Arbitration Agreements – Revised CMS Guidelines

Just Do It!

As we focus on tools and resources and proactivity in our Enterprise Risk Management, this month we discuss the CMS updates to the State Operations Manual on Arbitration Agreements. Properly executed Arbitration Agreements continue to serve  as one of the most effective legal means to mitigate liability claims and damages. Along with this article. The Senior Living Empower Hour on February 28, 2023 at 1 pm CST will be focused on Arbitration Agreements Under the New Guidance. Please join us!

Background on Arbitration Agreement and Nursing Homes

In 2017, CMS issued a final rule prohibiting nursing homes that accept Medicare and Medicaid from entering into binding arbitration agreements with a resident or their representative before a dispute arises. In doing so, CMS cited abundant evidence that resolving disputes behind closed doors was detrimental to the health and safety of nursing home residents.

The nursing home industry immediately challenged this rule in court and a U.S. district court (right down the street from our firm) issued an injunction prohibiting it from going into effect. The Trump administration then announced it was reviewing the rule.

The new rule, which took effect on September 16, 2019, allows nursing homes to enter into pre-dispute arbitration agreements with residents, but prohibits nursing homes from requiring residents to sign an arbitration agreement as a condition for admission. The rule also adds a requirement that facilities give residents a 30-day period to rescind their agreement to arbitrate disputes. And it prohibits language in the arbitration agreement that prevents residents from contacting federal or state authorities.

Should you still use an arbitration agreement? 

Some consider the new guidance as a win and a loss. Considering the stratospheric verdicts, we are seeing the nursing home litigation, we consider arbitration agreements a win for the nursing home industry.

The ability to pursue arbitration represents a real opportunity for facilities to reduce liability and minimize the costs of potential litigation with residents by eliminating discovery, attorneys’ fees, and other related litigation expenses far outweighs the number of provisions intended to protect nursing home residents.

The new CMS Guidelines

CMS released a revised State Operations Manual (SOM) Appendix PP on June 29, 2022, that became effective on October 24, 2022. The updates are designed to enhance nursing homequality and oversight, and to clarify CMS expectations of facilities. Surveyors are using this revised guidance to identify noncompliance with the Requirements of Participation.

For the legal eagles out there, the 8th U.S. Circuit Court of Appeals recently rejected the argument from the nursing home industry that the arbitration regulation was in direct conflict with a host of federal arbitration laws. U.S. District Judge Timothy L. Brooks in 2020 determined that the government did not violate federal arbitration laws when it sought to limit the use of such agreements between skilled nursing operators and residents. (Northport Health Services of Arkansas, LLC v. Department of Health and Human Services, et al.) The Supreme Court declined to weigh in on the case.

If your organization is using an arbitration program, please review it carefully for compliance with the new CMS guidance. We’d be happy to review it for you as a courtesy so please reach out.

New F847 – Entering into Binding Arbitration Agreements

If a facility chooses to ask a resident or their representative to enter into an agreement for binding arbitration, the facility must comply with all of these requirements:

  1. The facility must not require signing of an arbitration agreement as a condition of admission or a requirement to continue to receive care at the facility and must explicitly inform the resident or the resident’s representative of their right not to sign the agreement.Adelman Advantage Note: The majority of nursing homes using arbitration agreements have already adopted these practices and agreements are not a condition to admission. 
  2. The facility must ensure that the agreement is explained in a form and manner that is understood and that the resident or their representative acknowledges that they understand the agreement.Adelman Advantage Note: An arbitration training program includes education on how to explain an arbitration agreement.
  3. The agreement must explicitly grant the right to rescind the agreement within 30 calendar days of signing it.Adelman Advantage Note: The majority of nursing home arbitration agreements include this language.
  4. The agreement must explicitly state that neither the resident nor their representative is required to sign the arbitration agreement as a condition of admission to the facility or a requirement to continue to receive care.Adelman Advantage Note: The majority of nursing home arbitration agreements include this language.
  5. The agreement may not contain language that prohibits or discourages communications 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 Ombudsperson.Adelman Advantage Note: The majority of nursing home arbitration agreements include this language.

SOM Additions of F847 Provide Guidance Regarding Arbitration Agreements

To cite deficient practice at F847, a surveyor’s investigation will generally show that the facility failed to explain the terms of the agreement in a form or manner that is understandable, inform the resident or their representative that signing the arbitration agreement is not required as a condition of admission, or inform that the resident has the right to rescind the agreement within 30 calendar days of signing it.

As for the arbitration agreement itself, the surveyor’s investigation will generally show that the agreement contains language that prohibits or discourages communication with federal and state surveyors, federal and state agencies, or the Ombudsperson, or fails to contain language that clearly informs residents and/or their representatives that they are not required to sign agreement as a condition of admission or continued treatment.

Per the SOM, noncompliance at F847 will almost exclusively have a psychosocial impact or outcome. The failure of the facility to meet requirements creates more than minimal harm, so Severity Level 1 does not apply. Without evidence of actual harm, noncompliance is likely to be cited at Severity Level 2. If noncompliance has caused psychosocial harm, it should be cited at Severity Level 3. To cite Immediate Jeopardy, the investigation would have to show noncompliance resulted in the likelihood for serious psychosocial harm or caused actual serious psychosocial harm and required immediate action to further prevent harm.

Procedures and Probes

The SOM guidance for F847 provides surveyors with several sample interview questions to be addressed to a variety of individuals involved in the process. The following are some of the sample interview questions for certain individuals or groups.

  • Resident and/or Resident’s Representative
    • What is your understanding of the arbitration process when a dispute arises?
    • Do you understand that you are giving up your right to litigation in a court proceeding?
    • Were you told that the facility could not require you to enter into an arbitration agreement to be admitted to or remain in the facility?
    • Did you feel you were obligated, required, forced, or pressured to sign the arbitration agreement? If yes, how so?
    • Is there anything you would have liked to know before signing the arbitration agreement?
  • Resident’s Council/Family Council
    • Has the Resident’s Council ever voiced any concerns to the facility about arbitration agreements?
    • Do you know if residents feel forced to sign the arbitration agreement? If yes, how so?
  • Facility Staff
    • When and under what circumstances do you request a resident or their representative agree to an arbitration agreement?
    • How do you ensure the resident or representative understands the terms of an agreement?
    • How do you ensure an agreement is explained in a form and manner that accommodates a resident’s or representative’s needs?
    • What is your process for allowing rescission of an arbitration agreement in the first 30 days?
  • State Long-Term Care Ombudsperson
    • Did any resident or representative report having felt forced or pressured into signing an agreement as a condition of admission?
    • Do you know any resident to whom the facility may have refused admission or who was discharged due to refusal to sign?
    • Are you aware of any residents or representatives who sought to rescind an agreement?
  • Record Review
    • The agreement clearly states that a resident or representative is not required to enter into the agreement as a condition of admission.
    • There is evidence that an agreement was explained in a form, manner, and language that is understood by the resident or representative.

New F848 – Arbitrator/Venue Selection and Retention of Agreements

If a facility chooses to ask a resident or resident representative to enter into an arbitration agreement, the facility must comply with all of the requirements of this section.

  • The facility must ensure that the arbitration agreement provides for the selection of a neutral arbitrator agreed upon by both parties and provides for the selection of a venue that is convenient to both parties.
  • A copy of the signed arbitration agreement and the arbitrator’s final decision must be retained by the facility for five years after resolution of that dispute and be available for inspection upon request by CMS or its designee

When determining the severity of noncompliance at F847, surveyors must always consider what impact the identified noncompliance had on the affected resident(s). However, unlike noncompliance at other tags, such as Abuse or Quality of Care, which may result in physical, mental, and/or psychosocial outcomes, noncompliance at F847 will almost exclusively have a psychosocial impact or outcome. Surveyors must gather sufficient evidence through interviews, record review and observation to demonstrate what the psychosocial impact was to the resident. In some cases, the surveyor may have to use the reasonable person concept to determine severity. Refer to the Psychosocial Severity Outcome Guide for further information. The failure of the facility to meet the requirements at F847 is more than minimal harm.

Therefore, Severity Level 1 does not apply for this regulatory requirement. Absent evidence of actual harm, noncompliance at F847 would likely be cited at severity level 2, No Actual Harm with Potential for More than Minimal Harm that is not Immediate Jeopardy. However, if the surveyor identifies that noncompliance at F847 has caused psychosocial harm to the resident (per the Psychosocial Severity Outcome Guide), this should be cited at severity level 3, Actual Harm that is not Immediate Jeopardy.

In order to cite Immediate Jeopardy, the surveyor’s investigation would have to show that noncompliance resulted in the likelihood for serious psychosocial injury or harm, or caused actual serious psychosocial injury or harm, and required immediate action to prevent further serious psychosocial injury or harm from occurring or recurring.

SOM Addition of F848 Provides Guidance Regarding Arbitration Agreements’

To cite deficient practice at F848, the surveyor’s investigation will generally show that the facility failed to do any one or more of the following:

  • Ensure that the agreement provides for the selection of neutral arbitrator.
  • Ensure that the agreement provides for the selection of venue that is convenient.
  • Retain a copy of the agreement and the arbitrator’s final decision for five years after the dispute is resolved through arbitration.
  • Refuse to make the agreement or final decision available for inspection upon request by CMS or its designee.

When determining the severity of noncompliance at F848, the surveyors use the guidance as addressed in F847.

Procedures and Probes

Like F847, the SOM guidance for F848 provides surveyors with the process for reviewing the facility’s binding arbitration agreement. These include:

Entrance Conference Worksheet: The following information will be requested during the Entrance Conference:

  • The facility’s binding arbitration agreement.
  • A list of residents in the facility that have entered into a binding arbitration agreement on or after September 16, 2019.
  • A list of the residents who have had resolved disputes through the arbitration process that occurred on or after September 16, 2019.

Review Three Residents:

  • Select three residents from the lists, as available.
  • Select up to two residents who signed the binding arbitration agreement and one resident who had a resolved dispute.
  • If there aren’t any residents who have resolved a dispute, select three residents who signed the binding arbitration agreement, as available.
  • Attempt to select residents that are already in the finalized sample, when possible.
  • Add the name of the selected residents in the resident box on the Arbitration screen and identify the reason the resident is being selected.
  • If there aren’t any residents who entered into a binding arbitration agreement, review the facility’s binding arbitration agreement.

The SOM also includes a number of sample interview questions to be addressed to a variety of individuals involved in the process. The following are sample interview questions for certain individuals or groups.

  • Resident and/or Representative/Family Member:
    • What is your understanding of the arbitration process when a dispute arises
    • Do you understand that you are giving up your right to litigation in a court proceeding?
    • Were you told that the facility could not require you to enter into an arbitration agreement in order to be admitted, or to remain in the facility?
    • Were you told that you had the right to terminate or withdraw from the agreement within 30 days of signing? If yes, were you told how to do so?
    • Did you feel you were obligated, required, forced or pressured to sign the binding arbitration agreement? If yes, how so?
    • Were you discouraged in any way from contacting federal, state, or local officials, such as the state survey agency or ombudsman about an arbitration agreement? If yes, how so?
    • Have you filed any complaint(s) or grievance(s) with the facility and/or state survey agency about an arbitration agreement? If so, did the facility respond and provide a rationale for the response? o   Is there anything you would have liked to have known prior to signing the arbitration agreement? o   Was the arbitration agreement explained in a way that you understood?o   If the arbitration agreement was included within another document, were you told first that you had the right to decline the agreement; and second, how to exercise this right (crossing out, etc.)?
  • Facility Staff who are responsible for explaining the binding arbitration agreement to the resident or his/her representative:
    • How do you ensure that a resident or representative has an equal role in selecting an arbitrator?
    • What is your process for selecting a neutral arbitrator?
    • How do you ensure that a resident or representative has an equal role in selecting a venue?
    • What is your process for selecting a convenient venue?
    • When a resident or representative does not agree with the arbitrator and/or venue, what are the next steps?
    • How does the agreement provide for selection of an arbitrator agreed upon by both parties?
    • Are there any active complaints regarding selection of an arbitrator or a venue?
    • What information do you provide residents or representatives regarding specific arbitrators or arbitration services companies?
  • State Long-Term Care Ombudsman
    • Did any resident or representative ask for your assistance in selecting an arbitrator or a venue?
    • Did any resident or representative complain that they were forced or pressured to select a particular arbitrator or venue?
    • Did any resident or representative complain that a venue was inconvenient?
  • Record Review
    • Is there evidence that a resident or representative was provided with an opportunity to select an arbitrator and/or a venue?
    • Is there evidence that the facility retained a copy of the signed agreement and the arbitrator’s final decision after resolution of a dispute through arbitration for five years?

Other Tags and Care Areas and Tasks to Consider

The SOM guidance also references the following other tag and task areas surveyors will consider when assessing arbitration agreements:

  • Rights Exercised by Representatives F551
  • Resident Council – Grievances (Task)
  • Resident Contact with External Entities F586
  • Admission Policy F620 and Discharge (CA)

Conclusion

The new guidance reinforces what we have known about arbitration agreements for the past many years: The facility needs a compliant agreement and an education program for training on how to present the arbitration agreement. Investing in an arbitration training program and presenting a compliant agreement is one of the most proactive risk mitigation strategies senior living providers have to reduce losses arising from resident and family complaints.

Next Month

We’ll be discussing resident and family expectations management in March and how to design an expectations management training program. 

Please email Sara Cantú, scantu@adelmanfirm.com for more information about the newsletter or webinars.

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