Diving into the Skilled Nursing Facility (SNF) ‘Final Rule’ on arbitration agreements

February 15, 2017 ABILITY

snf skilled nursing final rule arbitration

Last fall the Centers for Medicare & Medicaid Services (CMS) issued The Final Rule to Reform the Requirements for Long-Term Care Facilities, a massive collection of new, revised and restructured regulations that touches nearly every aspect of nursing home operations – including resident assessments, quality improvement, data collection and utilization, and staffing levels. Luckily, all the changes are scheduled to take place over a three-year period, with three phases of implementation.

But there’s no time like the present to make sure your staff and processes are ready, especially for changes that took effect immediately when the Final Rule was announced. Here’s a deeper dive into one of those Phase 1 changes: skilled nursing facilities can no longer require new residents to agree to mandatory pre-dispute binding arbitration before moving into a nursing home.

Where the arbitration rule came from

The regulation bans the requirement that residents must use binding arbitration in a dispute, even before any dispute has arisen. Such contracts are no longer allowed as a condition of admission and may not be entered into with residents at any time.

Previously, binding arbitration was commonly used when residents (and their families) had complaints about abuse or neglect. It offered a predictable process that served to manage legal costs and minimize damage claims. However, the CMS was persuaded by the arguments of residents’ rights groups that denying access to the courts was unfair.

However, arbitration is still permitted and facilities can offer it when a dispute arises. As well, the rule does not affect existing pre-dispute arbitration clauses that homes may have with current residents. Arbitration can still be used in these cases.

How the rule impacts skilled nursing facilities

Many disputes will end up in court, although some will still be resolved through arbitration. Since court cases can be expensive and damage awards significant, homes may face higher legal costs.

In addition, there may be more publicity around incidents at SNFs. With binding arbitration, the cases were almost always kept confidential. This will not be the norm with lawsuits and there will be more news coverage and posts on social media.

Are your staff and facility in compliance?

Make sure you’ve implemented the following, as the new rule requires both operational and philosophical considerations:

First and foremost, make sure that your resident admission agreements comply with the new rule. It is no longer permissible to make arbitration mandatory in a dispute as a condition of accepting the resident. Remember, you do NOT need to revise agreements with current residents

  • Prevention of incidents is always the best approach to avoiding disputes. Make sure that all staff members are fully trained to prevent elder abuse and to care for residents with dementia. As well, update infection prevention and control programs to protect residents.
  • Arbitration can still be an excellent dispute settlement mechanism for both families and nursing homes. You may wish to develop a strategy to encourage families to agree to arbitration rather than pursuing legal action. Again, this is perfectly acceptable under the new rule as long as arbitration is not required before a dispute has arisen and is not a condition of admission.
  • During your next budget cycle, you may wish to review budgets for legal costs. If you have had to pay settlements from binding arbitration in the past, you can expect that these will be more expensive in the future. Legal fees in disputes likely will be higher since court trials can be longer and more complex than arbitration cases.
  • A final recommendation could be the most powerful: Better communication with residents and families. In a summary of the research around physician communication, Dr. Aaron E. Carroll, professor of pediatrics at the Indiana University School of Medicine, wrote in the New York Times that doctors who were better communicators were less likely to be sued. This likely applies to skilled nursing facilities as well. Review your communication policies to ensure that families receive accurate and timely information in the event of an incident. In any discussion about what happened, administrators should convey concern for the resident and the family.

Need a high-level review of the entire CMS Final Rule? See our earlier blog post. Remember, ABILITY is here to help you tackle all the changes facing healthcare. Browse our SNF Resource Center to help you keep on top of operations, revenue and clinical performance.





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