An issue that divided Virginia trial courts for more than a decade may have been resolved by federal edict.
A federal agency last month banned the use of arbitration clauses in nursing home contracts, outlawing a predetermined agreement to resolve claims of neglect and abuse in closed-door proceedings.
Lawyers for nursing home patients hailed the change as an end to nearly universal “forced marriage” contract terms that patients and families had to accept.
But the long-term care industry said the government ignored federal law and removed a useful tool for efficient and inexpensive dispute resolution.
The validity of arbitration clauses in specific cases has been litigated repeatedly in Virginia courts.
“We fight them tooth and nail in every case,” one patients’ lawyer said.
For a time, it seemed that judges in the western part of the state disfavored enforcement of arbitration provisions, while judges to the east tended to uphold the agreements.
Amid the apparent split, the Supreme Court of Virginia agreed to hear an appeal of a Norfolk decision in 2010, but the case settled without a ruling from the justices.
Those preliminary battles over the enforceability of arbitration provisions may be a thing of the past.
The Centers for Medicare and Medicaid Services, part of the federal Health and Human Services Department, issued a rule on Sept. 28 prohibiting the use of pre-dispute binding arbitration agreements for patients in long-term care facilities that take federal money.
Nearly all nursing homes participate in Medicare and Medicaid. The rule applies to nearly 1.5 million residents in more than 15,000 long-term care facilities, according to a CMS news release.
Both sides of the arbitration dispute made their voices heard as the government considered the issue.
The plaintiffs’ bar was surprised and delighted with the rulemaking.
“Never in our wildest dreams did we think Medicare would go this far, to forbid pre-dispute arbitration contracts,” said Ellerman, chair of the Long-Term Care Litigation Section of the Virginia Trial Lawyers Association.
On the other hand, “I know our clients are extremely unhappy about it,” said Mary C. Malone of Glen Allen, who counsels long-term care facilities on government regulation.
The nursing home industry lobbied hard for the right to keep arbitration clauses in patient care agreements, and the head of the Virginia Health Care Association says its efforts will continue.
“We expressed concerns about the proposed arbitration provisions last year during the comment period on the proposed rule,” said Keith Hare, VHCA president and CEO.
“The pre-dispute arbitration language clearly exceeds CMS’s statutory authority and is unnecessary to protect residents’ health and safety. Along with the American Health Care Association, we are exploring the appropriate steps to take in light of this unjustified action,” Hare said in an email.
Robert W. Carter of Appomattox, a long-time representative of nursing home residents in abuse and neglect claims, said arbitration clauses are like an “arranged marriage” for patients and their families. The families have no say in the deal, he said.
“These are being placed in front of families and patients when they are at their most vulnerable,” Carter said. “There’s no time to get a lawyer involved; there’s no time to exercise free will.”
“It’s not a bargained-for term,” agreed Carlton F. Bennett of Virginia Beach, another veteran patient advocate in nursing home litigation.
“You don’t turn down the admission of your father who needs rehabilitation because, buried on page 18, is an arbitration clause. That’s not the way things work in real life,” he said.
But arbitration agreements have proven to be “valuable dispute resolution mechanisms,” Hare said. Judges have not found that one party is “coerced” into signing the agreement simply because the parties are not considered to have equal bargaining power, Hare contended.
The arbitration ban is part of a package of new rules, including requirements for speedy initial care plans and increased staff training, welcomed by patient advocates, Bennett said.
From the other side, the arbitration ban is seen as “another pop to the long-term care industry,” Malone said.
“I feel like someday these folks may get regulated out of business,” she said.
Efficiency or secrecy
The industry says arbitration is a cheaper and more efficient way to resolve complaints about patient problems. Patient advocates suggest nursing homes want to keep the lid on big jury verdicts and, if possible, keep disputes over patient care out of the public eye.
“The nursing home industry knows that, in a forced arbitration setting when they draft the provision and pick the source for the arbitrator, they have the upper hand in guiding the outcome of the case,” Carter said. He said some arbitration provisions force the two sides to pick an arbitrator from an association of health care attorneys.
“They don’t ever want a jury to shine the white, hot light of public scrutiny on the ways nursing homes do business,” he said.
Ellerman said secrecy might be the main motivation.
“In my experience, the primary reason is so complaints remain confidential and so there is no accountability for nursing home abuse and neglect,” she said.
Malone questioned those secrecy suspicions.
“I have never sensed that’s an underlying motive. I sense the motivation is to contain litigation costs,” she said.
She said the government publishes reports on nursing home complaints and resolutions, so confirmed problems eventually become publicly available information, regardless of the forum for resolution.
“I’ve never gotten the feeling it’s a way to cloud transparency,” Malone said.
Claimants welcome unforced arbitration
The dispute over binding arbitration provisions in nursing home agreements tends to give arbitration an undeserved bad name, lawyers on both sides said.
“Arbitration gets a lot of bad press,” but it can be a tool in the alternative dispute resolution toolbox that “essentially allows for you to create your own solution in a helpful way,” Carter said.
Arbitration can bring closure, certainty of result and flexibility to the outcome of a claim, he said.
Carter spoke after completing a two-day arbitration, one that was agreed to by both sides after a claim arose.
“It ended up being an efficient process, a user-friendly process and a process where everybody felt like they got a fair shake, including the plaintiff,” Carter said.
Arbitration can even tilt in favor of a plaintiff, Malone said. In some cases, arbitrators order payment for claims that nursing home owners view as meritless.
“Arbitrators sometimes tend to split the baby,” Malone said.
Updated Nov. 11 to correct the name of the Long-Term Care Litigation section of the VTLA.