Federal Ruling May End Nursing Homes’ No-Lawsuit Agreements

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A new federal ruling could settle a long-disputed question of whether Oklahoma nursing homes can force patients or their families to sign away their rights to sue in court as a condition for admission.

The Centers for Medicare and Medicaid Services announced a final rule this week that blocks nursing homes that receive federal funds from using pre-dispute binding arbitration agreements. Almost all nursing homes get federal funds.

Over the years, the controversial practice has been used by dozens of nursing homes and assisted living centers in the state as part of their admission contracts. The agreements require disputes to be settled by an arbitrator instead of by a judge or jury as part of a lawsuit.

Opponents say arbitration agreements tend to reduce damages or settlement amounts paid to families, even in cases of abuse and neglect, and thus limit a nursing home’s financial exposure. In most cases, a ruling by an arbitrator cannot be appealed to a higher court.

These types of agreements are illegal under Oklahoma’s Nursing Home Care Act. But a series of court rulings over the years have suggested that the Federal Arbitration Act trumps state law and allows the practice.

In 2006, the Oklahoma Supreme Court ruled that a nursing home’s arbitration agreement was unenforceable because it violated state law. That prompted the Oklahoma State Department of Health to send a letter notifying providers that they would be subject to citations if they used mandatory binding arbitration agreements.

However, efforts to enforce that threat have been largely thwarted due to two Oklahoma federal court rulings in 2008 that said the Federal Arbitration Act takes precedence over state law. In April, the Oklahoma Court of Civil Appeals issued a ruling that upheld a pre-dispute binding arbitration agreement in a neglect case involving a Broken Arrow long-term care center.

Don Maisch, general counsel for the state Health Department, said the conflict between state and federal laws has “muddied the water” of what is and is not allowed.

However, the new CMS rule, which takes effect in November, will provide much-needed clarity, he said.

Maisch said the department is still studying the 713-page order, but it is clear that agreements requiring arbitration as a condition of admission – that is, before a dispute occurs – will be prohibited for centers that accept Medicare or Medicaid. Arbitration will still be allowed if both parties agree to it after a dispute occurs.

Travis Charles Smith, an Oklahoma City attorney who specializes in nursing home neglect cases, called the new rule a “monumental victory” for patients and their families.

Although arbitration cases are settled more quickly, he said, the patients or their families often have to pay much more to just hear the case since they have to hire the arbitrator as well as pay other legal fees. He said studies show that settlements paid by nursing homes outside the court system tend to be lower.

A representative of the Oklahoma Association of Health Care providers said the group was still studying the federal rule to determine how it will affect its members.

Mark Parkinson, head of the American Health Care Association, said in a statement that the ruling “clearly exceeds CMS’ statutory authority and is wholly unnecessary to protect residents’ health and safety.”