The Centers for Medicare and Medicaid Services is Attempting to Prohibit the Use of Pre-Dispute Binding Arbitration Agreements for Long-Term Care Facilities that Participate in Medicare and Medicaid Programs.

On September 28, 2016, the Centers for Medicare and Medicaid Services (CMS) filed a final rule with the Federal Register, that will prohibit the use of pre-dispute binding arbitration agreements for long-term care facilities that participate in Medicare and Medicaid programs. The final rule was published in the Federal Register on October 4, 2016.  The regulation will go into effect on November 28, 2016, and is not retroactive.

The regulation will cut off funding to facilities that (1) enter into pre-dispute arbitration agreements or (2) require that residents sign binding arbitration agreements as a condition of admission. Post-dispute arbitration agreements are still permitted under certain circumstances.

The regulation has no effect on long-term care facilities that do not receive Medicare or Medicaid funding. Furthermore, the regulation does not create a new standard for determining whether an arbitration agreement is unconscionable. Rather, the regulation adds to the requirements that long-term care facilities must meet to participate in Medicare and Medicaid programs. As CMS noted in its commentary: “We have only prohibited pre-dispute binding arbitration agreements between facilities and residents as a condition of participation in Medicare and Medicaid. If a facility wishes to continue to utilize pre-dispute agreements, it is free to continue in business without Medicare or Medicaid residents.”  

Many groups associated with long-term care facilities are challenging this decision.  This week, the American Health Care Association (AHCA) filed a lawsuit against the Department of Health and Human Services challenging the legality of this provision.  ACHA’s challenge is based on the Federal Arbitration Act (FAA) which mandates that arbitration agreements can only be changed by Congress.   

CMS received nearly 10,000 comments on the rule after it was first proposed in July 2015. The final rule is available at