Federal judge blocks CMS ban on arbitration

A federal judge has issued a preliminary injunction to press the pause button on a new mandate from the Centers for Medicare and Medicaid Services (CMS) that would prohibit arbitration agreements in resident contracts and admissions documents. Prior to the judicial decision, the new CMS rule was slated to go into effect on Nov. 28, 2016.

The injunction, sought by the American Health Care Association (AHCA) last week, challenged part of CMS’ Final Rule on long-term care facility reform—specifically, CMS’ authority to invoke forced agreement to a facility’s arbitration provisions, since it would override the Federal Arbitration Act, a law that encourages arbitration as a way to solve conflicts. “The merits of allowing individuals in our centers and their families this legal remedy are clear,” said AHCA President and CEO Mark Parkinson, who called the CMS rule an “overreach” in his recent association statement. “Study after study shows that arbitration is fair and speeds judgments in a cost-effective manner that benefits those injured more than anyone else.”

CMS, arguing in favor of removing arbitration agreements from resident contracts, noted in the final rule: "There is significant evidence that pre-dispute arbitration agreements have a deleterious impact on the quality of care for Medicare and Medicaid patients, which clearly warrants our regulatory response."

Judge Michael P. Mills of the U.S. District Court for the Northern District of Mississippi heard testimony from both sides Friday, issuing a decision today in favor of AHCA. As a temporary injunction, the decision acts like a restraining order on the CMS rule until further legal consideration can be given.

"In a carefully crafted 40-page decision, Judge Mills noted that 'Congress considered banning nursing home arbitration provisions but declined to do so,'" said Alan C. Horowitz, Esq., RN, partner at Arnall Golden Gregory, who has experienced both sides of the courtroom, previously as legal counsel for CMS and now as counsel for providers. "Based on Congress’ refusal to ban nursing home arbitration agreements, as well as other factors, Judge Mills determined that 'CMS does not have the authority to ban nursing home arbitration on general policy grounds.'"

AHCA’s Parkinson considers today’s decision a victory: “The court agreed with our argument that imposing a November 28 implementation would have resulted in real harm to providers as well as to our residents. We believe Federal law plainly prohibits CMS from issuing this arbitration regulation, and this injunction will halt implementation of the final rule until the court can consider the merits of the case.”

Topics: Medicare/Medicaid , Regulatory Compliance , Risk Management