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The Validity of Nursing Home Arbitration Agreements

The Federal government may change the way the states handle arbitration in nursing homes for good. There are two potential changes coming down the federal pipeline that could drastically alter the way nursing home disputes are handled. First, the Center for Medicare and Medicaid Services (CMS) has attempted to propose a new rule that would prohibit federal funds to nursing homes that use binding arbitration agreements in their nursing home contracts.

Second, the U.S. Supreme Court heard oral arguments on February 22, 2017, on Kindred Nursing Crts. Lp. v. Clark (U.S. No. 16-32), where the Court has been called to answer the question of whether the Federal Arbitration Act (FAA) preempts a state law contract rule that requires a power of attorney to expressly refer to arbitration agreements before the attorney-in-fact could bind her principal to an arbitration agreement.

New CMS Rule Prohibits Arbitration in Nursing Home Agreements

In October 2016, the Center for Medicare and Medicaid Services (CMS) proposed a rule that would prevent federal funding from going to nursing homes that used binding arbitration agreements in their contracts. The CMS ban was set to go into effect on November 28, 2016; however, at the request of the American Healthcare Association, the industry trade group, and four other state and local healthcare groups, a judge in the U.S. District Court for the Northern District of Mississippi granted an injunction to prevent the rule from taking effect.

The CMS filed a notice to appeal the injunction in January 2017.

Does Federal Law Preempt State Legislation on Arbitration?

The Federal case, Kindred Nursing Ctrs, concerns a question of Kentucky contract law where the Kentucky Supreme Court rejected an arbitration agreement signed by a "representative" of a nursing home resident rather than an individual with power-of-attorney over that residence.

Interestingly enough, the Colorado Court of Appeals came to a very similar conclusion in Lujan v. Life Centers of America, 222 P.3d 970 (C.O. Ct. App. 2009). In Lujan, the patient's son signed a nursing home agreement, which included an arbitration provision. The patient's son was considered a healthcare proxy for purposes of medical treatment decisions but was not power of attorney. Here the Court held that the decision to arbitrate was not a medical treatment decision that a healthcare proxy could enter into on a patient's behalf. 

On the one hand, nursing home supporters have stated that the FAA was enacted to put arbitration agreements on the same footing as contracts. Their argument is that the FAA prohibits a state from placing more of a burden on arbitration agreements than on any other contracts.

The counter-argument presented by the representatives of nursing home residents argues that using the FAA as a preemptive mechanism would lead to unconstitutional interference in the state court's ability to interpret and apply state agency law without running into issues with federal policy.

Considering that the factual scenario in Kindred Nursing Crts. was so similar to that in Lujan, it will be interesting to keep an eye out for the U.S. Supreme Court decision on Kindred Nursing Ctrs.

Either way, these two federal policies could drastically change the way nursing home disputes are handled throughout Colorado and the several states. If you or someone you know has a loved one in a nursing home with an arbitration agreement, keep an eye out for the decision in this case.


Why are Arbitration Clauses Harmful

Arbitration clauses can be harmful to nursing home residents because they remove the right of a cause of action in a court of law from potentially vulnerable individuals and deny them the right to have their case heard by a jury. Nursing homes, by definition, house people who are in some way more susceptible to being taken advantage of than the average person. When an individual moves into a nursing home, it is because he or she is usually older and needs assistance with his or her basic necessities.

While some nursing home residents have very active family members who ensure that their loved ones are being adequately taken care of, many residents do not.

Moreover, some arbitration arguments are unfairly skewed with the nursing home having the ability to choose the arbitrators, the length of arbitration, and the number of votes for a favorable outcome, leaving the nursing home residents at the mercy of an arbitration process that they had no voice in choosing.

Additional Resources

"Supreme Court's Nursing Home Arbitration Case Could Have Wider Implications" –Visit Bloomberg BNA to find out more information on Kindred Nursing Ctrs, the issue of Federal preemption and how such a decision could affect the application of state law.

Petition for a Writ of Cert –Kindred – Visit the Scotusblog website for the full 177-page petition for Writ of Certiorari filed by the Counsel for the Petitioner in Kindred Nursing Ctrs.


Find an Attorney for Nursing Home Disputes in Denver, Colorado

If your loved one has suffered serious injuries or died due to abuse or neglect in a nursing home, and you are unsure whether you signed an arbitration agreement, you should seek legal counsel immediately.

The Law Office of Jennifer L. Donaldson represents clients throughout the Mile High City and many surrounding areas, including Littleton, Thornton, Westminster, Longmont, Centennial, Boulder, Aurora, Lakewood, Arvada, and many others.

Colorado personal injury lawyer Jennifer Donaldson's more than 25 years of experience has earned her an AV Preeminent® Peer Review Rating™ from Martindale-Hubbell®, a testament to the respect and esteem of her peers.

She can review your case as soon as you call (303)-458-5000 to schedule a completely free consultation.

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