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Nursing Homes Can No Longer Hide Behind Arbitration Clauses

By George Khoury, Esq. on September 29, 2016 | Last updated on March 21, 2019

The hearts of nursing home bureaucrats are going to be breaking all over the country come November 28, 2016. That's the day the new regulation goes into effect preventing nursing homes from requiring new residents to sign agreements that contain arbitration clauses in order to move in, unless they're willing to forego receiving Federal government monies.

Arbitration clauses in nursing home admissions contracts have been so widely used that finding a nursing home without one would be harder than finding an heirloom tomato in Camden, New Jersey. This change in the law is great for the elderly moving into a nursing home after November 28. 2016. The law is not being applied retroactively.

What's the Big Deal? Why Does This Matter?

Arbitration clauses, generally, prevent people from filing a lawsuit in court, and require that any legal claims be decided before a neutral third party rather than a jury of your peers, or a federal or state court judge. Since arbitration clauses have gained in popularity over the past few decades, courts have generally upheld them as valid contract clauses, and have refused to hear countless cases on the basis that the parties agreed to resolve the dispute via arbitration.

The real problem comes from the fact that arbitration is a private process, unlike a court case, which is public. Large corporations or business entities use arbitration clauses not just to keep their legal costs low, but also to prevent people from going to court. This prevents the public and media from learning about the disputes. While this doesn't exactly sound egregious, it actually is, especially when a vulnerable population such as the elderly is involved. But now the Department of Health and Human Services has taken action to correct the problem. Arbitration clauses have allowed numerous cases of nursing home neglect and abuse to get swept under the confidential arbitration carpet.

What If the Resident Wants Arbitration?

This recent change, clearly explained in HHS's fact sheet, still allows an arbitration agreement to be entered into between a nursing home and resident in one specific situation: "We are requiring that facilities must not enter into an agreement for binding arbitration with a resident or their representative until after a dispute arises between the parties. Thus, we are prohibiting the use of pre-dispute binding arbitration agreements."

So, after a dispute arises between a resident and a facility, a resident can choose to arbitrate rather than go through the court process. Then, and only then, can a nursing home enter into an arbitration agreement.

But before you pop that sparkling white wine to celebrate, know that it is expected that the nursing home industry will aggressively challenge this new law in court.

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