CMS long-term care rule blocked by federal judge

A rule banning nursing homes from requiring residents to sign contracts requiring pre-dispute arbitration has been temporarily blocked by a federal judge.

The provision against mandatory arbitration in future nursing home residency agreements was due to go into effect Nov. 28. The industry’s largest trade group, the American Health Care Association (AHCA) quickly sued to block its implementation, arguing such a restriction could only be enacted by Congress. U.S. District Judge Michael Mills of the Northern District of Mississippi agreed.

“While this court is sympathetic to the public policy considerations behind the rule, it places even greater importance upon the basic separation of powers principles set forth in the U.S. Constitution,” Mills wrote in his 40-page opinion.

Much of the opinion was dedicated to Mills’ “sympathetic” view, saying AHCA’s argument ignores instances of nursing homes gaining mandatory arbitration agreements from residents who aren’t mentally competent or from relatives who haven’t been granted power of attorney. Even if families or resident do file lawsuit, Mills said nursing homes have shown this kind of legal dispute to be an effective tool for “pure delay.”

“This is partly due to the inherent difficulty in deciding nursing home arbitration-related issues, such as mental competency and agency,” Mills wrote. “In resolving such issues, the most important witness, the resident, will generally have died by the time the lawsuit is filed, making it exceedingly difficult to determine, after the fact, the decedent’s level of mental competency or whether he authorized a relative to sign on his behalf (particularly since the relevant agency standards are quite vague).”

Despite the criticisms leveled at the AHCA’s argument, the group said it was pleased with the outcome.

“The court agreed with our argument that imposing a Nov. 28 implementation would have resulted in real harm to providers as well as, we believe, to our residents,” AHCA President and CEO Mark Parkinson said in a statement. “We also 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.”

The AHCA’s own 2009 study found arbitration leads to smaller awards to patients, on average 35 percent lower than in courts.