The Centers for Medicare and Medicaid Services (CMS) had issued a new regulation that would have effectively banned mandatory arbitration clauses in nursing home admissions contracts.

A previous blog post discussed some of the problems with forced arbitration in nursing home contracts: Dangers of Forced Arbitration in Nursing Home Contracts

The new rule, which was to set to go into effect on November 28, 2016, would have effectively banned clauses in nursing home admissions contracts that force any legal dispute to go to arbitration in place of the courts. A number of plaintiffs, mostly comprised of nursing home operators and nursing home interest groups, sued to block the new regulation on the grounds CMS was overstepping its authority.

On November 7th, U.S. District Judge Michael Mills issued a preliminary injunction temporarily blocking the new regulation. While the injunction noted that the idea of banning arbitration in nursing home contracts was likely positive policy due to the disparity in bargaining power between nursing homes and potential nursing home residents, the court found that the new regulation would likely be an overreach. The main legal obstacle the court found was the Federal Arbitration Act. The Federal Arbitration Act is a broad federal law that favors the enforceability of arbitration clauses in contracts. According to the ruling, carving out an exception for nursing home contracts would likely require an act of Congress. Secondly, the court found that the policy findings supporting the new regulations as an already authorized action to protect resident rights, health, and safety were insufficient in that the compiled public comments only demonstrated the potential harm of forced arbitration rather than specific findings of actual harm. While the injunction is only a temporary injunction, the injunction was made on the court’s finding that the plaintiffs would almost certainly prevail after a full trial.

It is now up to CMS to either appeal the ruling or to revisit the regulatory process by either dropping the proposed regulation or making a new attempt to compile stronger findings highlighting the harms of forced nursing home arbitration clauses.