New Government Rules on Nursing Homes are a Victory for Everyone

The announcement last week that the federal government will bar most nursing homes and other care facilities from forcing clients to sign care contracts requiring them to settle disputes in arbitration is an enormous victory for ordinary Americans – one that deserved more attention than it received in both the national and local media.

As the New York Times noted: “With its decision, the Centers for Medicare and Medicaid Services, an agency under (the Department of) Health and Human Services, has restored a fundamental right of millions of elderly Americans across the country: their day in court. It is the most significant overhaul of the agency’s rules governing federal funding of long-term health care facilities in more than two decades.” Because virtually every nursing home and care facility in the country receives funds from either Medicare or Medicaid (and often from both) the rule is, effectively, universal. The rule change was essential to curb the spread of arbitration since a 2015 Supreme Court ruling (DIRECTV v Imburgia) which not only held that arbitration clauses are legal but also threw out state-level bans on the practice.

Obviously a federal law banning forced arbitration clauses can’t be passed in Washington’s present polarized political climate, but with last week’s decision the federal government effectively used the leverage that comes from being the largest single player in our healthcare system to put citizens ahead of corporate profits. The new federal rules effectively overturn the Court ruling in the area of nursing homes and related services.

In considering why it is significant, it is worth quoting Oregon Public Broadcasting: “A 2009 study… found the average awards after arbitration were 35 percent lower than if the plaintiff had gone to court.” Tellingly, OPB cites a spokesman for the American Health Care Association – an industry lobbying group that strongly opposed the new rules – defending the arbitration system on the grounds that “it actually allows consumers to get an expedited award.” In a single sentence this comment encapsulates the problem with the arbitration system. Just as it is clearly all a matter of money for the companies that run the homes, the people managing the industry assume that patients and their families view their relationship with caregivers as a predominantly financial one. In making that assumption, however, they miss a crucial truth about the nursing home industry: from the perspective of patients and families it is rarely about money but is always about care. We expect quality care for ourselves or for a friend or relative when signing a contract with a nursing home, and expect to be able to hold incompetent or negligent providers responsible for their actions.

The deeper problems with forced arbitration clauses are ones I have explored several times in this space over the last year or so. Most critically, the practice of forced arbitration deprives Americans of their Seventh Amendment right to a jury trial and, in its place, puts decision-making authority in the hands of a person (the arbitrator) who is paid by the accused party (i.e. the home or an industry group) and relies on that same party for promises of future work. In such a situation, how can we reasonably expect neutrality? The fact that most of these clauses are buried deep in the fine print, where few people will read them, only makes them more pernicious.

Oregon Statute 124.100 sets the terms for legal disputes surrounding nursing home care – defining such seemingly simple concepts as an “elderly”, “incapable”, and “disability.” It also sets broad limits on the damages that can be awarded. As the Times and OPB note, arbitration clauses often allow large companies to avoid the full liability that the legal system allows wronged patients and their families to claim. In addition, as notes, another key – if often overlooked – problem with the arbitration system is the fact that it leaves behind no public record. This means that companies have little incentive to learn from their mistakes and that other people facing the same problem in the future do not have the benefit of a legal precedent to support a case that may be similar.

As a Portland attorney practicing in both Oregon and Washington I am pleased to know that the protections offered by our court system will now be much more widely available to families with a loved one in a nursing home. As our population ages this is a victory we can all take pride in.


New York Times: U.S. to bar Arbitration Clauses in Nursing Home Contracts

Forbes: What You Should Know About the Government’s New Nursing Home Rules

Oregon Public Broadcasting: New Rule Preserves Patients’ Rights to Sue Nursing Homes in Court How nursing homes can prevent you from suing


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