitration agreements could impose an
unnecessary burden on LTC facilities. Prohibiting the use of these
agreements would deny facilities a method of resolving disputes that is
potentially more cost effective and efficient. We also agree with the
commenters that stated that facilities have a burden associated with
using pre-dispute, binding arbitration agreements due to the regulatory
requirements with which the facilities must comply. Even before these
requirements became effective, there was a burden associated with using
these agreements, such as developing the agreement, speaking to and
obtaining consent from residents or their representatives, and maintain
copies of the agreements. However, since no facility is required to use
these agreements, any burden associated with them is the facility's
choice. However, we disagree with one commenter's contention that for
facilities that are providing appropriate care the burden associated
with pre-dispute, binding arbitration agreements is time-consuming or
unnecessary. Even facilities that provide appropriate care could have
disputes with their residents. Thus, these regulations allow the use of
arbitration so long as LTC facilities comply with the requirements
finalized in this rule.
Comment: One commenter supported our proposal to remove the
prohibition on pre-dispute, binding arbitration agreements because they
believe it disrespectful to seniors and their families' capability,
dignity, and autonomy. State law presumes seniors are fully competent
unless there is evidence to the contrary. They noted that mental
deterioration only results from certain diseases, not aging alone.
Constitutional and other legal rights cannot be taken away solely
because of age and certainly not without due process. Yet, the
prohibition on pre-dispute, binding arbitration agreements presumes
that residents are not competent to make an informed and appropriate
choice concerning an arbitration agreement. The commenter believed it
is insulting and ignorant to suggest that every senior who enters into
a pre-dispute, binding arbitration agreement is either coerced,
uninformed, or has been taken advantage of by the facility. These same
individuals are signing many different documents during the admissions
process, including the contract with the LTC facility, and these are
not being questioned. This prohibition essentially denies residents the
legal right to enter into voluntary contracts due to the assumption of
incompetence of the resident. The choice to sign one of these
agreements can hardly be considered less reasonable or valid than the
choices made by residents that are influenced by promises of a lawyer
seeking to sue the nursing home. However, other commenters, including a
national association of health care providers, stated that residents
cannot make an informed decision concerning whether to sign a pre-
dispute, binding arbitration agreement without knowledge of the
circumstances surrounding the dispute, which can only be known after
the dispute arises. Other commenters stated that during the admissions
process, residents are not likely to contemplate the possible disputes
that could arise later as a result of the actions or lack to action by
the LTC facility's management or staff, including physical abuse and
neglect, sexual assault, and even wrongful death of the resident.
Further, residents are frequently admitted during a time of stress and
often after a decline in their health or directly from the hospital and
these circumstances make it extremely difficult for LTC residents or
their representatives to make an informed decision about arbitration.
Response: The prohibition against pre-dispute, binding arbitration
agreements was never intended to convey any disrespect to residents.
However, we cannot ignore the comments we received from patient
advocacy groups and other health care providers that raised a number of
concerns about the way LTC residents are presented with arbitration
agreements and the harm that results when residents unwittingly sign
arbitration agreements that are later found to be against their best
interests. Therefore, the intent was solely to address these concerns.
Comment: Numerous commenters opposed any regulation that does not
prohibit facilities from requiring that a resident or his or her
representative sign a pre-dispute, binding arbitration agreement as a
condition of admission. They stated that no person in need of care
should be put in the position of choosing between signing one of these
agreements or not receiving care. Nursing home care is often sought
during a time of crisis. The individual has usually suffered a serious
injury, surgery, or some other condition that has resulted in a
substantial decrease in their health or their ability to care for
themselves. In most cases, the choice of nursing home is severely
limited. All of these factors create stress for both the individuals
who need care, their families, and other caregivers. Some commenters
stated that it was unrealistic to presume that these individuals are in
a position to fully understand the consequences of a pre-dispute,
binding arbitration agreement. Other commenters noted that the number
of LTC facilities practically available to an individual may be
extremely limited. For example, it is entirely reasonable for a
resident to want to remain close to family and friends. However, many
times there is only one nursing home within a reasonable geographic
distance of the resident's family or friends. Likewise, factors such as
the type of payment the facility will accept, the health care and
services it offers, and the availability of beds limit an individual's
choice of facilities. Therefore, many residents may only have a few,
and perhaps only one or two, suitable facilities from
[[Page 34728]]
which to choose. Once a facility is selected, commenters stated that
some residents believe they have no choice but to sign the agreement in
order to obtain the care they need.
Response: We agree with the commenters that a pre-dispute, binding
arbitration agreement should not be a condition of admission. In the
2017 proposed rule, we proposed removing the prohibition set forth at
Sec. 483.70(n)(1) against using these agreements as a condition of
admission because we did not believe that the prohibition struck the
right balance between the advantages and disadvantages with pre-
dispute, binding arbitration agreements. However, the overwhelming
number of commenters who commented on this proposal were against
allowing the facility to make signing a pre-dispute, binding
arbitration agreement a condition of admission. We agree that many
residents or their families usually do not have many LTC facilities to
choose from and the existence of one of these agreements as a condition
of admission is not likely to be a deciding factor in choosing a
facility. We also agree that no one should have to choose between
receiving care and signing an arbitration agreement. Therefore, we have
finalized Sec. 483.70(n)(1) to state that the facility must not
require any resident or his or her representative to sign an agreement
for binding arbitration as a condition of admission to, or as a
requirement to continue to receive care at, the facility. In addition,
the facility must inform the resident or his or her representative of
these rights and ensure that this language is in the agreement.
Comment: Some commenters were concerned that allowing pre-dispute,
binding arbitration agreements to be used as a condition of admission
would encourage LTC facilities that do not use these agreements to
begin using them. Another commenter questioned whether this could
eviscerate one of the fundamental protections under the FAA and
contract law, that a contract is not enforceable if it is entered into
as a result of coercion, misrepresentation, fraud, duress, or otherwise
was unconscionable. One commenter noted that state courts have often
found that requiring the resident to sign one of these agreements as a
condition of admission was unconscionable. Some commenters were
concerned that LTC facilities would have less incentive to provide
quality care or improve their care to their residents, or perhaps, even
worse, view these agreements as ``get out of jail free cards.''
Response: We note that until the 2016 final rule was issued, there
were no LTC facility requirements regarding arbitration. LTC facilities
were allowed to use these agreements and still maintained that right
until the effective date of that rule. This rule was never enforced due
to litigation. This final rule would allow the use of arbitration
agreements as long as LTC facilities comply with the requirements
finalized in this rule. We believe that residents and their families
will have their rights protected and that there will be transparency in
the arbitration process under this final rule. We believe that concerns
about a link between the use of arbitration agreements and quality of
care can be alleviated by ensuring that surveyors have access to key
documents relating to the arbitration, including arbitral decisions. By
prohibiting secrecy, surveyors can review the facts giving rise to the
arbitration and keep those issues in mind when conducting the survey
to, among other things, determine whether the LTC facility has taken
steps to prevent similar problems from arising. In order to avoid
secrecy problems, under these regulations Medicare-participating LTC
facilities must retain copies of the signed arbitration agreements and
the arbitrator's final decision for each dispute settled through
arbitration. In addition, as discussed below, the LTC facility
requirements are enforced through a survey process, including both
routine surveys and complaint surveys. When surveyors are investigating
a complaint that refers to issues related to the arbitration agreements
and/or arbiter's final decisions, surveyors will be directed to collect
the relevant information (for example, the admissions packet,
arbitration agreement, and record of arbitrator's hearing).
After finalization of the regulation, we will monitor trends of
compliance and take any actions warranted based on these trends.
Failure to comply with these requirements can result in sanctions, up
to and including being de-certified from the Medicare program. Hence,
these agreements are neither a ``get out of jail free card'' nor an
incentive to provide substandard care or not improve the care they
provide to their residents. Concerning the commenters' concerns that
allowing these agreements to be used as a condition of admission would
affect the fundamental concept that contracts must be entered into
voluntarily and with consent, we share their concerns about individuals
being coerced into signing one of these agreements, especially if they
believe the resident will not receive the care he or she needs if the
agreement is not signed. As discussed above, we have modified the
proposed rule to resolve these concerns by precluding LTC facilities
from requiring an arbitration agreement as a condition of admission to,
or as a requirement to continue receiving care at, the facility. The
facility must also inform the resident or his or her representative of
these rights and ensure that this language is in the agreement.
Comment: Some commenters were concerned about current residents in
LTC facilities being coerced into signing pre-dispute, binding
arbitration agreements. These commenters pointed out that when current
residents are approached with these agreements, even if signing the
agreement is presented as voluntary, they might feel pressured to sign
it for fear of not being allowed to stay at the facility.
Response: This final rule makes clear that a resident must be
informed, and the arbitration agreement must state, that signing an
arbitration agreement is not a condition of admission nor is it
necessary to remain at the facility. In addition, the agreement must
explicitly grant the resident or his or her representative the right to
rescind the agreement within 30 calendar days of signing it. Thus, if a
LTC facility complies with the rule, we believe residents should not
feel that they have no choice in signing the arbitration agreement. In
addition, a facility that transferred or discharged a resident for
failure to sign an arbitration agreement (whether pre- or post-dispute)
would risk termination from the Medicare and Medicaid programs. Under
current regulations, residents cannot be transferred or discharged from
a LTC facility due to their decision not to sign an arbitration
agreement. Section 483.15(c), formerly Sec. 483.12(a)(2), ``Transfer
and discharge'', sets forth the permissible reasons a LTC facility can
transfer or discharge a resident. For a current resident, the
permissible reasons a facility may transfer or discharge a resident
are: (1) It is necessary for the resident's welfare and the resident's
needs cannot be met in their facility; (2) the resident's health has
improved sufficiently so the resident no longer needs the services
provided by the facility; (3) the safety of individuals in the facility
is endangered due to the clinical or behavioral status of the resident;
(4) the health of individuals in the facility would otherwise be
endangered; (5) the resident failed, after reasonable and appropriate
notice, to pay for (or to have paid under Medicare or Medicaid) a stay
at the facility; and, (6) the facility ceases to operate. Failure to
sign an agreement for binding
[[Page 34729]]
arbitration is not a permissible reason. If a LTC facility attempted to
transfer or discharge a resident after either the resident or his or
her representative refused to sign the agreement, they could be in
violation of Sec. 483.15(c) and CMS could take action, including
citing the facility for a deficiency. Thus, we believe that residents
are still protected from being transferred or discharged because of a
refusal to sign an arbitration agreement. See Binding Arbitration in
Nursing Homes, Survey and Certification Letter dated January 9, 2003
(S&C-03-10) (available at https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/SCletter03-10.pdf).
Regarding current residents that have already signed arbitration
agreements, we note that CMS does not have the power to annul valid
contracts. Current arbitration agreements that are valid under the
applicable state or other relevant jurisdiction's laws are still valid.
We do believe that it would be good policy and we would encourage LTC
facilities to offer current residents who have signed arbitration
agreements the opportunity to rescind those agreements and proceed with
a new agreement that conforms to these regulations. However, these
provisions are only effective prospectively.
Comment: Many commenters contended that claims for abuse, neglect,
and malpractice are not appropriate for arbitral resolution. Other
commenters noted the types of claims commonly brought against LTC
facilities such as pressure ulcers, broken bones, malnutrition,
dehydration, asphyxiation (due to improper restraints), sexual assault
and other criminal activities are also inappropriate matters for
arbitration.
Response: From these comments, it is our understanding that the
commenters believe that claims related to possible medical negligence
or malpractice or claims that involved serious physical or emotional
injury need to be resolved in a public forum where the circumstances
surrounding the claim would result in a public record. They apparently
believe that settling a dispute through judicial proceedings has a more
important and positive effect on improving the quality of care for
residents and holding the LTC facility responsible for poor care than
if the dispute had been settled through arbitration. Certain claims,
especially those related to a serious injury to a resident's physical
and/or his or her emotional well-being, are especially disturbing. We
understand that many individuals would prefer that these types of
claims be treated differently. However, we believe that either type of
forum, arbitration or judicial proceedings, can be an appropriate forum
to resolve disputes. We also believe that a fundamental requirement for
arbitration would be that the arbitral forum has the expertise to
handle the dispute presented by the parties. Thus, we do not believe it
is appropriate to prohibit certain types of claims from being resolved
in arbitration. This could lead to confusion and some grievances or
concerns not being addressed appropriately. Some claims may not fit
into a single, clearly designated category, such as when there are
features of the dispute that could be put it into multiple categories.
Resolving the dispute could result in some portions of the dispute
being resolved through arbitration but others having to go into
judicial proceedings. Some matters may also involve CMS enforcement
surveys or audits. We would also note that notwithstanding the
existence of an arbitration agreement, the LTC facility is obligated to
comply with all requirements for participation. Specifically, there are
requirements in our regulations for reporting abuse, neglect,
misappropriation, and maltreatment (See Sec. 483.12 Freedom from
abuse, neglect and exploitation). The resolution of any dispute through
arbitration or judicial proceedings would not interfere with the
facility's responsibility to report abuse or negate our ability to take
appropriate enforcement action. The relevant law enforcement entities
could also take appropriate action against individuals. In addition,
Sec. 483.70(n)(5) of this final rule provides that the agreement may
not contain any language that prohibits or discourages the resident or
anyone else from communicating with federal, state, or local officials,
including but not limited to, federal and state surveyors, other
federal or state health department employees, and representatives of
the Office of the State Long-Term Care Ombudsman. This provision
ensures that residents also have the right to speak to officials about
any concerns they have regarding their treatment. Finally, the
recordkeeping requirements finalized in this rule will also allow us to
learn how these types of claims are being treated and resolved through
arbitration in LTC facilities.
Comment: Despite the oversight that results from surveys,
ombudsmen, and other mechanisms, some commenters believed these are
insufficient to protect residents from neglect, abuse, or other harm.
One commenter, who had been a therapist and is now a LTC ombudsman,
indicated that abuse and disregard of residents' rights was widespread
in LTC facilities. The commenter also indicated that when violations
were identified and reported to his or her state's Department of
Health, it was rare for a facility to be held accountable for its
actions. Other commenters also noted that they saw or their loved ones
had experienced abuse and/or neglect. Some commenters drew our
attention to media reports about incidents of abuse, neglect, and even
criminal offenses against in LTC facilities. Some commenters pointed to
a recent CNN investigation on LTC facilities (aired on March 17, 2017)
as evidence of the poor and negligent care residents were enduring in
these facilities, available at http://www.cnn.com/2017/03/17/health/nursing-home-sex-abuse/index.html. That investigation found that more
than 1,000 nursing homes have been cited for mishandling alleged cases
of sexual abuse. Another commenter cited other articles that also
indicated that elder abuse and elder abuse in nursing homes was a
serious problem.
Response: Given the lack of hard social science data, we do not
believe that removing the ban on pre-dispute, binding arbitration
agreements will increase the occurrence of any of the serious incidents
that the commenters and the media are describing. We believe that the
requirements finalized in this rule, as well as the other LTC facility
requirements, will work together to reduce, and hopefully, eliminate
such incidents. For example, in this final rule the results of disputes
settled through arbitration will no longer be private but subject to
inspection by CMS or its designee (Sec. 483.70(n)(5)). Other current
requirements, including the requirements to report instances of abuse,
neglect, exploitation, and mistreatment as set forth in Sec.
483.12(c), will also address these instances to ensure that facilities
are reporting to the state and other appropriate entities. In addition,
we will continue to monitor the care residents receive through our
routine and complaint survey processes. Information on the Quality,
Certification and Oversight Reports are available at: https://qcor.cms.gov/main.jsp. Nursing Home Compare data sets are available at:
https://data.medicare.gov/data/nursing-home-compare.
D. Transparency
Comment: Regarding the proposal to retain the requirement that
would bar any arbitration agreement from including any language that
would prohibit or discourage a resident or anyone else from
communicating with
[[Page 34730]]
federal, state, or local officials, one commenter noted that they were
unaware of any resident being precluded from discussing any quality-of-
care concerns with any government official. In addition, the inclusion
of such a provision in the agreement could invalidate the agreement, or
at least that provision, as being unconscionable. No arbitration
agreement could limit the power of government regulators from taking
action when there is a complaint. They also point out that there are
ample protections for residents to communicate with government
officials. For example, facilities must not prohibit or discourage
residents from communicating with federal, state, or local officials;
facilities must provide residents with written notice of how they can
file a complaint with the State Survey Agency and information and
contact information for filing grievances of any suspected violation of
state or federal nursing facility regulations; and facilities must post
information regarding the filing of complaints with the State Survey
Agency in a form and a manner accessible and understandable to
residents and their representatives (Sec. 483.10(k), (g)(4)(i)(D),
(vi), and (g)(5), respectively). There is no justification for an
arbitration-specific provision and its inclusion in the requirements.
It demonstrates a suspicion about arbitration which is inconsistent
with the federal policy embodied within the FAA and the proposed
changes.
Response: We disagree with the commenters. We believe that there
does need to be an arbitration-specific requirement to ensure that
there is no language in the LTC facility's arbitration agreement that
could be interpreted as either discouraging or prohibiting not only the
resident but anyone else from communicating with federal, state, or
local officials. Comments we received contained anecdotal evidence of
so-called `gag-clauses' being common in arbitration agreements and that
residents and family members were uncertain if they could talk to
surveyors about a quality concern that was arbitrated. The requirements
cited by the commenters only apply to residents, no one else. Since
others in the LTC facility, including staff and other residents and
visitors, may have important information surrounding the circumstances
of a dispute between a resident and the LTC facility, it is important
that the facility not be able to prevent or discourage anyone, such as
family, friends, volunteers, other residents or staff, from
communicating with any government officials, especially surveyors that
need to investigate the care being provided to residents. In addition,
if an arbitration agreement contained such language, we believe that it
is quite likely that the resident could interpret it as overriding the
protections cited by the commenter, or at least result in confusion.
Concerning the commenter's contention that, if a dispute arises, the
resident has the opportunity to challenge the existence of the
agreement, we do not believe that is sufficient. To vacate an award or
decision procured through arbitration, courts are limited to certain
causes, if proved. These limitations are set forth in 9 U.S.C. 10a and
include, but are not limited to, the award was procured through
corruption, fraud, or undue means; evident partiality or corruption in
arbitrators, and misconduct by arbitrators such that the rights of any
party were prejudiced. Among other things, this regulation ensures that
arbitral decisions be available for surveyors. As we have explained, we
have concluded that it is important for surveyors to be able to review
these documents to determine compliance with requirements. Thus, this
arbitration-specific requirement will ensure that the resident is not
misled or confused about his or her right to communicate with federal,
state, and local officials about the circumstances surrounding the
dispute.
Comment: One commenter was concerned about the recordkeeping
requirements mandating that a signed copy of the agreement and decision
must be retained by the LTC facility for 5 years and be made available
for inspection by CMS. They believe that this unjustifiably singles out
arbitration and is unduly burdensome. They also noted that CMS had not
provided any reason for the facility to retain the arbitration
agreement for the 5 years after the dispute was resolved. If a dispute
arises, the resident has the opportunity to challenge the existence of
the agreement. The commenter stated that there was no reason to add
this additional recordkeeping burden on facilities, and no
justification for singling out arbitration agreements for this
requirement. For example, CMS has not proposed that all settlement
agreements be retained for 5 years.
Response: Unlike court decisions and settlement agreements, there
are no public records when a dispute is settled through arbitration.
These recordkeeping requirements are intended to ensure that CMS can
fully evaluate quality of care complaints that are addressed in
arbitration and assess the overall impact of these agreements on the
safety and quality of care provided in LTC facilities. Many commenters
were concerned that these agreements have a negative effect on the care
residents receive in these facilities. Some commenters, as noted
previously, stated that pre-dispute, binding arbitration agreements
would lead to a declining standard of care for residents. The
requirement for facilities to retain these documents for CMS or its
designee to review will assist CMS in determining to what extent
quality of care issues are addressed in arbitration and in ensuring
that quality of care concerns that are the subject of arbitration can
be thoroughly investigated, if needed, in specific cases, or in
aggregate.
Comment: Some commenters were dissatisfied with the transparency
requirements we proposed. They believed that these requirements offered
little, if any, value. The imbalance of power between the resident and
the facility, as well as the stress a resident may experience during
the admissions process, could exert pressure on the resident to sign a
pre-dispute, binding arbitration agreement, even if the facility does
not intend to pressure the resident. One commenter stated that the
transparency provisions simply do not protect residents from the
coercive nature of the process. We believe that the commenter is
referring to the unequal bargaining power between the resident and the
facility, especially concerning knowledge of and control of the
arbitration process and resident's need for care. Other commenters
stated that it was unlikely that a resident would delay signing the
admissions contract in order to seek legal advice, since the
predominant concern will be obtaining the care the resident needs. Two
commenters discussed a cooling off or rescission period. One commenter,
an organization that supports the overall health and well-being of
seniors, children, and those with special needs, made some specific
recommendations concerning the use of pre-dispute, binding arbitration
agreements. One of those recommendations is that the agreement should
include a rescission period. This would give residents and their
representatives a chance to thoroughly read the agreement and
reconsider whether they should agree to its terms. They would also have
time to seek legal advice, if they chose to do so. If they change their
minds regarding the agreement, they would then have time to rescind it.
The other commenter, a major organization that represents nursing
homes, noted that its own model agreement for arbitration agreements
contained a provision for a 30-day rescission period. That
[[Page 34731]]
commenter noted that many nursing homes already include safeguards in
their contracting process, including a provision for a 30-day
rescission process, so that a resident and his or her representative
has a meaningful opportunity to reconsider whether he or she wants to
settle any disputes with the LTC facility through arbitration.
Therefore, we are adding a requirement that the agreement must allow
the resident or his or her representative to rescind the agreement
within 30 calendar days of signing it at Sec. 483.70(n)(3).
Response: We acknowledge that, despite the requirements in this
rule that would prohibit a LTC facility to have a resident sign an
arbitration agreement as a condition of admission, some residents or
their representatives might feel pressure to sign these agreements. We
agree with the commenter who suggested that a rescission period would
provide residents time to get beyond the admissions process and
consider whether they want to be bound by the arbitration agreement. It
will also give them time to obtain legal advice, if they chose to do
so. Therefore, we are adding a requirement that the agreement must
allow the resident or his or her representative to rescind the
agreement within 30 calendar days of signing it at Sec. 483.70(n)(3).
Comment: Some commenters stated that the transparency provisions do
not overcome the fundamental problem with pre-dispute, binding
arbitration agreements, which is the lack of an informed agreement. The
decision to sign a binding arbitration agreement can never be informed
unless both parties are fully aware of the circumstances surrounding
the dispute and the consequences of agreeing to settle the dispute
through arbitration. This can only happen after the circumstances that
resulted in the dispute have already occurred.
Response: We agree that, when a pre-dispute, binding arbitration
agreement is signed neither the resident nor the LTC facility are aware
of the circumstances surrounding any future dispute between them.
However, by signing one of these agreements, the parties are not
settling a dispute but deciding the forum in which any future disputes
would be settled. We believe that the requirements finalized in this
rule provide the transparency necessary for residents to understand the
ramifications of signing an arbitration agreement.
Comment: Some commenters believed that posting a notice was not
only unhelpful but also confusing. One commenter noted that so many
items must already be posted that any notice on arbitration would
likely not stand out.
Response: We agree with the commenters. Posting a notice would not
likely serve any purpose other than to require more paperwork. Thus, we
are not finalizing the requirement that LTC facilities post a notice
concerning their policy on arbitration agreements.
Comment: We received mixed comments on the fairness of arbitral
forums. Some commenters expressed concerns that in some situations
arbitrators had awarded the resident or his or her family much less
compensation then would have been expected if the dispute had been
resolved through a formal judicial proceeding or had found that the LTC
facility was not responsible for an injury to a resident when it was
likely that a judge or jury would have. Some commenters pointed to
specific instances of residents or their families receiving little to
no compensation. Other commenters stated that residents and their
families did as well or better with disputes settled through
arbitration than they would have through formal judicial proceedings.
Other commenters stated that residents, especially those that are in
facilities for an extended length of time, are vulnerable. As discussed
above, about half of LTC facility residents have been diagnosed with
Alzheimer's disease or another form of dementia. This situation only
amplifies the disadvantages of arbitration. In addition, some
commenters were concerned about arbitrator bias in favor of the
facility. They were particularly concerned that a facility's ongoing
need for arbitrators in subsequent cases could result in arbitrators
issuing decisions favorable to the facility in order to receive future
arbitral business from that facility.
Response: We understand that there are concerns about the fairness
of the arbitral forum. Although no one can guarantee that every
arbitrator will be neutral and fair in all arbitrations, comments we
received caused us to conclude that arbitrators generally review the
evidence submitted to them and make rational decisions based upon that
evidence. While most state laws limit the circumstances upon which an
arbitrator's decision can be challenged in court,\2\ we believe that
state laws regarding unconscionability or cohesion contracts offer some
protection to residents from an arbitrator's decision if such a
decision suggests bias towards the LTC facility. In addition, we are
retaining the requirements that the facility must ensure that the
arbitration agreement provides for the selection of a neutral
arbitrator agreed upon by both parties and for the selection of a venue
that is convenient to both parties. We are also finalizing the
requirement at Sec. 483.70(n)(5), which requires that when a facility
resolves a dispute with a resident through arbitration, the facility
must retain a copy of the signed arbitration agreement and the
arbitrator's final decision for 5 years after the resolution of that
dispute and make it available for inspection upon request from CMS or
its designee. This requirement will enable us to determine how
arbitration is being used by nursing homes and how residents are being
treated in these arbitral forums. We believe that improving the
transparency surrounding arbitration in nursing homes should also
encourage facilities and arbitrators to treat residents fairly, if they
are not currently doing so.
---------------------------------------------------------------------------
\2\ See 9 U.S. Code 10(a).
---------------------------------------------------------------------------
Comment: Some commenters disagreed with our proposal to require
that the agreement be in plain language, be explained in a form and
manner the resident understands, and that the facility receive an
acknowledgement from the resident that he or she understands the
agreement. They contended that these requirements did not eliminate or
address what they saw as the fundamental problem: That a resident's
decision to sign a pre-dispute, binding arbitration agreement could
never be informed or voluntary without in-context knowledge of what is
at stake. Some commenters asserted that the plain language requirement
was useless, arguing that where pre-dispute, binding arbitration
agreements are allowed as a condition of admission, it simply meant
that it would be clear to the resident that he or she had no choice.
Other commenters believed that the requirements for ``plain language''
were so vague and unclear that they would generate confusion. They also
contended that the proposed rule would not support meaningful decision
making by residents and its implementation would decrease residents'
health, safety, and well-being. These commenters stated that the only
way for the decision to sign an arbitration agreement to be voluntary
and informed is if the resident was asked to sign it after the dispute
has arisen. Many residents enter LTC facilities because they lack the
ability to manage their day-to-day affairs. About half of LTC residents
have been diagnosed with Alzheimer's disease or another form of
dementia. The commenters are concerned that failure to explain the
arbitration agreement to
[[Page 34732]]
residents in a way that they understand the issue, could result in
residents unwittingly signing an agreement to arbitrate with little
understanding of the consequences of their action.
Response: After considering these comments, we agree with the
commenters that the requirement for ``plain language'' is vague and
could result in confusion. Therefore, we are not finalizing that
proposed change to the requirements. As discussed above, we are also
not finalizing the proposed change that would have allowed these
agreements to be used as a condition of admission. However, we are
retaining the requirement at Sec. 483.70(n)(2)(i) and (ii) that the
facility must ensure that the agreement be explained to the resident
and his or her representative in a form and manner that he or she
understand, including in a language the resident understands and the
resident or his or her representative acknowledges that he or she
understands the agreement. We believe these requirements are essential
to ensure transparency in the arbitration process.
Comment: Some commenters were concerned about removing some of the
specific requirements concerning arbitration or the arbitration
agreement. For example, the proposed removal of the requirement that
another individual could only sign for the resident if that individual
had no interest in the facility and was authorized by state law to sign
for the resident, could result in a person who is affiliated with the
facility or has some type of interest in the facility signing for the
resident. This would remove a critical protection for residents that
may lack decision-making capacity. Others expressed concern about the
possibility that residents and potential residents could have a family
member, friend, or other personal contact affiliated with the facility.
Response: In drafting and entering into an arbitration agreement
with its residents, LTC facilities must still comply with state law
governing the rights of an individual to represent or legally bind a
resident through a power of attorney or similar instrument. We are
confident that state law would protect the rights of residents if
someone signs one of these agreements without having the appropriate
authority.
E. Costs
Comment: Some commenters pointed out the different advantages and
disadvantages of arbitration. Some stated that arbitration results in
faster, more flexible, less costly, and less adversarial resolution of
disputes than litigation. One commenter quoted the 2016 final rule,
``arbitration agreements are, in fact, advantageous to both providers
and beneficiaries because they allow for the expeditious resolution of
claims without the costs and expense of litigation'' (82 FR 26651). One
commenter cited an article that showed that in the context of labor-
management disputes the costs of arbitration were less for lower-income
employees (Elizabeth Hill, Due Process at Low Cost: An Empirical Study
of Employment Arbitration Under the Auspices of the American
Arbitration Association, 18 Ohio St. J on Disp. Resol. 777, 802
(2003)). They also pointed out that other advantages of arbitration
included not needing an attorney, not having to show up at court since
arbitration could be accomplished over the telephone or, perhaps, just
submitting documents to the arbitrator. In addition, the commenter
noted that reductions in funding to both federal and state courts could
also lengthen the time needed to resolve a dispute through judicial
proceedings. The commenter noted that arbitration proceedings do not
have similar backlogs and can resolve disputes much faster.
However, there were also commenters pointed out that there were
disadvantages. Some pointed out that arbitration could be more costly,
especially for the resident. While LTC facilities may pay the costs for
arbitration, this is not always the case. Since arbitration is a
private process, there are costs for the venue, discovery, and the
arbitrator. These costs can amount to thousands of dollars. It may also
not result in a much faster or less adversarial resolution than
litigation. In addition, some commenters contended that if arbitrators
apply the applicable law incorrectly or make mistakes concerning what
the appropriate law is for a particular claim and that state law
generally limits the reasons for challenging the arbitrator's decision.
Privacy was another area in which commenters differed. Many
commenters believed the secrecy of the arbitration process could be a
disadvantage because LTC facilities could prevent disclosure of
instances of poor or substandard care. However, another commenter, a
non-profit provider, pointed out that some residents may not want to
settle disputes in a court, especially disputes that involve physical
or emotional injuries. Due to the relationship between non-profits and
their residents, the residents may also prefer a less adversarial forum
in which to settle disputes. Hence, judicial proceedings might not be
preferable for all disputes.
Response: We agree with the commenters that arbitration has both
advantages and disadvantages. Nonetheless, despite these claimed
advantages and disadvantages, arbitration is an accepted form of
dispute resolution and the FAA expresses a favorable view of
arbitration. In addition, we agree that judicial proceedings may not be
a preferable way for resolving all disputes. There are substantial
hurdles to get a dispute into court. The resident must find an attorney
willing to take the case. The attorney will generally decide to take a
case based upon the potential damages and the difficulty of the case.
If the attorney believes the case will be difficult to prove or that
the damages are not adequate to justify the time and expense of
judicial proceedings, he or she may not take the case. Cases of this
nature would appear, therefore, to be good candidates for arbitration.
Of course, there are also disadvantages to arbitration. It is not
always faster or less expensive. In some cases, the costs associated
with settling a dispute through arbitration could exceed those if the
dispute was settled through judicial proceedings, especially for the
resident or his or her representative. As commenters noted, settling a
dispute in arbitration may not be faster. In addition, the losing party
has limitations on contesting an arbitrator's decision in court. We
acknowledge these advantages and disadvantages to arbitration and
believe that the requirements in this final rule provide the
transparency and opportunity for the resident and his or her
representative to evaluate those advantages and disadvantages and make
a choice that is best for them. This rule in no way would prohibit two
willing and informed parties from entering voluntarily into an
arbitration agreement.
Comment: Some commenters stated that prohibiting arbitration
agreements would lead to more litigation and higher legal costs. These
higher legal costs would result from increased insurance premiums and
jury verdicts that would likely be higher than awards given in
arbitration. One commenter cited a declaration from the AHCA
litigation, that indicated that the insurer for Mississippi LTC
facilities was likely to increase premiums if these arbitration
agreements were not enforceable (citing Decl. of Suzanne Meyer at para.
14, Am. Health Care Ass'n v. Burwell, 217 F. Supp. 3d 921 (N.D. Miss.
2016) (No. 3:16-cv-00233), Dkt. No. 20-3). These higher legal costs
could result in fewer resources for resident care and improving the
quality of care for all residents. It would also increase the cost
[[Page 34733]]
of care, which would affect residents who are self-pay, their insurance
companies, and government programs, especially Medicare and Medicaid.
Response: As discussed above, we are removing the prohibition on
pre-dispute, binding arbitration agreements. Facilities are allowed to
ask their residents to sign arbitration agreements so long as they
comply with the requirements we are finalizing in this rule. This
should address the commenters' concerns.
Comment: One commenter was concerned about higher costs to the
facility as a result of the prohibition on pre-dispute, binding
arbitration agreements. Since the amount of reimbursement from the
Medicare and Medicaid programs is fixed, LTC facilities cannot raise
their rates for residents whose care is paid for by those programs.
Hence, LTC facilities could only cover higher costs by increasing the
costs of care to residents who are paying for their care themselves
and/or reduce the amount of resources that go to resident care. This
could result in less care to all of the residents. Government programs
could even face increased costs due to increased injuries or
complications that result from poorer care.
Response: At this point, the evidence on the financial effects of
prohibiting arbitration or allowing unfettered arbitration is
anecdotal. However, the commenters tend to agree that when a claim is
settled through arbitration, facilities save money. The resident
advocacy groups contend that residents lose more often and, when they
win, receive smaller awards than they would likely have had in judicial
proceedings. LTC facilities assert that this same set of facts results
in a positive financial impact because arbitration reduces their costs
and ensures that more of their money can be spent on providing quality
care to the residents. As discussed above, we are removing the
prohibition on pre-dispute, binding arbitration agreements and
permitting LTC facilities to enter into arbitration agreements if they
comply with the requirements that are being finalized in this rule. We
believe that the finalized requirements address these commenters'
concern to a large extent.
Comment: Another commenter stated that arbitration prevents the
government from seeking reimbursement for the costs of the resident's
care related to any negligence by the LTC facility. Arbitration is not
a public process and the government would not be made aware of any
award by the arbitrator to a resident. Without notice, the government
could not seek to recover any part of the cost of care to the resident
as a result of any negligence or substandard care provided on the part
of the facility from that award.
Response: We note that CMS generally does not seek to recover its
costs from any award of damages to a resident when services are
negligently provided. Instead, we enforce our health and safety
standards through Requirements of Participation, Conditions of
Participation, Conditions for Coverage, and the authority to terminate
a negligent provider. For LTC facilities, we can also impose civil
monetary penalties.
IV. Provisions of the Final Regulations
In this final rule, we are adopting the provisions in the June 8,
2017 proposed rule, with the following changes:
Revised Sec. 483.70(n)(1) to specify that a facility must
not require any resident or his or her representative to sign an
agreement for binding arbitration as a condition of admission to, or as
a requirement to continue receiving care at, the facility and must
explicitly inform the resident or his or her representative of his or
her right not to sign the agreement as a condition of admission to, or
as a requirement to continue receiving care at, the facility.
Removed Sec. 483.70(n)(1)(i).
Redesignated Sec. 483.70(n)(1)(ii) and (iii) as Sec.
483.70(n)(2)(i) and (ii).
Revised the redesignated Sec. 483.70(n)(2)(ii) to specify
that the facility must ensure that the resident or his or her
representative acknowledge that he or she understands the agreement.
Added Sec. 483.70(n)(2)(iii) to specify that the
agreement provides for the selection of a neutral arbitrator agreed
upon by both parties.
Added Sec. 483.70(n)(2)(iv) to specify that the agreement
provides for the selection of a venue that is convenient to both
parties.
Redesignated Sec. 483.70(n)(2) as Sec. 483.70(n)(5).
Redesignated Sec. 483.70(n)(3) as Sec. 483.70(n)(6).
Added Sec. 483.70(n)(3) to specify that the agreement
must explicitly grant the resident or his or her representative the
right to rescind the agreement within 30 calendar days of signing it.
Revised Sec. 483.70(n)(4) to state that an arbitration
agreement must explicitly state that neither the resident nor his or
her representative is required to sign an agreement for binding
arbitration as a condition of admission to, or as a requirement to
continue to receive care at, the facility.
Revised redesignated Sec. 483.70(n)(6) to read that when
a facility and a resident resolve a dispute through arbitration, a copy
of the signed agreement for binding arbitration and the arbitrator's
final decision must be retained by the facility for 5 years after
resolution of that dispute and be available for inspection upon request
by CMS or its designee.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Omnibus Budget Reconciliation Act of 1987 Waiver
Ordinarily, we are required to estimate the public reporting burden
for information collection requirements for this regulation in
accordance with chapter 35 of title 44, United States Code. However,
sections 4204(b) and 4214(d) of the Omnibus Budget Reconciliation Act
of 1987 (OBRA '87) (Pub. L. 100-204) provide for a waiver of the PRA
requirements for this regulation. Thus, we have not provided an
estimate for any paperwork burden related to these revisions and
additions.
VI. Regulatory Impact Statement
A. Statement of Need
The district court's decision in granting the preliminary
injunction against enforcement of the prohibition on pre-dispute,
arbitration agreements indicated that CMS would at a minimum face some
substantial legal hurdles from pursuing the arbitration policy set
forth in the 2016 final rule. We have reviewed the provisions and
determined that the arbitration requirements should be revised. We
believe that the protections for residents that we have finalized in
this rule strike a better balance of competing policy
[[Page 34734]]
concerns. The revisions to these requirements in the 2017 final rule
will increase transparency in LTC facilities that chose to use
arbitration while, at the same time, allowing facilities to use
arbitral forums as a means of resolving disputes.
B. Overall Impact
The overall impact of this final rule is to provide transparency in
the arbitration process in nursing homes to the residents, his or her
family and representatives, and the government. It also ensures that no
resident will be required to sign a pre-dispute, binding arbitration
agreement as a condition for receiving the care he or she needs. In
addition, by ensuring that the resident has the right to rescind the
agreement within 30 calendar days of signing it, residents can get
beyond the admissions process and have adequate time to consider the
agreement and get legal advice.
We have examined the impact of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4),
Executive Order 13132 on Federalism (August 4, 1999), the Congressional
Review Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing
Regulation and Controlling Regulatory Costs (January 30, 2017).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A RIA
must be prepared for major rules with economically significant effects
($100 million or more in any 1 year). This rule does not reach the
economic threshold and thus is not considered a major rule.
The RFA requires agencies to analyze options for regulatory relief
of small entities. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
less than $7.5 million to $38.5 million in any 1 year. Individuals and
states are not included in the definition of a small entity. We are not
preparing an analysis for the RFA because we have determined, and the
Secretary certifies, that this final rule will not have a significant
economic impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare an
RIA if a rule may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must conform
to the provisions of section 604 of the RFA. For purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a Metropolitan Statistical Area for Medicare
payment regulations and has fewer than 100 beds. We are not preparing
an analysis for section 1102(b) of the Act because we have determined,
and the Secretary certifies, that this final rule will not have a
significant impact on the operations of a substantial number of small
rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2019, the
UMRA threshold is approximately $154 million. This rule will have no
consequential effect on state, local, or tribal governments or on the
private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on state
and local governments, preempts state law, or otherwise has Federalism
implications. Since this regulation does not impose any costs on state
or local governments, the requirements of Executive Order 13132 are not
applicable.
C. Cost to the Federal Government
We do not believe that these revisions would impose any additional
costs.
D. Regulatory Review Costs
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret a final rule, we should
estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the rule, we assume that the number of commenters on
the proposed rule is the number of reviewers who will thoroughly review
the final rule. We acknowledge that this assumption may understate or
overstate the costs of reviewing this rule. It is possible or even
likely that not all of those prior reviewers will extensively reread
this rule, and may instead focus on changes to the regulatory text or
only specific responses to comments. On the other hand, it is
conceivable that there may be more than one individual reviewing the
rule for some of the affected entities, or that many entities
thoroughly reviewed the rule without commenting. For those reasons, we
thought that the number of commenters on the proposed rule would be a
fair estimate of the number of reviewers of this rule. We also
recognize that different types of entities are in many cases affected
by mutually exclusive sections of some final rules, or that some
entities may not find it necessary to fully read each rule, and
therefore for the purposes of our estimate we assume that each reviewer
reads approximately 50 percent of the rule.
Using the wage information from the Bureau of Labor Statistics
(BLS) for medical and health service managers (Code 11-9111), we
estimate that the cost of reviewing this rule is $107.38 per hour,
including overhead and fringe benefits https://www.bls.gov/oes/2017/may/oes_nat.htm. Assuming an average reading speed, we estimate that it
would take 0.65 hours for the staff to review half of this final rule.
For each entity that reviewed the rule, the estimated cost is $69.80
(0.65 hours x $107.38). Therefore, we estimate that the total cost of
reviewing this regulation is $70,000 ($69.80 x 1,020 reviewers).
E. Executive Order 13771
Executive Order 13771, titled Reducing Regulation and Controlling
Regulatory Costs, was issued on January 30, 2017 and requires that the
costs associated with significant new regulations ``shall, to the
extent permitted by law, be offset by the elimination of existing costs
associated with at least two prior regulations.'' OMB's interim
guidance, issued on April 5, 2017, https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/M-17-21-OMB.pdf, explains that
for Fiscal Year 2017 the above requirements only apply to each new
``significant regulatory action that imposes costs.'' It has been
determined that this final rule is an action that does not impose more
than de minimis costs and thus is not a regulatory or deregulatory
action for the purposes of Executive Order 13771.
F. Benefits of the Rule
With the exception of the requirement that facilities post notices
of their
[[Page 34735]]
arbitration policies, the requirements finalized in this rule maintain
the transparency requirements promulgated in the 2016 final rule.
Specifically, this rule ensures that LTC facilities must make every
effort to inform the resident of the nature and existence of any
proposed arbitration agreement. The agreement must be explained to the
resident in a form and manner he or she understands and the must
resident acknowledge that he or she understands the agreement.
Additionally, we are retaining the requirement that the agreement may
not contain any language that prohibits or discourages the resident or
anyone else from communicating with federal, state, or local officials.
We believe that these transparency requirements address many
stakeholder concerns regarding the fairness of arbitration in LTC
facilities. These requirements also support the resident's right to
make informed choices about important aspects of his or her healthcare
and ensure that we can protect resident health and safety.
We have also finalized the requirement that, when a facility and a
resident resolve a dispute through arbitration, a copy of the signed
agreement for binding arbitration and the arbitrator's final decision
must be retained by the facility for 5 years after the resolution of
that dispute and also be available for inspection by CMS or its
designee. This requirement will provide CMS an opportunity to gather
data about the extent to which quality of care issues are addressed in
arbitration, to ensure that quality of care concerns that are the
subject of arbitration can be thoroughly investigated, if needed, in
specific cases, or in aggregate, and the overall impact that
arbitration may have on residents of LTC facilities. Based on the
comments we received, we have also added a requirement that the
agreement must explicitly grant the resident the right to rescind the
agreement within 30 calendar days of signing it. This provides the
resident approximately one month to adjust to the LTC facility,
consider and understand the implications of the agreement, and, if he
or she desires, seek legal advice about rescinding the agreement.
In addition, based on comments we received, we are not finalizing
the proposal to allow facilities to use pre-dispute, binding
arbitration agreements as a condition of admission to the facility. As
discussed above, residents, their families, and caregivers consider
various factors in choosing a LTC facility. We doubt that one of those
potential factors, whether a nursing home requires signing a pre-
dispute, binding arbitration agreement as a condition of admission, is
often a deciding factor for residents, caregivers, or representatives.
This is especially important since the choice of nursing homes may be
limited based on various factors. This requirement will enable
residents, their families, and caregivers to choose a LTC facility
based upon what is best for the resident's health and safety without
having to be required to sign a pre-dispute, binding arbitration
agreement. It will also ensure that no resident, his or her family, or
caregiver will have to decide between signing this type of agreement
and the resident receiving the care he or she needs.
G. Alternatives Considered
As discussed above, the district court granted a preliminary
injunction against enforcement of the prohibition against pre-dispute,
binding arbitration agreements. We considered removing all of the
arbitration requirements and returning to the position in the previous
requirements, that is, the requirements would be silent on arbitration.
We also considered continuing to defend the 2016 regulation. While we
do not agree with the district court's decision, it provided us the
opportunity to explore other ways to balance the interests of LTC
facilities that wish to arbitrate claims with the need to ensure that
LTC residents have the ability to make an informed decision about
whether or not to sign an arbitration agreement and resolve issues when
necessary in the best and most reasonable way they see fit.
In light of the comments we received, we have determined that such
a balance can be struck by removing the prohibition of pre-dispute,
binding arbitration agreements while maintaining and modifying the
transparency requirements promulgated in the 2016 regulation. The
comments we received demonstrated that many LTC residents are not aware
they have signed an arbitration agreement until after a dispute arises.
We have concluded, therefore, that transparency is essential, and that
CMS may properly exercise its statutory authority to ensure
transparency under its statutory authority to promote the health and
safety of LTC residents. Consequently, with the exception of posting
notices and requiring ``plain language,'' we have retained those
requirements that provide for transparency. We are also not finalizing
our proposal that would have allowed facilities to use pre-dispute,
binding arbitration agreements as a condition of admission to, or a
requirement to continue to receive care at, the facility for the
reasons discussed above. We believe the finalized requirements will
provide sufficient transparency to protect residents' health and
safety, including supporting their right to make informed decisions
about their health care. These finalized requirements should also
alleviate many of the residents and advocates' concerns about the
arbitration process while also allowing LTC facilities to arbitrate
claims should they so choose.
In accordance with the provisions of Executive Order 12866, this
final rule was reviewed by the Office of Management and Budget.
List of Subject in 42 CFR Part 483
Grant programs--health, Health facilities, Health professions,
Health records, Medicaid, Medicare, Nursing homes, Nutrition, Reporting
and recordkeeping requirements, Safety.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 483--REQUIREMENTS FOR STATES AND LONG TERM CARE FACILITIES
0
1. The authority citation for part 483 is revised to read as follows:
Authority: 42 U.S.C. 1302, 1320a-7, 1395i, 1395hh and 1396r.
0
2. Section 483.70 is amended by revising paragraph (n) to read as
follows:
Sec. 483.70 Administration.
* * * * *
(n) Binding arbitration agreements. If a facility chooses to ask a
resident or his or her representative to enter into an agreement for
binding arbitration, the facility must comply with all of the
requirements in this section.
(1) The facility must not require any resident or his or her
representative to sign an agreement for binding arbitration as a
condition of admission to, or as a requirement to continue to receive
care at, the facility and must explicitly inform the resident or his or
her representative of his or her right not to sign the agreement as a
condition of admission to, or as a requirement to continue to receive
care at, the facility.
(2) The facility must ensure that:
(i) The agreement is explained to the resident and his or her
representative in a form and manner that he or she understands,
including in a language the resident and his or her representative
understands;
(ii) The resident or his or her representative acknowledges that he
or she understands the agreement;
[[Page 34736]]
(iii) The agreement provides for the selection of a neutral
arbitrator agreed upon by both parties; and
(iv) The agreement provides for the selection of a venue that is
convenient to both parties.
(3) The agreement must explicitly grant the resident or his or her
representative the right to rescind the agreement within 30 calendar
days of signing it.
(4) The agreement must explicitly state that neither the resident
nor his or her representative is required to sign an agreement for
binding arbitration as a condition of admission to, or as a requirement
to continue to receive care at, the facility.
(5) The agreement may not contain any language that prohibits or
discourages the resident or anyone else from communicating with
federal, state, or local officials, including but not limited to,
federal and state surveyors, other federal or state health department
employees, and representatives of the Office of the State Long-Term
Care Ombudsman, in accordance with Sec. 483.10(k).
(6) When the facility and a resident resolve a dispute through
arbitration, a copy of the signed agreement for binding arbitration and
the arbitrator's final decision must be retained by the facility for 5
years after the resolution of that dispute on and be available for
inspection upon request by CMS or its designee.
* * * * *
Dated: February 6, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: February 13, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
Editorial Note: This document was received by the Office of the
Federal Register on July 10, 2019.
[FR Doc. 2019-14945 Filed 7-16-19; 4:15 pm]
BILLING CODE 4120-01-P