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CMS Dismantles Binding Arbitration in Nursing Homes

Sign on the dotted line...

Choosing to put a loved one into a care facility, whether that be an around-the-clock nursing home or a semi-independent assisted living facility, is a difficult and emotional process. For some it may be a relief that an aging loved one will receive the care that they need. Leaving them in the care of strangers at a vulnerable time is undoubtedly anxiety provoking and doing so requires a fair amount of trust. Of course researching the facility can help alleviate many fears, but it’s still likely a major life change for the loved one entering the care facility. As the beloved family member (or their guardian) is being asked to fill out what seems like an endless pile of paperwork, it’s easy to lose focus of all of the forms being presented for a signature or initial. There will be dozens of these forms to fill out and sign—forms for insurance billing, current prescriptions, family and physician contact information, dietary preferences—and that’s just a few examples, the list goes on!

The endless forms often include very important, but frequently unnoticed language: an arbitration clause embedded within the fine print. Whether the arbitration clause is overlooked or not fully understood, signing it can severely limit one’s rights should something ever happen while in the facility’s care. Dealing with the stress of moving a loved-one into a facility is tough enough without having to worry about signing away future rights should the facility fail to provide the care they’re being paid for. For years, that single arbitration clause had a huge impact on residents’ and their families when something bad happened under the facility’s care.  That is, until now.

The Centers for Medicare and Medicaid (CMS), the Federal agency that administers the national Medicare program and oversees state Medicaid programs, announced a new rule that any nursing home or care facility that receives federal funding can no longer force their residents to resolve disputes through binding arbitration. Binding arbitration is the processes by which a third-party person or panel will review a claim or case and make a legally-binding decision. The Seventh Amendment grants the right to sue in court and have a case be decided by a jury of one’s peers. With arbitration clauses, nursing homes were able to limit residents from exercising this right, forcing them instead to resolve any dispute through binding arbitration. In arbitration, the arbitrator has the power to decide how much evidence can be considered and how much to award in damages. The arbitrator’s decision is nearly impossible to appeal. On top of this, the arbitration clauses often include language that grants the nursing home or facility the choice of who the arbitrator will be. There are few situations where the panel is not stacked in favor of the facility, and because of that arbitration clause, it’s been perfectly legal.

CMS’s decision affects at least 1.5 million nursing home residents. It is the most substantial overhaul of the agency’s rules on federal funding for long-term care facilities in over two decades. This ruling came after officials across the country urged the government to cut funding to nursing homes with arbitration clauses because they felt that arbitration allowed patterns of wrongdoing to be hidden from prospective residents and their families.

“The system has helped the nursing home industry reduce its legal costs but it has stymied the families of nursing home residents from getting justice, even in the case of murder”, The New York Times reported. The tragic case of a 100-year-old woman named Elizabeth Barrow who was strangled to death by her roommate in a nursing home was initially blocked from court. In this case, Mrs. Barrow’s roommate, Laura Lundquist, was charged with murder, even though Ms. Lundquist was 97-years-old at the time and suffering from dementia. Ultimately she was deemed unfit to stand trial and the case remains active while Ms. Lundquist is held in a state psychiatric hospital pending an evaluation that finds her capable of standing trial. The nursing home claimed that the women got along well, although they noted in Ms. Lundquist’s file that she was “at risk to harm herself or others”. When Mrs. Barrow’s only son tried to hold the nursing home accountable for failing to protect his mother from a resident known to be a risk to herself and others and take them to court, he was barred by the private arbitration clause.

Amidst the arbitration process, the son and his legal team found that the arbitration firm named to decide his case had also handled over 400 cases for the law firm that represented the nursing home. After the private arbiter ruled that the nursing home was not negligent, the son fought to appeal the decision and for his day in court. After six years he ultimately received a trial by asking a judge to declare that he had no right to sign the contract. He argued that although he signed the paperwork that contained an embedded arbitration clause, his mother had authorized him to make only medical decisions for her not legal or financial decisions.

Unfortunately, there are many other instances of families being barred from trial due to arbitration clauses. Another family was denied access to justice after their loved one died as a result of neglect: she sustained a head wound that festered in her nursing home, rather than receiving appropriate medical care and attention. Arbitration clauses have systematically dismantled this family’s right, and thousands of others, to hold nursing homes accountable for their negligence and wrongdoing, all in the name of profit.

The nursing home industry has already come out against CMS’s recent ruling, claiming this rule is beyond the authority of the agency. They argue that removing the arbitration clause is not necessary to protect residents. Proponents of the rule change have noted that arbitrations often keep poor or embarrassing practices out of the public eye—thereby protecting the nursing home’s reputation and financial gain. Because arbitration is a confidential process, outcomes are not made public as they would be in a civil lawsuit. In a profit-driven market where many nursing homes are consistently understaffed and employees are underpaid, accidents happen. That doesn’t mean that the entities responsible for those accidents shouldn’t be held accountable. Under this new ruling, new individuals that enter a nursing facility will no longer be forced to sign a hidden arbitration agreement if that facility receives federal funding. Should an unfortunate event ever arise, the resident or their family will be able to pursue a civil claim and jury trial, just as the Seventh Amendment provides.

Arbitration clauses have not only affected nursing home cases but also consumer and employer contracts. We’ll discuss the rise of arbitration clauses more in an upcoming blog.

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