Medicare and Medicaid Programs; Revision of Requirements for Long-Term Care Facilities: Arbitration Agreements, 34718-34736 [2019-14945]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 84, Number 138 (Thursday, July 18, 2019)]
[Rules and Regulations]
[Pages 34718-34736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14945]



[[Page 34717]]

Vol. 84

Thursday,

No. 138

July 18, 2019

Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 410, 482, 483, et al.





Medicare and Medicaid Programs; Revision of Requirements for Long-Term 
Care Facilities: Arbitration Agreements; Final Rule





Medicare and Medicaid Programs; Requirements for Long-Term Care 
Facilities: Regulatory Provisions To Promote Efficiency, and 
Transparency; Proposed Rule

Federal Register / Vol. 84 , No. 138 / Thursday, July 18, 2019 / 
Rules and Regulations

[[Page 34718]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 483

[CMS-3342-F]
RIN 0938-AT18


Medicare and Medicaid Programs; Revision of Requirements for 
Long-Term Care Facilities: Arbitration Agreements

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule amends the requirements that Long-Term Care 
(LTC) facilities must meet to participate in the Medicare and Medicaid 
programs. Specifically, we are repealing the prohibition on the use of 
pre-dispute, binding arbitration agreements. We are also strengthening 
the transparency of arbitration agreements and arbitration in LTC 
facilities. This final rule supports residents' rights to make informed 
choices about important aspects of their health care.

DATES: These regulations are effective on September 16, 2019.

FOR FURTHER INFORMATION CONTACT: LTC Regulations Team: Diane Corning 
and Sheila Blackstock at (410) 786-6633.

SUPPLEMENTARY INFORMATION: 

I. Background

    Prior to October 2016, the requirements for Long-Term Care (LTC) 
facilities to participate in the Medicare and Medicaid programs, found 
in 42 CFR part 483, contained no provisions specific to the use of pre-
dispute, binding arbitration agreements between LTC facilities and 
their residents. Then, on October 4, 2016, we published in the Federal 
Register a final rule entitled ``Reform of Requirements for Long-Term 
Care Facilities'' (81 FR 68688) (2016 final rule), that, among other 
revisions, established several requirements regarding the use of 
binding arbitration agreements by long-term care facilities.
    Specifically, the 2016 final rule amended 42 CFR 483.70(n) to 
prohibit LTC facilities from entering into pre-dispute, binding 
arbitration agreements with any resident or his or her representative, 
or requiring that a resident sign an arbitration agreement as a 
condition of admission to the LTC facility. It also required that an 
agreement for post-dispute binding arbitration be entered into by the 
resident voluntarily, that the parties agree on the selection of a 
neutral arbitrator, and that the arbitral venue be convenient to both 
parties. The arbitration agreement could be signed by another 
individual only if allowed by the relevant state's law, if all of the 
other requirements in this section were met, and if that individual had 
no interest in the facility. In addition, a resident's right to 
continue to receive care at the facility post-dispute could not be 
contingent upon the resident or his or her representative signing an 
arbitration agreement. The arbitration agreement could not contain any 
language that prohibited or discouraged the resident or anyone else 
from communicating with federal, state, or local officials, including 
but not limited to, federal and state surveyors, other federal and 
state health department employees, and representatives of the Office of 
the State Long-Term Care Ombudsman. In addition, when a LTC facility 
and a resident resolved a dispute through arbitration, a copy of the 
signed agreement for binding arbitration and the arbitrator's final 
decision was required to be retained by the facility for 5 years and be 
available for inspection upon request by the Centers for Medicare & 
Medicaid Services (CMS) or its designee.
    On October 17, 2016, the American Health Care Association (AHCA) 
and a group of affiliated nursing homes filed a complaint in the United 
States District Court for the Northern District of Mississippi, Oxford 
Division seeking a preliminary and permanent injunction enjoining 
agency enforcement of the prohibition on pre-dispute, binding 
arbitration agreements, as provided in the regulation (Sec.  
483.70(n)(1)) (AHCA litigation). On November 7, 2016, the district 
court preliminarily enjoined enforcement of that regulation prohibiting 
the use of pre-dispute, binding arbitration agreements (Civil Action 
No. 3:16-CV-00233).
    As a result of the court's decision, on December 9, 2016, we issued 
a nation-wide instruction to State Survey Agency Directors, directing 
them not to enforce the 2016 final rule's prohibition of pre-dispute, 
binding arbitration provisions during the period that the court-ordered 
injunction remained in effect (S&C: 17-12-NH) https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-17-12.pdf).
    In addition, we determined that further analysis of the arbitration 
provisions was warranted. We re-evaluated the provisions to determine 
if a policy change would achieve a better balance between the 
advantages and disadvantages of pre-dispute, binding arbitration for 
residents and their providers and to ensure that the requirements 
complied with the terms of the January 30, 2107 Executive Order 
``Reducing Regulation and Controlling Regulatory Costs'' (E.O. 13771). 
Based on this further analysis, we developed a revised regulatory 
approach to the use of arbitration agreements by Medicare and Medicaid 
participating LTC facilities.
    On June 8, 2017, we published in the Federal Register a proposed 
rule entitled ``Revision of Requirements for Long-Term Care Facilities: 
Arbitration Agreements'' (82 FR 26649) (2017 proposed rule). The 2017 
proposed rule would remove the provision prohibiting pre-dispute, 
binding arbitration agreements and strengthen requirements regarding 
the transparency of arbitration agreements in LTC facilities. The 
proposal would support the resident's right to make informed choices 
about important aspects of his or her health care.

Statutory Authority

    The agency has statutory authority to issue these rules under the 
authority granted by the Congress in the Nursing Home Reform Act, part 
of the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), (Pub. L. 
100-203, 101 Stat. 1330 (1987)). That statute added sections 1819 and 
1919 to the Social Security Act (the Act), authorizing the agency to 
promulgate regulations that are ``adequate to protect the health, 
safety, welfare, and rights of residents and to promote the effective 
and efficient use of public moneys'' (Sections 1819(f)(1) and 
1919(f)(1) of the Act). In addition, sections 1819(d)(4)(B) and 
19199(d)(4)(B) of the Act authorizes the Secretary to impose ``such 
other requirements relating to the health and safety [and well-being 
\1\] of residents as [he] may find necessary''. This final rule does 
not purport to regulate the enforceability of any arbitration 
agreement, and, assuming that it limits the right of the Secretary to 
protect the rights of Medicaid beneficiaries, in our view, this rule 
does not pose any conflict with the language of the Federal Arbitration 
Act (FAA).
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    \1\ Section 1819 only.
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II. Provisions of the Proposed Regulations

    In the 2017 proposed rule, we proposed to revise the provision 
related to pre-dispute, binding arbitration at Sec.  483.70(n). We 
proposed to remove provisions that we believed on reconsideration did 
not strike the best balance between the advantages and

[[Page 34719]]

disadvantages of pre-dispute, binding arbitration. Specifically, we 
proposed to:
     Remove the requirement at Sec.  483.70(n)(1) precluding 
facilities from entering into pre-dispute, binding agreements for 
binding arbitration with any resident or resident's representative;
     remove the provisions at Sec.  483.70(n)(2)(ii) regarding 
the terms of arbitration agreements; and
     remove the prohibition at the root statement and Sec.  
483.70(n)(2)(iii) banning facilities from requiring that residents sign 
arbitration agreements as a condition of admission to, or as a 
requirement to continue to receive care at, a facility.
    We proposed to retain provisions important to transparency of 
arbitration agreements. Specifically, we proposed to retain that:
     The agreement be explained to the resident and his or her 
representative in a form and manner that he or she understands, 
including in a language that the resident and his or her representative 
understands; and require that the resident acknowledge that he or she 
understands the agreement,
     the agreement must not contain any language that prohibits 
or discourages the resident or anyone else from communicating with 
federal, state, or local officials, including but not limited to, 
federal and state surveyors, other federal or state health department 
employees, and representatives of the Office of the State Long-Term 
Care Ombudsman, in accordance with Sec.  483.10(k), and
     when the facility and a resident resolve a dispute through 
arbitration, a copy of the signed agreement for binding arbitration and 
the arbitrator's final decision must be retained by the facility for 5 
years and be available for inspection upon request by CMS or its 
designee.
    Finally, we proposed to add two transparency requirements. 
Specifically, we proposed to require that:
     The facility ensure that the agreement for binding 
arbitration is in plain language, and
     the facility must post a notice in plain language that 
describes its policy on the use of agreements for binding arbitration 
in an area that is visible to residents and visitors.
    In response to the 2017 proposed rule, we received over 1,000 
comments concerning the changes to the requirements regarding 
arbitration. Many comments were submitted by organizations that 
advocate for the rights of older adults, residents in nursing homes, or 
people with disabilities, including State Offices of the Long-Term Care 
Ombudsman.

III. Responses to Public Comments

    We have reviewed all of the comments received and considered the 
concerns raised by all stakeholders. As a result, we have made some 
revisions to the proposed rule in response to public comments. 
Specifically, as discussed in detail below, we are finalizing our 
proposals to remove the requirement at Sec.  483.70(n)(1) precluding 
facilities from entering into pre-dispute, binding agreements for 
binding arbitration with any resident or his or her representative, and 
the provisions at Sec.  483.70(n)(2)(ii) regarding the terms of 
arbitration agreements. We are not finalizing the proposed removal of 
the provision at Sec.  483.70(n)(2)(iii) banning facilities from 
requiring that residents sign arbitration agreements as a condition of 
admission to a facility. Therefore, facilities will continue to be 
prohibited from requiring any resident or his or her representative to 
sign an agreement for binding arbitration as a condition of admission 
to the facility. In addition, to address commenters' concerns that 
facilities may still coerce or intimidate the resident and his or her 
representative into signing the agreement, the facility must explicitly 
inform the resident or his or her representative that signing the 
agreement is not a condition of admission and ensure that this language 
is also in the agreement. We are finalizing provisions requiring that 
arbitration agreements be in a form and manner that the resident 
understands. However, we are not finalizing the proposed transparency 
related provisions that the facility must ensure that the agreement for 
binding arbitration is in ``plain language'' and that the facility post 
a notice regarding the use of agreements for binding arbitration in an 
area that is visible to residents and visitors. We are not finalizing 
the proposed removal of the provision specifying that a resident's 
right to continue to receive care at the facility must not be 
contingent upon signing an arbitration agreement. Finally, based on 
comments, we are adding a requirement that facilities grant to 
residents a 30 calendar day period during which they may rescind their 
agreement to an arbitration agreement. Our rationale for these changes, 
as well as our responses to comments we received on these issues is 
discussed below in detail.

A. General Comments

    Comment: The overwhelming majority of commenters were opposed to 
our proposal to remove the prohibition on pre-dispute, binding 
arbitration agreements and recommended that we keep the requirements 
established by the October 2016 final rule. These commenters included 
consumer advocates, legal organizations, health care providers and 
practitioners, and members of the public. Some commenters believed that 
the current requirements contained long overdue improvements and the 
proposed rule was ``reversing course'' on those improvements. They 
agreed with the reasoning in the October 2016 final rule and often 
quoted the language in that rule. Some commenters favored the proposed 
revisions and supported finalizing the revisions as proposed. Others 
supported the proposed revisions but recommended specific changes. One 
commenter stated that they would support arbitration agreements, if 
they were properly structured. The commenter recommended requiring a 
rescission period, changes in the agreement terms, and even the 
creation of a governmental arbitration agency. Another commenter, a 
non-profit, long-term care provider, favored allowing voluntary, pre-
dispute, binding arbitration agreements. Although the majority of 
commenters expressed support for the 2016 final rule, we also received 
comments from associations representing the LTC industry supporting the 
use of pre-dispute, binding arbitration agreements.
    Response: In light of this broad spectrum of opinions, we have 
decided to revise Sec.  486.70(n) by removing the prohibition on pre-
dispute, binding arbitration agreements and creating protections 
against the abuses associated with arbitration agreements. Most 
significantly, arbitration agreements must not be used as a condition 
of admission to, or as a requirement for a resident to continue to 
receive care at, the facility. The agreement must explicitly grant 
residents the explicit right to rescind the agreement within 30 
calendar days of signing it. The recommendation that there be the 
creation of a government arbitration agency is beyond the scope of this 
rule.
    Comment: Some commenters stated that any regulations addressing 
arbitration are unnecessary. They stated that, under current law, 
residents, as well as all consumers, are already protected against 
fraud, unfairness, duress, and other types of overreaching in contracts 
by state contract and consumer protection law. For example, they 
contended that state laws already require the party seeking to enforce 
a contract, in this case the LTC facility

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seeking to compel the resident or his or her representative to 
arbitrate a dispute, to demonstrate that the other party consented to 
the agreement. They asserted that a fundamental concept of contract law 
is a `meeting of the minds' and `a manifestation of mutual assent.' 
Thus, if the agreement is not in a language the resident understands or 
he or she does not understand the agreement for some other reason, it 
could be held invalid or unenforceable. Some commenters also pointed 
out that allowing LTC facilities to make signing an arbitration 
agreement a condition of admission might conflict with some states' 
laws. Another commenter pointed out that state courts would routinely 
invalidate unfair arbitration provisions on generally-applicable 
unconscionability principles for a variety of reasons, such as 
limitations on a consumer/resident's substantive rights to recover 
certain types of damages permitted to them by federal and state law, an 
unreasonably shortened statute of limitations, and unfair selection or 
excessive fees associated with selection of the arbitrator, arbitration 
venue, or access to an arbitral forum. Since residents can already 
challenge arbitration agreements in court under state law, these 
commenters believed residents' rights are already being protected and 
the arbitration requirements in the 2016 final rule are unnecessary. 
Some commenters even asserted that there should be no arbitration 
provisions in the LTC requirements because CMS has no expertise in this 
area and there is no evidence that state law is failing to adequately 
protect its citizens, including residents, regarding arbitration. Many 
commenters requested that, if we finalized our proposal to remove the 
prohibition on pre-dispute, binding arbitration agreements, CMS should 
remove all provisions discussing arbitration requirements. They stated 
that having no requirements regarding arbitration would be better for 
the residents than having any. Another commenter stated that, since 
much of the reimbursement received by these facilities is from the 
Medicare and Medicaid programs, which are funded by taxpayers, there 
should never be any limitations on the rights and remedies provided by 
state law.
    Response: We agree with the commenters that many states' contract 
and consumer protection laws offer residents, as well as others, 
protections from unfair contracts, including pre-dispute, binding 
arbitration agreements that are unconscionable or are otherwise 
unenforceable under state contract law. This is why we revisited the 
protections promulgated in the October 2016 final rule. However, even 
though state law may provide some protection for residents, commenters 
raised a number of concerns that convinced us that these protections 
are limited and do not protect the unique needs of Medicare and 
Medicaid beneficiaries. Commenters pointed out that state laws differ 
and would likely offer varying levels of protection to residents. The 
requirements in this final rule offer consistent levels of protection 
to all residents in LTC facilities that are certified by the Medicare 
and Medicaid programs. Commenters also stated that many residents would 
find it difficult, if not impossible, to challenge these agreements in 
court. The resident or his or her family would generally have to retain 
an attorney. Since most residents' care is being paid for by either 
Medicare or Medicaid, some residents may not have the resources to pay 
an attorney. Many commenters also noted that engaging an attorney to 
challenge an arbitration agreement is also difficult because, should 
the challenge prove unsuccessful, the damages awarded through 
arbitration are generally lower than those awarded through judicial 
proceedings. If the award is smaller, the attorney's fee would likely 
also be smaller if the attorney took the case on a contingency basis. 
In addition, one commenter presented evidence of several instances 
indicating that challenging an arbitration agreement, even if 
successful, could result in years of delay before the claim could be 
resolved. The commenter cited 14 cases involving claims of abuse or 
neglect where the resident or their family successfully challenged the 
enforceability of an arbitration agreement. The commenter noted that it 
required between two and four years to resolve the issue of the 
enforceability of the binding arbitration before addressing the 
underlying abuse and neglect claim. Commenters said that some attorneys 
could determine that the delay associated with a particular case did 
not justify the resources and time needed to challenge the 
enforceability of a binding arbitration agreement. Some commenters were 
concerned that facilities could make it more difficult for residents to 
challenge arbitration agreements. Thus, some residents or their 
representatives would find it difficult, perhaps almost impossible, to 
retain an attorney to challenge the arbitration agreement in court. 
State law protections would be meaningless to residents if, as a 
practical manner, they did not have the ability to challenge these 
agreements in court. Thus, we believe that relying solely on state 
contract or consumer protection law, enforced primarily by private 
action, could in fact result in little to no real protections for the 
residents.
    We believe the LTC requirements finalized in this rule are 
essential to ensure that arbitration agreements are not barriers to the 
resident receiving care and that there is no interference with federal, 
state, or local officials investigating quality of care issues. 
Therefore, in this final rule, we are retaining the existing 
requirement at Sec.  483.70(n)(1), which prohibits the facility from 
using an arbitration agreement as a condition of admission. We are also 
retaining the requirement that an arbitration agreement cannot be used 
as a condition of admission to, or right to continue to receive care 
at, the facility. In addition, facilities must explicitly inform the 
resident or his or her representative that it is his or her right not 
to sign the agreement and this language must also be in the arbitration 
agreement. This provision will ensure that no resident or his or her 
representative will have to choose between signing an arbitration 
agreement and receiving care at the LTC facility. Although we are not 
finalizing a prohibition on pre-dispute, binding arbitration 
agreements, we believe that the requirements we are finalizing in this 
rule will provide the protections residents and their representatives 
will need to avoid being compelled to arbitrate disputes with LTC 
facilities without voluntarily and knowingly choosing to do so. The LTC 
facility must not require the resident or his or her representative 
sign an agreement for binding arbitration as a condition of admission 
to, or as a requirement for the resident to continue to receive care 
at, the facility. The facility must also ensure that the agreement is 
explained to the resident or his or her representative in a form and 
manner that he or she understands, and that individual(s) must 
acknowledge that he or she understands the agreement. The agreement 
must also explicitly grant the representative or his or her 
representative the right to rescind the agreement within 30 calendar 
days of signing it. This allows the resident to seek legal advice, if 
he or she chooses to do so. These requirements ensure that a decision 
on whether to sign the agreement is made only after the resident or his 
or her representative understands what he or she is agreeing to and 
that there is time to reconsider a decision to sign the agreement and 
seek legal advice, if he or she chooses

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to do so. We believe that these protections address the concerns of the 
commenters who contended that LTC facilities were taking advantage of 
or coercing residents to sign these agreements.
    We are also finalizing Sec.  483.70(n)(2), which specifies that the 
agreement cannot contain any language that prohibits or discourages the 
resident or anyone else from communicating with federal, state, or 
local officials, including federal and state surveyors, other federal 
or state health department employees, and representatives of the Office 
of the State Long-Term Care Ombudsman. This is the same requirement 
that was located at Sec.  483.70(n)(2)(iv) in the 2016 final rule. 
Commenters informed us that a significant number of claims subjected to 
arbitration address quality of care issues. They also stated that it is 
quite often the case that the arbitral forum itself does not provide a 
way for the beneficiaries to seek full redress for their injuries. 
Commenters further stated that, when this happens, many substandard 
nursing homes continue providing poor care because the consequences for 
their conduct are insignificant. In light of these comments, we have 
concluded that the Secretary's statutorily-mandated duty to protect the 
health and safety of residents mandates that we create protections that 
assist LTC residents in knowingly and willingly entering into 
arbitration agreements that provide a neutral and fair arbitration 
process.
    Comment: Several commenters were concerned about the effect that 
federal rules on arbitration might have on state laws addressing 
arbitration. They expressed particular concern that a federal 
regulation might be viewed as superseding state arbitration laws that 
are designed to protect residents and their families. State courts have 
invalidated arbitration agreements due to, among other reasons, 
unconscionability, fraud, and duress. Other state laws protect 
consumers from one-sided or cohesion contracts. The commenters claimed 
that these protections could not be overridden by the FAA because they 
apply to all consumer contracts and not arbitration agreements 
specifically. They expressed concern that a facility might argue that 
being in compliance with the current regulation would demonstrate that 
the arbitration agreement in question was not unconscionable. Other 
commenters believed that the arbitration requirements could conflict 
with the current consumer protection laws in some states and result in 
facilities avoiding or believing that those protections would no longer 
apply to residents, perhaps even those designed to prevent elder abuse. 
Some commenters were concerned that facilities would argue that their 
arbitration agreements were fair and that the court should compel 
arbitration because they complied with the arbitration requirements in 
the federal LTC requirements. This could make it more difficult for 
residents and their families to challenge an arbitration agreement in 
court. Other commenters also pointed out that, since it was against LTC 
facilities' interests to get residents or their families to sign 
arbitration agreements that could be struck down by a state court, they 
would not do so.
    Response: We understand the commenters' concerns; however, we do 
not believe the requirements finalized in this rule will be detrimental 
to residents. These protections are in no way designed to supersede or 
interfere with state laws or other state contract and consumer 
protection laws. Many of these state laws provide for more protections 
than are set forth in the LTC requirements, and we believe it is in the 
best interests of the residents to have maximum protection afforded by 
law to protect their rights. This regulation is not intended in any way 
to preempt these state laws except to the extent any such laws are 
actually in conflict with this regulation. This regulation provides 
additional protections, and it is our hope that state court judges will 
understand this when deciding whether an arbitration agreement complies 
with any protections afforded residents under state law. In addition, 
the purpose of our LTC facility requirements are to protect the health, 
safety, welfare, and rights of residents. CMS establishes these minimum 
requirements that LTC facilities must meet to receive payment 
reimbursement from the Medicare and Medicaid programs. Hence, we do not 
believe that the arbitration requirements finalized in this rule would 
negatively impact any challenge to an arbitration agreement in state 
court.
    Comment: Some commenters asserted that the confidential nature of 
arbitration could result in LTC facilities being able to hide, or avoid 
the consequences of, providing substandard or poor care. Commenters 
stated that since arbitration proceedings and the arbitrator's final 
decision are not matters of public record, that by allowing pre-
dispute, binding arbitration agreements, LTC facilities could avoid 
some of the consequences of poor care, such as larger jury awards than 
those generally awarded in arbitration proceedings and a bad reputation 
that could dissuade potential residents from seeking admission to a 
facility.
    Response: As discussed above, commenters have raised a variety of 
concerns about the confidential nature of arbitration. We share their 
concerns, and we are therefore finalizing the requirements mandating 
that LTC facilities retain copies of the signed arbitration agreement 
and the arbitrator's final decision for each dispute resolved through 
arbitration. They must retain these documents for 5 years after the 
resolution of the dispute, and make them available for inspection by 
CMS or its designee. This will allow us to gather data on how 
arbitration is being conducted in LTC facilities. We note the sincere 
concerns of many individual commenters that residents are not being 
treated fairly in facilities that use pre-dispute, binding arbitration 
agreements and that quality of care is negatively impacted by the use 
of these agreements. We believe that collecting these data would play a 
part in helping us determine the validity of these allegations on 
quality of care. For more information on our efforts to improve the 
quality of care in nursing homes, please see the Nursing Home Quality 
Initiative web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/.
    Comment: Some commenters agreed with our proposal to rescind the 
prohibition on pre-dispute, binding arbitration agreements. One 
organization stated that there was no policy justification for the 
prohibition or even regulating arbitration in any way because 
arbitration does not affect a resident's health, safety, or welfare. 
Another commenter disagreed with some of our statements in the 2016 
final rule. This commenter noted that non-profit LTC providers are 
mission-driven and focus on providing the highest quality of care to 
their residents. The commenter noted that studies show that non-profit 
providers consistently provide the quality of care and service that 
exceeds that of for-profit LTC providers, because they do not have 
shareholders, investors, or owners that could pressure the facility to 
increase profits. The commenter also noted that there was no identified 
widespread deficiency in the care provided by non-profit LTC providers 
that would justify or be addressed by the prohibition of voluntary pre-
dispute, binding arbitration agreements between the facility and its 
residents. The commenter stated the threat of excessive jury verdicts 
was unnecessary to provide incentive for non-profit

[[Page 34722]]

providers to either maintain or improve the quality of care they 
provide to their residents. A non-profit provider that served, and was 
set up to accommodate the Jewish community was concerned that a blanket 
prohibition on voluntary, pre-dispute, binding arbitration agreements 
would violate exercise of freedom of religion in violation of the 
Religious Freedom and Restoration Act. The commenter noted that under 
some interpretations of Talmudic law, disputes are not to be settled in 
secular courts. The commenter was concerned that if a resident either 
dies or another individual has authority to act for them, such other 
individual could file a lawsuit against the facility, and that such 
suit could conceivably be contrary to the deceased/incapacitated 
resident's beliefs. Essentially, they asserted that the relationship 
between the residents of their facility and the facility itself was not 
merely a commercial transaction since both the provider and the 
resident share mutual goals, aligned interests, and trust. However, 
they also stated that they did not object to common sense requirements 
that ensure that the agreement was voluntary. The commenter indicated 
that they would not object to requiring that the agreement be in plain 
language, explained to the resident in a form and manner he or she 
understands, and the resident must acknowledge that he or she 
understands the agreement.
    Response: We appreciate that some data like the Nursing Home Data 
Compendium 2015 Edition (NHDC), indicate that non-profit LTC facilities 
tend to provide a better quality of care than some for-profit 
facilities, as evidence by fewer health deficiencies found on surveys. 
See https://www.cms.gov/Medicare/Provider-Enrollment-and-certification/CertificationandComplianc/Downloads/nursinghomedatacompendium_508-2015.pdf) (Accessed May 25, 2018). However, all ownership types of LTC 
facilities, including non-profits, have been cited for health 
deficiencies, sometimes very serious ones that result in a finding of 
actual harm or immediate jeopardy (NHDC, pp. 92-97). We agree with the 
commenters that completely prohibiting the use of pre-dispute, binding 
arbitration agreements could be too burdensome for some LTC facilities, 
regardless of whether they are non-profit or for-profit LTC facilities, 
because it would deny facilities a method of dispute resolution that 
can be faster and more economical than resolving the dispute in court. 
Thus, as we have noted previously, we are modifying the original rule 
to provide a balance between LTC facilities' desire for arbitration and 
the need for protections for LTC facility residents.
    Regarding the commenter that was concerned that prohibiting a LTC 
facility from entering into pre-dispute, binding arbitration agreements 
with its residents could violate a resident's wishes, especially if 
they pass away or become incapacitated, we acknowledge that situation 
could happen. Since we have finalized the removal of that prohibition, 
we believe the commenter's concern has been addressed.
    Comment: Some commenters stated that the proposed changes to the 
2016 final rule were contrary to the evidence we presented and the 
comments we received when promulgating the 2016 rule. One commenter 
stated that the 2017 proposed rule did not address the evidence upon 
which we based the LTC facility requirements in the 2016 final rule. 
They asserted that the 2017 proposed rule was improper because it 
constituted a complete reversal of the policy in the 2016 final rule 
and, as such, CMS could not modify the 2016 rule without identifying or 
citing new evidence that justified the proposed changes. This commenter 
believed that the 2016 final rule presented an extensive literature 
review and an analysis of public comments that overwhelmingly 
demonstrated that pre-dispute, binding arbitration agreements should be 
prohibited. They insisted that the 2016 final rule constituted a 
carefully considered policy and should not be reversed on weak or non-
existent evidence. Another commenter stated that, since the 
overwhelming number of comments opposed the use of pre-dispute, binding 
arbitration agreements because of the dangers they pose to the health, 
safety, and welfare of residents in LTC facilities, there is no 
reasonable basis for reversing the policy in 2016 final rule. The 
commenter stated that the 2016 final rule was clearly well justified by 
the evidence, the comments, and solid legal authority. They asserted 
that the modifications to the 2016 final rule contained in the 2017 
proposed rule lacked the same level of support that underpinned the 
2016 final rule. One commenter cited Federal Communications Commission 
v. Fox Television Stations, Inc. (566 U.S. 502, 129 S.Ct. 1800 (2009)) 
(FCC vs. Fox), in which the U.S. Supreme Court addressed the legal 
standard governing whether an agency's reversal of a prior action is 
arbitrary and capricious. Based upon this opinion, the commenter stated 
that the critical protections in the 2016 final rule could not be 
rescinded without supplying a reasoned, record-based explanation for 
reversing its assessment of the evidence and comments that demonstrated 
the negative impact of forced arbitration on LTC residents.
    Response: In the 2017 proposed and this final rule, we have 
provided a rationale for the requirements that are being finalized. As 
we noted earlier, the vast majority of commenters from the LTC industry 
have argued for the continued use of arbitration agreements for reasons 
of cost and efficiency. This regulation is designed to strike a balance 
between those concerns and protecting the needs of LTC residents. 
Furthermore, one court has preliminarily enjoined the agency from 
enforcing the prohibition against pre-dispute, binding arbitration 
agreements. Given our reconsideration of the available evidence and 
based on our review of the comments we received, as well as the 
comments received for the 2017 proposed rule, we believe the policies 
set forth in this final rule better balance the need for resident 
protections with the potential burden on LTC facilities' need for 
efficient and cost-effective operation. The court in FCC vs. Fox 
clearly indicated that an agency action would not be subject to 
heightened scrutiny simply because it changed its policy. It need only 
demonstrate that--(1) it is changing its position; (2) the new policy 
is permissible under the statute; (3) it has good reasons for the new 
policy and for the change of policy; and (4) that it believes the new 
policy is better. (FCC v. Fox, 566 U.S. 502, 515, 129 S.Ct. 1800, 
1811.) We have explained our reasoning for the changes to the 
requirements and believe that these finalized requirements constitute a 
better policy. Concerning the ``evidence'' and comments referred to by 
the commenter, there was very little statistical data (although a great 
deal of anecdotal evidence and reportage) upon which we made our 
decisions that supported this provision of the 2016 final rule. Many 
comments were based upon anecdotal or personal experiences, and some 
commenters provided articles published in various general and legal 
periodicals. However, there was little solid social science research 
evidence to support these assertions. In light of the lack of 
statistical data, we believe the best way to strike a balance between 
the stakeholders supporting arbitration and residents having a complete 
understanding of the consequences of entering into an arbitration 
agreement is to issue regulations that ensure that these agreements not 
be used as a condition of admission to, or as a requirement for a 
resident to continue to

[[Page 34723]]

receive care at, the facility and the arbitration process is 
transparent to the resident and his or her representative. In addition, 
the requirement to retain copies of the arbitration agreement and the 
arbitrator's final decision will allow us to learn how arbitration is 
being used by LTC facilities and how this is affecting the residents.
    Comment: Some commenters believed that the proposed changes to the 
arbitration requirements were politically motivated. Some believed that 
the motivation for these changes, which they believe benefit the 
providers at the detriment of the residents' rights, resulted from the 
change in administrations. One commenter noted the sudden and 
remarkable change between allowing pre-dispute, binding arbitration 
agreements in the 2017 proposed rule as compared to the 2016 final 
rule, which prohibited these agreements, despite CMS having earlier 
stated that ``there is significant evidence that pre-dispute 
arbitration agreements have a deleterious impact on the quality of care 
for [nursing home] patients'' in the 2016 final rule (81 FR 68791). One 
commenter even stated that they thought these changes would personally 
benefit some in the current administration.
    Response: While there has been a change in Administration since the 
2016 Final Rule was published, we disagree that change was the sole or 
primary reason for the proposed changes. As discussed above, at least 
one district court has rendered a decision that preliminarily enjoins 
us from enforcing the prohibition against pre-dispute, binding 
arbitration agreements. Following that ruling, we undertook a re-
evaluation of the arbitration-related requirements in order to 
determine if a different approach would better serve both residents and 
facilities. That approach is reflected in this final rule, which 
includes some of the requirements in the 2016 Final Rule.
    Comment: Some commenters that are opposed to pre-dispute, binding 
arbitration agreements asserted that post-dispute, binding arbitration 
agreements could be appropriate in a LTC setting. Since the agreement 
would be signed after the circumstances of the dispute had occurred, 
the resident could make an informed decision about settling the dispute 
with the facility through binding arbitration. However, other 
commenters were in favor of our proposal to remove the prohibition or 
ban on pre-dispute, binding arbitration agreements because they 
believed it was the equivalent of banning all arbitration. These 
commenters contended that parties often are unwilling to consider 
arbitration after a dispute arises. After a dispute arises, parties 
often have an emotional investment in resolving the dispute solely in 
their favor. This emotional investment often results in the parties not 
being able to evaluate the dispute logically or rationally. They may 
also believe that a willingness or offer to negotiate or submit the 
dispute to arbitration may appear as weakness. As a result, at least 
one of the parties would virtually always reject arbitration in favor 
of judicial proceedings, while another commenter asserted that pre-
dispute, binding arbitration agreements were the most efficient way to 
ensure that parties do, in fact, arbitrate their disputes.
    Response: As the comments make clear, there are strong arguments 
both for and against pre-dispute, binding arbitration agreements. This 
is a key reason why we are modifying this rule in an attempt to create 
a balance between both sides. As discussed above, we are finalizing our 
proposal to remove the prohibition on pre-dispute, binding arbitration 
agreements. Facilities and their residents will be able to enter into 
both pre-dispute and post-dispute binding arbitration agreements as 
long as facilities comply with the requirements that we are finalizing 
in this rule.
    Comment: Some commenters were opposed to our proposal to remove the 
requirements at Sec.  483.70(n)(2)(ii)(A), (B), and (C) in the 2016 
Final Rule. Those requirements were that the agreement must: (A) Be 
entered into by the resident voluntarily, (B) Provide for the selection 
of a neutral arbitrator agreed upon by both parties, and (C) Provide 
for selection of a venue convenient to both parties. Commenters 
contended that these protections were critical for residents as they, 
at least partially, addressed the unequal bargaining power between the 
resident or his or her representative and the facility. Another 
commenter said that the selection of a neutral arbitrator was a key 
component of the LTC facility's accountability and consumer protection. 
One commenter pointed out that since residents have explicit rights to 
select their pharmacist and doctor, residents should also have a voice 
in the selection of the arbitrator and the location of the arbitration.
    Response: We agree with the commenters. We believe these components 
are standard elements of arbitration and expect that these elements 
would be covered in the arbitration agreement. To ensure that the 
resident or his or her representative has the benefit of these 
components, this final rule retains the requirement that the facility 
provide for the selection of a neutral arbitrator agreed upon by both 
parties and provide for the selection of a venue convenient to both 
parties. However, we will remove the requirement that the resident or 
his or her representative sign the agreement voluntarily as we believe 
this provision is redundant. Other requirements in this section ensure 
that the agreement is explained and the resident or his or her 
representative knows that he or she does not have to sign the agreement 
as a condition of admission to, or as a requirement to continue to 
receive care at, the facility. In addition, we are finalizing a right 
for the resident or his or her representative to rescind the agreement 
within 30 calendar days of signing it. This provides the resident or 
his or her representative an opportunity to reconsider the agreement 
or, if they choose, seek legal advice. We believe that this right to 
rescind the agreement, as well as the requirements to provide for a 
neutral arbitrator agreed upon by both parties and the selection of a 
venue convenient to both parties, provide sufficient protection against 
an agreement that does not treat the resident fairly.
    Comment: Some commenters appeared to interpret the district court's 
holding in the AHCA litigation as a ban on all arbitration agreements 
or other arbitration-specific requirements. Another commenter contended 
that the district court said that the forum for the dispute, whether 
resolved through judicial proceedings or arbitration, had no meaningful 
effect on the health, safety, and well-being of residents.
    Response: We disagree with the commenter. As noted above, in our 
discussion of the relevant litigation, the only issue before the court 
was whether CMS could enforce Sec.  483.70(n)(1)'s prohibition of pre-
dispute, binding arbitration agreements. The court did not address 
issues beyond the arbitration prohibition.
    Comment: Some commenters were against our proposal to remove the 
prohibition on pre-dispute, binding arbitration agreements because they 
believe the agreements are inherently unfair. They did not believe that 
any LTC facility requirements could overcome that inherent unfairness. 
They pointed to the imbalance of power between the resident and the 
facility, the facility having drafted the agreement with terms that 
would be favorable to the LTC facility, not the resident. In addition, 
staff rarely have the authority to re-negotiate the terms of the 
agreement with an individual prospective resident. Most residents and 
their representatives are likely unfamiliar with the implications of 
the

[[Page 34724]]

use of arbitration as a form of alternative dispute resolution and the 
consequences of signing the agreement. In addition, many commenters 
noted that residents would likely not seek legal advice before they 
sign the agreement. Other commenters contended that the inherent 
unfairness in using pre-dispute, binding arbitration agreements in LTC 
facilities is demonstrated by policy statements issued by various 
national legal and arbitration associations opposing the use of these 
agreements in health care disputes.
    Response: We believe that the LTC requirements finalized in this 
rule will address the concerns identified by these commenters. We 
further acknowledge that various legal and arbitration associations 
have issued policy statements opposing the use of these agreements in 
health care disputes. In the 2016 final rule, we noted that three major 
legal or arbitration associations have made policy statements opposing 
continued use of pre-dispute, binding arbitration agreements (81 FR 
68797). We believe these requirements address many of the concerns upon 
which those policy statements were based. As discussed below, the 
facility must not require the resident to sign one of these agreements 
as a condition of admission to, or as a requirement to continue to 
receive care at, the facility. The facility must also explicitly inform 
the resident or his or her representative that he or she is not 
required to sign the agreement as a condition of admission to or a 
requirement to continue to, or as a requirement to continue to receive 
care at, the facility; this language must be included in the agreement. 
This requirement will ensure that the resident or his or her 
representative is not placed into the position of deciding between 
signing an arbitration agreement or potentially the resident not 
receiving the care at the facility that he or she needs. The facility 
must ensure that the agreement is explained to the resident or his or 
her representative and he or she acknowledges that he or she 
understands the agreement. These requirements ensure that the facility 
has explained the agreement and should provide the resident or his or 
her representative with the opportunity to ask questions before he or 
she acknowledges that they understand the agreement. The agreement must 
also now explicitly grant the resident or his or her representative the 
right to rescind the agreement within 30 calendar days of signing it. 
This will provide the resident with the opportunity to reconsider the 
agreement and, if they chose, seek legal advice within that 30-day 
rescission period. The right to rescind must also be explained by the 
facility when it explains the rest of the agreement and the resident or 
his or her representative must acknowledge that he or she understands 
the right to rescind the agreement, as well as the remaining provisions 
in the agreement. We believe that the right to rescind the agreement 
within 30 calendar days of signing it addresses the commenters' concern 
that the requirements finalized in this rule are insufficient to 
protect residents' rights. We believe that the transparency 
requirements, the requirement that an arbitration agreement must not be 
used as a condition of admission, and that the facility must explicitly 
inform the resident or his or her representative of his or her right 
not to sign the agreement, will address the resident's ability to 
negotiate with the facility as well as provide residents, their 
representatives, and their families with the protections they need to 
ensure that they understand the agreement and can make a voluntary 
decision on whether to sign the agreement. They will further ensure 
that residents will not be forced to sign arbitration agreements to 
receive the care they need.
    Comment: One commenter pointed out that in proposed Sec.  
483.70(n)(2)(i) the agreement had to be explained to the resident and 
his or her representative in a form and manner that he or she would 
understand, including a language that the resident or his or her 
representative would understand. However, in proposed Sec.  
483.70(n)(2)(ii), we stated that only the resident would have to 
acknowledge that he or she understands the agreement.
    Response: We agree with the issue that the commenter pointed out. 
Section 483.70(n)(2)(ii) should also provide for the resident's 
representative to be able to acknowledge that he or she understands the 
agreements. Therefore, we have revised the language of that section to 
provide for the representative to acknowledge he or she understands the 
agreement.

B. Authority To Regulate Arbitration in LTC Facilities

    Comment: Some commenters, particularly an association that 
represents LTC facilities, stated that the Secretary had no legal 
authority to regulate arbitration in any manner. They indicated that 
section 2 of the FAA provided that arbitration agreements are ``valid, 
irrevocable, and enforceable save upon such grounds as exist at law or 
equity for the revocation of any contract'' (9 U.S.C. 2). The last 
section of this clause, ``save upon such grounds as exist at law or 
equity for revocation of any contract'' is commonly referred to as the 
savings clause. The savings clause holds that arbitration agreements 
can be invalidated by generally applicable contract defenses, such as 
fraud, duress or unconscionability. Thus, the commenters stated that 
arbitration agreements or contracts should be treated as any other 
contract, and that the FAA's mandate could only be overcome by these 
generally applicable contract defenses. Some of these commenters also 
cited the district court's conclusion that the prohibition on pre-
dispute, binding arbitration clauses was inconsistent with the 
requirement to treat arbitration contracts equally with all other 
contractual arrangements and that prohibition could not fit into the 
savings clause. Other commenters, however, strongly disagreed with the 
district court's decision in the AHCA litigation.
    One commenter stated that the current LTC requirements already 
contain other limitations on the admissions contract. Specifically, the 
facility's contract cannot: (1) Request or require residents to waive 
their rights set forth in the federal regulations or in applicable 
state, federal or local licensing or certification laws; (2) request or 
require oral or written assurance that the resident is not eligible 
for, or will not apply for, Medicare or Medicaid benefits; (3) request 
or require residents to waive potential facility liability for losses 
of personal property; (4) request or require a third-party guarantee of 
payment to the facility as a condition of admission or expedited 
admission, or continued stay in the facility; and (5) charge, solicit, 
accept or receive, in addition to any amount otherwise required to be 
paid under the State plan, any gift, money, donation, or other 
consideration as a precondition of admission, expedited admission or 
continued stay in the facility (42 U.S.C. 1395i-3(c)(5), 1396r(c)(5), 
and 42 CFR 483.15(a)). The commenter stated that since federal law 
already targets multiple specific contract provisions for more 
stringent treatment, the 2017 proposed requirements actually provide 
special deference to arbitration agreements and as a result contradict 
and ignore the entire regulatory purpose and context of the LTC 
requirements. This commenter, in other words, claimed that since there 
are already restrictions on what can be in the admission contract, by 
removing the current restrictions on binding arbitration, we are 
actually giving

[[Page 34725]]

preferential treatment to arbitration agreements. In addition, the 
commenter appeared to be encouraging us to continue pursuing the AHCA 
litigation. Another commenter believed that the analysis contained in 
the 2016 final rule provided strong support for the Secretary to 
regulate arbitration agreements in LTC facilities.
    All of these commenters stated there was Supreme Court precedent 
that the FAA mandate could only be overcome by a specific contrary 
congressional command. Since both the Medicare and Medicaid statutes 
are silent on arbitration, these individuals stated there was no 
contrary congressional command that gives the Secretary the authority 
to regulate arbitration. These commenters also stated that the district 
court properly rejected the arguments that the Secretary had authority 
based on her right to establish ``rights'' under the Medicare and 
Medicaid statutes and that she had authority to regulate these 
agreements, if the Secretary believed the regulation was necessary for 
the health, safety, and well-being of LTC residents.
    Response: We recognize that the FAA is the overall federal statute 
addressing arbitration agreements. However, the FAA is concerned with 
general commercial contracts, whereas these rules arise under the 
Medicare and Medicaid statutes. The Medicare and Medicaid statutes 
explicitly grant the Secretary authority to ensure the protection of 
Medicare and Medicaid beneficiaries. Thus, this rule addresses a set of 
concerns that are unrelated to the reasons behind the FAA, as well as 
the statutory provisions contained within the FAA. Thus, while this 
rule modifies the original provisions regarding pre-dispute, binding 
arbitration clauses, we remain mindful of the comments claiming that 
these agreements potentially harm residents. We will, therefore, 
continue monitoring whether there is an effect on beneficiaries and, if 
we determine that the use of arbitration agreements poses a risk to the 
well-being of Medicare and Medicaid beneficiaries, we may revisit and 
revise the current policy. After reexamining the issue and reviewing 
public comments we received, at this point we believe that a balance 
can be struck that accommodates the use of arbitration agreements while 
also protecting the rights of LTC facility residents. Thus, we are 
finalizing the removal of the prohibition on pre-dispute, binding 
arbitration agreements and the provisions regarding the content of the 
agreement and implementing requirements we believe will provide greater 
transparency in the arbitration process.
    Comment: Some commenters stated that CMS did not have the authority 
to change the arbitration requirements established by the 2016 final 
rule because removing or modifying the 2016 rule's prohibition of pre-
dispute, binding arbitration agreements would harm residents' rights. 
These commenters pointed to the authorities contained in the Medicare 
and Medicaid statutes that the agency cited as authority for 
promulgating the 2016 Final Rule. Specifically, they agreed with the 
2016 final rule's conclusions that the Medicare and Medicaid statutes 
provided the Secretary: (1) Authority to promulgate regulations that 
are adequate to protect the health, safety, welfare, and rights of 
resident and to promote the effective and efficient use of public 
moneys (42 U.S.C. 1395i-3(f)(1) 1396r(f)(1)); (2) Authority to 
establish such other requirements relating to the health and safety and 
well-being of residents as the Secretary may find necessary (42 U.S.C. 
1395i-3(d)(4)(B), 1396r(d)(4)(B)); and (3) Authority to establish other 
rights(s) for residents, in addition to those set forth in statute to 
protect and promote the rights of each resident (42 U.S.C. 1395i-
3(c)(1)(A)(xi), 1396r(c)(1)(A)(xi)) and the 2017 proposed rule (82 FR 
26651) for a list of authorities). Based upon these authorities, these 
commenters stated that the Secretary lacked authority to remove 
requirements that would re-establish practices that are detrimental to 
residents, especially when one of the stated reasons for the changes is 
to reduce burden on providers. Another commenter added that the policy 
changes were contrary to the ``person-centered care'' framework 
established by federal law, policy, and regulation.
    Response: While these commenters have reiterated concerns we raised 
in the 2016 final rule, other commenters have asserted that there are 
ways to protect the rights of residents without placing a complete 
prohibition on pre-dispute, binding arbitration agreements. The 
requirements we are finalizing in this rule are designed to accomplish 
the same goals as the 2016 rule, namely, protecting resident's rights 
in matters concerning the arbitration process. We believe the concept 
of ``person-centered care'', a crucial concept in the 2016 final rule, 
continues to be addressed in the requirements finalized in this rule. 
The facility must explain the agreement to the resident or his or her 
representative in a form and manner that the individual understands, 
and the individual must acknowledge that they understand the agreement. 
The agreement cannot be used as a condition of admission to, or as a 
requirement to continue to receive care at, the facility, so that the 
resident is not forced or coerced into signing the agreement to obtain, 
or continue to receive, the care that he or she needs. The facility 
must also explicitly inform the resident and his or her representative 
that they are not required to sign the agreement as a condition of 
admission and that this language in the agreement. The requirement that 
facilities retain copies of the signed agreements to binding 
arbitration and the arbitrators' final decisions will allow CMS to 
ensure that arbitration agreements are not used in a manner detrimental 
to quality of care concerns. We believe that these regulations will 
protect residents.

C. Impact on Health & Safety

    Comment: Some commenters insisted that allowing LTC facilities to 
enter into pre-dispute, binding arbitration agreements would have a 
negative effect on residents because LTC facilities would be able to 
avoid some, or perhaps all, of the consequences of providing poor or 
inadequate care to their residents, including responsibility for 
illegal or even criminal acts. They stated that the threat of 
litigation was necessary to provide adequate incentive for the 
facilities to provide adequate care and a safe environment for the 
residents. When facilities use these agreements, their insurance 
premiums are lower since arbitration awards are usually lower than 
those received through judicial proceedings. Other commenters pointed 
out that there are also no public records of the arbitration 
proceedings. The public, including potential residents and their 
families, would likely not be aware of or even have the ability to 
learn of instances of poor care. Without the threat of lawsuits, some 
facilities might believe they are less accountable for the care they 
provide, which could result in substandard care and worse health 
outcomes for the residents. At best, binding arbitration would not 
provide sufficient incentive to improve resident care. One commenter 
stated that LTC facilities were already understaffed and the staff they 
do have are poorly trained. Since settling disputes through arbitration 
lowers the costs to the facilities, arbitration provides no incentive 
for facilities to increase the number of staff or improve their 
training. However, another commenter pointed out that the financial 
burden of LTC facilities being potentially subject to liability for 
damages determined by jury verdicts are spread out among the various 
nursing homes via standardized insurance premiums. Since the burden

[[Page 34726]]

associated with poor or substandard care is spread among all insured 
nursing homes, there is little incentive for any particular home to 
improve its care even if the facility is potentially exposed to the 
risk of jury-imposed damages. Another commenter pointed out that if LTC 
facilities provided appropriate care to their residents, they would not 
need to be so concerned with pre-dispute, binding arbitration 
agreements. Some commenters were also troubled about what they believed 
was an emphasis on eliminating unnecessary burden to providers over 
protecting LTC facility residents and ensuring that they receive proper 
care.
    Response: While some commenters state that the existence of pre-
dispute, binding arbitration agreements leads to a lower quality of 
care for residents, a significant number of other commenters have 
stated that there is, in fact, no link between arbitration and quality 
of care. At this point, all sides of the issue have credible arguments 
supporting their position. However, while both sides have good 
arguments, as noted earlier, there is little solid social science 
research evidence demonstrating that arbitration agreements necessarily 
have a negative effect on quality of care. As a result, we have 
determined that the best solution is to implement a regulation that 
accommodates arbitration while also protecting LTC facility residents 
from unfairly coerced agreements. We agree with the commenters that 
litigation and damage awards provide a way to hold LTC facilities 
accountable for substandard care. At the same time, however, it is not 
the only way to hold LTC facilities accountable for the quality of care 
they deliver.
    We believe that these final regulations also hold facilities 
accountable in several additional ways. Specifically, we are finalizing 
the requirement that LTC facilities retain copies of the signed 
arbitration agreement and the arbitrator's final decision for each 
dispute resolved through arbitration for 5 years after resolution of 
that dispute. We also note that Sec.  483.10(j) gives residents the 
right to voice grievances to the facility or any other agency or entity 
that hears grievances without discrimination or reprisal and without 
fear of discrimination or reprisal. These grievances could involve care 
and treatment received or not received, the behavior of staff or other 
residents, as well as any other concerns regarding the nursing home. 
LTC facilities must make prompt efforts to resolve the grievance. 
Section 483.12 requires, among other things, that residents be free 
from abuse, neglect, and exploitation. In accordance with section 1150B 
of the Act, 42 U.S.C. 1320b-25, any reasonable suspicion of a crime 
against a resident of an LTC facility must be reported to CMS and to 
one or more relevant law enforcement entities. All LTC facilities that 
are eligible to be paid through the Medicare and Medicaid programs must 
be certified and comply with our LTC facility requirements. One of 
those requirements, Sec.  483.35, requires facilities to have 
sufficient nursing staff with the appropriate competencies and skill 
sets to provide nursing and related services to assure resident safety 
and attain or maintain the highest practical physical, mental, and 
psychosocial well-being of each resident. Specifically, we are 
finalizing the prohibition that facilities must not require any 
resident or his or her representative to enter into an agreement for 
binding arbitration as a condition of admission to the facility. We are 
also retaining the prohibition on facilities requiring a current 
resident or his or her representative to sign an agreement in order to 
continue to receive care at the facility. The facility must also 
explicitly inform the resident or his or her representative of these 
prohibitions and this language must be included in the agreement. This 
holds the facility accountable by ensuring that the facility cannot 
coerce or apply unreasonable pressure on a resident or his or her 
representative by implying the resident would not receive the care he 
or she needs without signing the agreement. We are also finalizing the 
requirements that the facility ensure that the agreement is explained 
to the resident and his or her representative, and that the resident or 
his or her representative acknowledge that he or she understands the 
agreement. This holds the facility accountable by ensuring that the 
agreement is explained to, and understood by, the resident or his or 
her representative before the agreement is signed. We are also 
finalizing the requirement that the agreement explicitly grant the 
resident or his or her representative the right to rescind the 
agreement within 30 calendar days of signing it. This holds the 
facility accountable by ensuring that the resident or his or her 
representative has the opportunity to reconsider his or her decision 
and seek legal advice, if they choose to do so. We are also finalizing 
the requirement that the agreement not contain any language that 
prohibits or discourages the resident or anyone else from communicating 
with federal, state, or local officials, including but not limited to, 
federal and state surveyors, other federal or state health department 
employees, and representative of the Office of the Long-Term Care 
Ombudsman. This requirement holds the facility accountable by ensuring 
that neither the resident nor anyone else could be intimidated or 
discouraged from discussing the circumstances around the dispute with 
surveyors or others responsible for evaluating the quality and safety 
of the resident's care and the facility's compliance with regulatory 
requirements. In addition, we are finalizing the requirement that LTC 
facilities retain copies of the signed arbitration agreement and the 
arbitrator's final decision for 5 years after any dispute is resolved 
through arbitration and make these documents available for inspection 
upon request by CMS or its designee. This holds LTC facilities 
accountable because it allows surveyors to review the issues raised in 
the arbitration and to determine if they raise concerns about the 
quality and safety of the resident's care and the facility's compliance 
with regulatory requirements. Surveyors can then incorporate problems 
identified through arbitration into the current survey in order to 
determine if the LTC facility has taken steps to prevent the problem 
from reoccurring. The LTC requirements are enforced through both 
routine and complaint surveys and certification process. We note that 
the survey and certification provisions set forth in sections 
1819(g)(2)(A)(iii) and 1919(g)(2)(A)(iii) of the Act and in 42 CFR 
488.308 require that each skilled nursing facility and nursing facility 
be subject to a standard survey no later than 15 months after the last 
day of the previous standard survey and that the statewide average 
interval between standard surveys of skilled nursing facilities and 
nursing facilities not exceed 12 months. As part of the standard Long 
Term Care Survey Process, surveyors ask for and review the facility's 
admission packet, which would include arbitration agreements presented 
to residents. If violations of these requirements are found, LTC 
facilities could face, among other things, being cited with 
deficiencies, being put on a correction plan, or even losing or not 
obtaining certification in the Medicare program. For more information 
on CMS' efforts to improve the quality of care in nursing homes, please 
see the Nursing Home Quality Initiative web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/.
    Comment: Some commenters agreed with our proposal to remove the

[[Page 34727]]

prohibition on pre-dispute, binding arbitration agreements. They 
claimed that the prohibition of these agreements would substantially 
increase the cost of resolving disputes which, in turn, would reduce 
the financial resources available for resident care. In addition to the 
increased costs of judicial litigation, these commenters claimed their 
insurance premiums will rise if disputes cannot be resolved through 
arbitration. This, too, they claim, would reduce the resources a 
provider could use for improving the quality of care. These commenters 
further asserted that rising insurance premiums would either cause some 
nursing homes to cease operations or bear an additional substantial 
financial burden. Since Medicare and Medicaid compensation rates are 
fixed, according to the commenter, nursing homes could be forced to 
make cuts that could affect resident care and would likely have to 
increase costs to those who are not on one of these government 
programs. This could make care unaffordable for families without 
improving the quality of care. Instead of being beneficial to 
residents, prohibiting pre-dispute, binding arbitration agreements 
could actually result in being detrimental to all residents, regardless 
of payor. However, other commenters pointed out that facilities also 
have a burden associated with using pre-dispute, binding arbitration 
agreements and that prohibiting them would reduce burden for the 
providers. Using pre-dispute, binding arbitration agreements for every 
resident is both a time-consuming and unnecessary process if the 
facility is providing appropriate care for its residents.
    Response: While there is little empirical evidence supporting the 
consequences claimed by these commenters, we also agree that 
prohibiting pre-dispute, binding arbitration agreements could impose an 
unnecessary burden on LTC facilities. Prohibiting the use of these 
agreements would deny facilities a method of resolving disputes that is 
potentially more cost effective and efficient. We also agree with the 
commenters that stated that facilities have a burden associated with 
using pre-dispute, binding arbitration agreements due to the regulatory 
requirements with which the facilities must comply. Even before these 
requirements became effective, there was a burden associated with using 
these agreements, such as developing the agreement, speaking to and 
obtaining consent from residents or their representatives, and maintain 
copies of the agreements. However, since no facility is required to use 
these agreements, any burden associated with them is the facility's 
choice. However, we disagree with one commenter's contention that for 
facilities that are providing appropriate care the burden associated 
with pre-dispute, binding arbitration agreements is time-consuming or 
unnecessary. Even facilities that provide appropriate care could have 
disputes with their residents. Thus, these regulations allow the use of 
arbitration so long as LTC facilities comply with the requirements 
finalized in this rule.
    Comment: One commenter supported our proposal to remove the 
prohibition on pre-dispute, binding arbitration agreements because they 
believe it disrespectful to seniors and their families' capability, 
dignity, and autonomy. State law presumes seniors are fully competent 
unless there is evidence to the contrary. They noted that mental 
deterioration only results from certain diseases, not aging alone. 
Constitutional and other legal rights cannot be taken away solely 
because of age and certainly not without due process. Yet, the 
prohibition on pre-dispute, binding arbitration agreements presumes 
that residents are not competent to make an informed and appropriate 
choice concerning an arbitration agreement. The commenter believed it 
is insulting and ignorant to suggest that every senior who enters into 
a pre-dispute, binding arbitration agreement is either coerced, 
uninformed, or has been taken advantage of by the facility. These same 
individuals are signing many different documents during the admissions 
process, including the contract with the LTC facility, and these are 
not being questioned. This prohibition essentially denies residents the 
legal right to enter into voluntary contracts due to the assumption of 
incompetence of the resident. The choice to sign one of these 
agreements can hardly be considered less reasonable or valid than the 
choices made by residents that are influenced by promises of a lawyer 
seeking to sue the nursing home. However, other commenters, including a 
national association of health care providers, stated that residents 
cannot make an informed decision concerning whether to sign a pre-
dispute, binding arbitration agreement without knowledge of the 
circumstances surrounding the dispute, which can only be known after 
the dispute arises. Other commenters stated that during the admissions 
process, residents are not likely to contemplate the possible disputes 
that could arise later as a result of the actions or lack to action by 
the LTC facility's management or staff, including physical abuse and 
neglect, sexual assault, and even wrongful death of the resident. 
Further, residents are frequently admitted during a time of stress and 
often after a decline in their health or directly from the hospital and 
these circumstances make it extremely difficult for LTC residents or 
their representatives to make an informed decision about arbitration.
    Response: The prohibition against pre-dispute, binding arbitration 
agreements was never intended to convey any disrespect to residents. 
However, we cannot ignore the comments we received from patient 
advocacy groups and other health care providers that raised a number of 
concerns about the way LTC residents are presented with arbitration 
agreements and the harm that results when residents unwittingly sign 
arbitration agreements that are later found to be against their best 
interests. Therefore, the intent was solely to address these concerns.
    Comment: Numerous commenters opposed any regulation that does not 
prohibit facilities from requiring that a resident or his or her 
representative sign a pre-dispute, binding arbitration agreement as a 
condition of admission. They stated that no person in need of care 
should be put in the position of choosing between signing one of these 
agreements or not receiving care. Nursing home care is often sought 
during a time of crisis. The individual has usually suffered a serious 
injury, surgery, or some other condition that has resulted in a 
substantial decrease in their health or their ability to care for 
themselves. In most cases, the choice of nursing home is severely 
limited. All of these factors create stress for both the individuals 
who need care, their families, and other caregivers. Some commenters 
stated that it was unrealistic to presume that these individuals are in 
a position to fully understand the consequences of a pre-dispute, 
binding arbitration agreement. Other commenters noted that the number 
of LTC facilities practically available to an individual may be 
extremely limited. For example, it is entirely reasonable for a 
resident to want to remain close to family and friends. However, many 
times there is only one nursing home within a reasonable geographic 
distance of the resident's family or friends. Likewise, factors such as 
the type of payment the facility will accept, the health care and 
services it offers, and the availability of beds limit an individual's 
choice of facilities. Therefore, many residents may only have a few, 
and perhaps only one or two, suitable facilities from

[[Page 34728]]

which to choose. Once a facility is selected, commenters stated that 
some residents believe they have no choice but to sign the agreement in 
order to obtain the care they need.
    Response: We agree with the commenters that a pre-dispute, binding 
arbitration agreement should not be a condition of admission. In the 
2017 proposed rule, we proposed removing the prohibition set forth at 
Sec.  483.70(n)(1) against using these agreements as a condition of 
admission because we did not believe that the prohibition struck the 
right balance between the advantages and disadvantages with pre-
dispute, binding arbitration agreements. However, the overwhelming 
number of commenters who commented on this proposal were against 
allowing the facility to make signing a pre-dispute, binding 
arbitration agreement a condition of admission. We agree that many 
residents or their families usually do not have many LTC facilities to 
choose from and the existence of one of these agreements as a condition 
of admission is not likely to be a deciding factor in choosing a 
facility. We also agree that no one should have to choose between 
receiving care and signing an arbitration agreement. Therefore, we have 
finalized Sec.  483.70(n)(1) to state that the facility must not 
require any resident or his or her representative to sign an agreement 
for binding arbitration as a condition of admission to, or as a 
requirement to continue to receive care at, the facility. In addition, 
the facility must inform the resident or his or her representative of 
these rights and ensure that this language is in the agreement.
    Comment: Some commenters were concerned that allowing pre-dispute, 
binding arbitration agreements to be used as a condition of admission 
would encourage LTC facilities that do not use these agreements to 
begin using them. Another commenter questioned whether this could 
eviscerate one of the fundamental protections under the FAA and 
contract law, that a contract is not enforceable if it is entered into 
as a result of coercion, misrepresentation, fraud, duress, or otherwise 
was unconscionable. One commenter noted that state courts have often 
found that requiring the resident to sign one of these agreements as a 
condition of admission was unconscionable. Some commenters were 
concerned that LTC facilities would have less incentive to provide 
quality care or improve their care to their residents, or perhaps, even 
worse, view these agreements as ``get out of jail free cards.''
    Response: We note that until the 2016 final rule was issued, there 
were no LTC facility requirements regarding arbitration. LTC facilities 
were allowed to use these agreements and still maintained that right 
until the effective date of that rule. This rule was never enforced due 
to litigation. This final rule would allow the use of arbitration 
agreements as long as LTC facilities comply with the requirements 
finalized in this rule. We believe that residents and their families 
will have their rights protected and that there will be transparency in 
the arbitration process under this final rule. We believe that concerns 
about a link between the use of arbitration agreements and quality of 
care can be alleviated by ensuring that surveyors have access to key 
documents relating to the arbitration, including arbitral decisions. By 
prohibiting secrecy, surveyors can review the facts giving rise to the 
arbitration and keep those issues in mind when conducting the survey 
to, among other things, determine whether the LTC facility has taken 
steps to prevent similar problems from arising. In order to avoid 
secrecy problems, under these regulations Medicare-participating LTC 
facilities must retain copies of the signed arbitration agreements and 
the arbitrator's final decision for each dispute settled through 
arbitration. In addition, as discussed below, the LTC facility 
requirements are enforced through a survey process, including both 
routine surveys and complaint surveys. When surveyors are investigating 
a complaint that refers to issues related to the arbitration agreements 
and/or arbiter's final decisions, surveyors will be directed to collect 
the relevant information (for example, the admissions packet, 
arbitration agreement, and record of arbitrator's hearing).
    After finalization of the regulation, we will monitor trends of 
compliance and take any actions warranted based on these trends. 
Failure to comply with these requirements can result in sanctions, up 
to and including being de-certified from the Medicare program. Hence, 
these agreements are neither a ``get out of jail free card'' nor an 
incentive to provide substandard care or not improve the care they 
provide to their residents. Concerning the commenters' concerns that 
allowing these agreements to be used as a condition of admission would 
affect the fundamental concept that contracts must be entered into 
voluntarily and with consent, we share their concerns about individuals 
being coerced into signing one of these agreements, especially if they 
believe the resident will not receive the care he or she needs if the 
agreement is not signed. As discussed above, we have modified the 
proposed rule to resolve these concerns by precluding LTC facilities 
from requiring an arbitration agreement as a condition of admission to, 
or as a requirement to continue receiving care at, the facility. The 
facility must also inform the resident or his or her representative of 
these rights and ensure that this language is in the agreement.
    Comment: Some commenters were concerned about current residents in 
LTC facilities being coerced into signing pre-dispute, binding 
arbitration agreements. These commenters pointed out that when current 
residents are approached with these agreements, even if signing the 
agreement is presented as voluntary, they might feel pressured to sign 
it for fear of not being allowed to stay at the facility.
    Response: This final rule makes clear that a resident must be 
informed, and the arbitration agreement must state, that signing an 
arbitration agreement is not a condition of admission nor is it 
necessary to remain at the facility. In addition, the agreement must 
explicitly grant the resident or his or her representative the right to 
rescind the agreement within 30 calendar days of signing it. Thus, if a 
LTC facility complies with the rule, we believe residents should not 
feel that they have no choice in signing the arbitration agreement. In 
addition, a facility that transferred or discharged a resident for 
failure to sign an arbitration agreement (whether pre- or post-dispute) 
would risk termination from the Medicare and Medicaid programs. Under 
current regulations, residents cannot be transferred or discharged from 
a LTC facility due to their decision not to sign an arbitration 
agreement. Section 483.15(c), formerly Sec.  483.12(a)(2), ``Transfer 
and discharge'', sets forth the permissible reasons a LTC facility can 
transfer or discharge a resident. For a current resident, the 
permissible reasons a facility may transfer or discharge a resident 
are: (1) It is necessary for the resident's welfare and the resident's 
needs cannot be met in their facility; (2) the resident's health has 
improved sufficiently so the resident no longer needs the services 
provided by the facility; (3) the safety of individuals in the facility 
is endangered due to the clinical or behavioral status of the resident; 
(4) the health of individuals in the facility would otherwise be 
endangered; (5) the resident failed, after reasonable and appropriate 
notice, to pay for (or to have paid under Medicare or Medicaid) a stay 
at the facility; and, (6) the facility ceases to operate. Failure to 
sign an agreement for binding

[[Page 34729]]

arbitration is not a permissible reason. If a LTC facility attempted to 
transfer or discharge a resident after either the resident or his or 
her representative refused to sign the agreement, they could be in 
violation of Sec.  483.15(c) and CMS could take action, including 
citing the facility for a deficiency. Thus, we believe that residents 
are still protected from being transferred or discharged because of a 
refusal to sign an arbitration agreement. See Binding Arbitration in 
Nursing Homes, Survey and Certification Letter dated January 9, 2003 
(S&C-03-10) (available at https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/SCletter03-10.pdf).
    Regarding current residents that have already signed arbitration 
agreements, we note that CMS does not have the power to annul valid 
contracts. Current arbitration agreements that are valid under the 
applicable state or other relevant jurisdiction's laws are still valid. 
We do believe that it would be good policy and we would encourage LTC 
facilities to offer current residents who have signed arbitration 
agreements the opportunity to rescind those agreements and proceed with 
a new agreement that conforms to these regulations. However, these 
provisions are only effective prospectively.
    Comment: Many commenters contended that claims for abuse, neglect, 
and malpractice are not appropriate for arbitral resolution. Other 
commenters noted the types of claims commonly brought against LTC 
facilities such as pressure ulcers, broken bones, malnutrition, 
dehydration, asphyxiation (due to improper restraints), sexual assault 
and other criminal activities are also inappropriate matters for 
arbitration.
    Response: From these comments, it is our understanding that the 
commenters believe that claims related to possible medical negligence 
or malpractice or claims that involved serious physical or emotional 
injury need to be resolved in a public forum where the circumstances 
surrounding the claim would result in a public record. They apparently 
believe that settling a dispute through judicial proceedings has a more 
important and positive effect on improving the quality of care for 
residents and holding the LTC facility responsible for poor care than 
if the dispute had been settled through arbitration. Certain claims, 
especially those related to a serious injury to a resident's physical 
and/or his or her emotional well-being, are especially disturbing. We 
understand that many individuals would prefer that these types of 
claims be treated differently. However, we believe that either type of 
forum, arbitration or judicial proceedings, can be an appropriate forum 
to resolve disputes. We also believe that a fundamental requirement for 
arbitration would be that the arbitral forum has the expertise to 
handle the dispute presented by the parties. Thus, we do not believe it 
is appropriate to prohibit certain types of claims from being resolved 
in arbitration. This could lead to confusion and some grievances or 
concerns not being addressed appropriately. Some claims may not fit 
into a single, clearly designated category, such as when there are 
features of the dispute that could be put it into multiple categories. 
Resolving the dispute could result in some portions of the dispute 
being resolved through arbitration but others having to go into 
judicial proceedings. Some matters may also involve CMS enforcement 
surveys or audits. We would also note that notwithstanding the 
existence of an arbitration agreement, the LTC facility is obligated to 
comply with all requirements for participation. Specifically, there are 
requirements in our regulations for reporting abuse, neglect, 
misappropriation, and maltreatment (See Sec.  483.12 Freedom from 
abuse, neglect and exploitation). The resolution of any dispute through 
arbitration or judicial proceedings would not interfere with the 
facility's responsibility to report abuse or negate our ability to take 
appropriate enforcement action. The relevant law enforcement entities 
could also take appropriate action against individuals. In addition, 
Sec.  483.70(n)(5) of this final rule provides that the agreement may 
not contain any language that prohibits or discourages the resident or 
anyone else from communicating with federal, state, or local officials, 
including but not limited to, federal and state surveyors, other 
federal or state health department employees, and representatives of 
the Office of the State Long-Term Care Ombudsman. This provision 
ensures that residents also have the right to speak to officials about 
any concerns they have regarding their treatment. Finally, the 
recordkeeping requirements finalized in this rule will also allow us to 
learn how these types of claims are being treated and resolved through 
arbitration in LTC facilities.
    Comment: Despite the oversight that results from surveys, 
ombudsmen, and other mechanisms, some commenters believed these are 
insufficient to protect residents from neglect, abuse, or other harm. 
One commenter, who had been a therapist and is now a LTC ombudsman, 
indicated that abuse and disregard of residents' rights was widespread 
in LTC facilities. The commenter also indicated that when violations 
were identified and reported to his or her state's Department of 
Health, it was rare for a facility to be held accountable for its 
actions. Other commenters also noted that they saw or their loved ones 
had experienced abuse and/or neglect. Some commenters drew our 
attention to media reports about incidents of abuse, neglect, and even 
criminal offenses against in LTC facilities. Some commenters pointed to 
a recent CNN investigation on LTC facilities (aired on March 17, 2017) 
as evidence of the poor and negligent care residents were enduring in 
these facilities, available at https://www.cnn.com/2017/03/17/health/nursing-home-sex-abuse/. That investigation found that more 
than 1,000 nursing homes have been cited for mishandling alleged cases 
of sexual abuse. Another commenter cited other articles that also 
indicated that elder abuse and elder abuse in nursing homes was a 
serious problem.
    Response: Given the lack of hard social science data, we do not 
believe that removing the ban on pre-dispute, binding arbitration 
agreements will increase the occurrence of any of the serious incidents 
that the commenters and the media are describing. We believe that the 
requirements finalized in this rule, as well as the other LTC facility 
requirements, will work together to reduce, and hopefully, eliminate 
such incidents. For example, in this final rule the results of disputes 
settled through arbitration will no longer be private but subject to 
inspection by CMS or its designee (Sec.  483.70(n)(5)). Other current 
requirements, including the requirements to report instances of abuse, 
neglect, exploitation, and mistreatment as set forth in Sec.  
483.12(c), will also address these instances to ensure that facilities 
are reporting to the state and other appropriate entities. In addition, 
we will continue to monitor the care residents receive through our 
routine and complaint survey processes. Information on the Quality, 
Certification and Oversight Reports are available at: https://qcor.cms.gov/main.jsp. Nursing Home Compare data sets are available at: 
https://data.medicare.gov/data/nursing-home-compare.

D. Transparency

    Comment: Regarding the proposal to retain the requirement that 
would bar any arbitration agreement from including any language that 
would prohibit or discourage a resident or anyone else from 
communicating with

[[Page 34730]]

federal, state, or local officials, one commenter noted that they were 
unaware of any resident being precluded from discussing any quality-of-
care concerns with any government official. In addition, the inclusion 
of such a provision in the agreement could invalidate the agreement, or 
at least that provision, as being unconscionable. No arbitration 
agreement could limit the power of government regulators from taking 
action when there is a complaint. They also point out that there are 
ample protections for residents to communicate with government 
officials. For example, facilities must not prohibit or discourage 
residents from communicating with federal, state, or local officials; 
facilities must provide residents with written notice of how they can 
file a complaint with the State Survey Agency and information and 
contact information for filing grievances of any suspected violation of 
state or federal nursing facility regulations; and facilities must post 
information regarding the filing of complaints with the State Survey 
Agency in a form and a manner accessible and understandable to 
residents and their representatives (Sec.  483.10(k), (g)(4)(i)(D), 
(vi), and (g)(5), respectively). There is no justification for an 
arbitration-specific provision and its inclusion in the requirements. 
It demonstrates a suspicion about arbitration which is inconsistent 
with the federal policy embodied within the FAA and the proposed 
changes.
    Response: We disagree with the commenters. We believe that there 
does need to be an arbitration-specific requirement to ensure that 
there is no language in the LTC facility's arbitration agreement that 
could be interpreted as either discouraging or prohibiting not only the 
resident but anyone else from communicating with federal, state, or 
local officials. Comments we received contained anecdotal evidence of 
so-called `gag-clauses' being common in arbitration agreements and that 
residents and family members were uncertain if they could talk to 
surveyors about a quality concern that was arbitrated. The requirements 
cited by the commenters only apply to residents, no one else. Since 
others in the LTC facility, including staff and other residents and 
visitors, may have important information surrounding the circumstances 
of a dispute between a resident and the LTC facility, it is important 
that the facility not be able to prevent or discourage anyone, such as 
family, friends, volunteers, other residents or staff, from 
communicating with any government officials, especially surveyors that 
need to investigate the care being provided to residents. In addition, 
if an arbitration agreement contained such language, we believe that it 
is quite likely that the resident could interpret it as overriding the 
protections cited by the commenter, or at least result in confusion. 
Concerning the commenter's contention that, if a dispute arises, the 
resident has the opportunity to challenge the existence of the 
agreement, we do not believe that is sufficient. To vacate an award or 
decision procured through arbitration, courts are limited to certain 
causes, if proved. These limitations are set forth in 9 U.S.C. 10a and 
include, but are not limited to, the award was procured through 
corruption, fraud, or undue means; evident partiality or corruption in 
arbitrators, and misconduct by arbitrators such that the rights of any 
party were prejudiced. Among other things, this regulation ensures that 
arbitral decisions be available for surveyors. As we have explained, we 
have concluded that it is important for surveyors to be able to review 
these documents to determine compliance with requirements. Thus, this 
arbitration-specific requirement will ensure that the resident is not 
misled or confused about his or her right to communicate with federal, 
state, and local officials about the circumstances surrounding the 
dispute.
    Comment: One commenter was concerned about the recordkeeping 
requirements mandating that a signed copy of the agreement and decision 
must be retained by the LTC facility for 5 years and be made available 
for inspection by CMS. They believe that this unjustifiably singles out 
arbitration and is unduly burdensome. They also noted that CMS had not 
provided any reason for the facility to retain the arbitration 
agreement for the 5 years after the dispute was resolved. If a dispute 
arises, the resident has the opportunity to challenge the existence of 
the agreement. The commenter stated that there was no reason to add 
this additional recordkeeping burden on facilities, and no 
justification for singling out arbitration agreements for this 
requirement. For example, CMS has not proposed that all settlement 
agreements be retained for 5 years.
    Response: Unlike court decisions and settlement agreements, there 
are no public records when a dispute is settled through arbitration. 
These recordkeeping requirements are intended to ensure that CMS can 
fully evaluate quality of care complaints that are addressed in 
arbitration and assess the overall impact of these agreements on the 
safety and quality of care provided in LTC facilities. Many commenters 
were concerned that these agreements have a negative effect on the care 
residents receive in these facilities. Some commenters, as noted 
previously, stated that pre-dispute, binding arbitration agreements 
would lead to a declining standard of care for residents. The 
requirement for facilities to retain these documents for CMS or its 
designee to review will assist CMS in determining to what extent 
quality of care issues are addressed in arbitration and in ensuring 
that quality of care concerns that are the subject of arbitration can 
be thoroughly investigated, if needed, in specific cases, or in 
aggregate.
    Comment: Some commenters were dissatisfied with the transparency 
requirements we proposed. They believed that these requirements offered 
little, if any, value. The imbalance of power between the resident and 
the facility, as well as the stress a resident may experience during 
the admissions process, could exert pressure on the resident to sign a 
pre-dispute, binding arbitration agreement, even if the facility does 
not intend to pressure the resident. One commenter stated that the 
transparency provisions simply do not protect residents from the 
coercive nature of the process. We believe that the commenter is 
referring to the unequal bargaining power between the resident and the 
facility, especially concerning knowledge of and control of the 
arbitration process and resident's need for care. Other commenters 
stated that it was unlikely that a resident would delay signing the 
admissions contract in order to seek legal advice, since the 
predominant concern will be obtaining the care the resident needs. Two 
commenters discussed a cooling off or rescission period. One commenter, 
an organization that supports the overall health and well-being of 
seniors, children, and those with special needs, made some specific 
recommendations concerning the use of pre-dispute, binding arbitration 
agreements. One of those recommendations is that the agreement should 
include a rescission period. This would give residents and their 
representatives a chance to thoroughly read the agreement and 
reconsider whether they should agree to its terms. They would also have 
time to seek legal advice, if they chose to do so. If they change their 
minds regarding the agreement, they would then have time to rescind it. 
The other commenter, a major organization that represents nursing 
homes, noted that its own model agreement for arbitration agreements 
contained a provision for a 30-day rescission period. That

[[Page 34731]]

commenter noted that many nursing homes already include safeguards in 
their contracting process, including a provision for a 30-day 
rescission process, so that a resident and his or her representative 
has a meaningful opportunity to reconsider whether he or she wants to 
settle any disputes with the LTC facility through arbitration. 
Therefore, we are adding a requirement that the agreement must allow 
the resident or his or her representative to rescind the agreement 
within 30 calendar days of signing it at Sec.  483.70(n)(3).
    Response: We acknowledge that, despite the requirements in this 
rule that would prohibit a LTC facility to have a resident sign an 
arbitration agreement as a condition of admission, some residents or 
their representatives might feel pressure to sign these agreements. We 
agree with the commenter who suggested that a rescission period would 
provide residents time to get beyond the admissions process and 
consider whether they want to be bound by the arbitration agreement. It 
will also give them time to obtain legal advice, if they chose to do 
so. Therefore, we are adding a requirement that the agreement must 
allow the resident or his or her representative to rescind the 
agreement within 30 calendar days of signing it at Sec.  483.70(n)(3).
    Comment: Some commenters stated that the transparency provisions do 
not overcome the fundamental problem with pre-dispute, binding 
arbitration agreements, which is the lack of an informed agreement. The 
decision to sign a binding arbitration agreement can never be informed 
unless both parties are fully aware of the circumstances surrounding 
the dispute and the consequences of agreeing to settle the dispute 
through arbitration. This can only happen after the circumstances that 
resulted in the dispute have already occurred.
    Response: We agree that, when a pre-dispute, binding arbitration 
agreement is signed neither the resident nor the LTC facility are aware 
of the circumstances surrounding any future dispute between them. 
However, by signing one of these agreements, the parties are not 
settling a dispute but deciding the forum in which any future disputes 
would be settled. We believe that the requirements finalized in this 
rule provide the transparency necessary for residents to understand the 
ramifications of signing an arbitration agreement.
    Comment: Some commenters believed that posting a notice was not 
only unhelpful but also confusing. One commenter noted that so many 
items must already be posted that any notice on arbitration would 
likely not stand out.
    Response: We agree with the commenters. Posting a notice would not 
likely serve any purpose other than to require more paperwork. Thus, we 
are not finalizing the requirement that LTC facilities post a notice 
concerning their policy on arbitration agreements.
    Comment: We received mixed comments on the fairness of arbitral 
forums. Some commenters expressed concerns that in some situations 
arbitrators had awarded the resident or his or her family much less 
compensation then would have been expected if the dispute had been 
resolved through a formal judicial proceeding or had found that the LTC 
facility was not responsible for an injury to a resident when it was 
likely that a judge or jury would have. Some commenters pointed to 
specific instances of residents or their families receiving little to 
no compensation. Other commenters stated that residents and their 
families did as well or better with disputes settled through 
arbitration than they would have through formal judicial proceedings. 
Other commenters stated that residents, especially those that are in 
facilities for an extended length of time, are vulnerable. As discussed 
above, about half of LTC facility residents have been diagnosed with 
Alzheimer's disease or another form of dementia. This situation only 
amplifies the disadvantages of arbitration. In addition, some 
commenters were concerned about arbitrator bias in favor of the 
facility. They were particularly concerned that a facility's ongoing 
need for arbitrators in subsequent cases could result in arbitrators 
issuing decisions favorable to the facility in order to receive future 
arbitral business from that facility.
    Response: We understand that there are concerns about the fairness 
of the arbitral forum. Although no one can guarantee that every 
arbitrator will be neutral and fair in all arbitrations, comments we 
received caused us to conclude that arbitrators generally review the 
evidence submitted to them and make rational decisions based upon that 
evidence. While most state laws limit the circumstances upon which an 
arbitrator's decision can be challenged in court,\2\ we believe that 
state laws regarding unconscionability or cohesion contracts offer some 
protection to residents from an arbitrator's decision if such a 
decision suggests bias towards the LTC facility. In addition, we are 
retaining the requirements that the facility must ensure that the 
arbitration agreement provides for the selection of a neutral 
arbitrator agreed upon by both parties and for the selection of a venue 
that is convenient to both parties. We are also finalizing the 
requirement at Sec.  483.70(n)(5), which requires that when a facility 
resolves a dispute with a resident through arbitration, the facility 
must retain a copy of the signed arbitration agreement and the 
arbitrator's final decision for 5 years after the resolution of that 
dispute and make it available for inspection upon request from CMS or 
its designee. This requirement will enable us to determine how 
arbitration is being used by nursing homes and how residents are being 
treated in these arbitral forums. We believe that improving the 
transparency surrounding arbitration in nursing homes should also 
encourage facilities and arbitrators to treat residents fairly, if they 
are not currently doing so.
---------------------------------------------------------------------------

    \2\ See 9 U.S. Code 10(a).
---------------------------------------------------------------------------

    Comment: Some commenters disagreed with our proposal to require 
that the agreement be in plain language, be explained in a form and 
manner the resident understands, and that the facility receive an 
acknowledgement from the resident that he or she understands the 
agreement. They contended that these requirements did not eliminate or 
address what they saw as the fundamental problem: That a resident's 
decision to sign a pre-dispute, binding arbitration agreement could 
never be informed or voluntary without in-context knowledge of what is 
at stake. Some commenters asserted that the plain language requirement 
was useless, arguing that where pre-dispute, binding arbitration 
agreements are allowed as a condition of admission, it simply meant 
that it would be clear to the resident that he or she had no choice. 
Other commenters believed that the requirements for ``plain language'' 
were so vague and unclear that they would generate confusion. They also 
contended that the proposed rule would not support meaningful decision 
making by residents and its implementation would decrease residents' 
health, safety, and well-being. These commenters stated that the only 
way for the decision to sign an arbitration agreement to be voluntary 
and informed is if the resident was asked to sign it after the dispute 
has arisen. Many residents enter LTC facilities because they lack the 
ability to manage their day-to-day affairs. About half of LTC residents 
have been diagnosed with Alzheimer's disease or another form of 
dementia. The commenters are concerned that failure to explain the 
arbitration agreement to

[[Page 34732]]

residents in a way that they understand the issue, could result in 
residents unwittingly signing an agreement to arbitrate with little 
understanding of the consequences of their action.
    Response: After considering these comments, we agree with the 
commenters that the requirement for ``plain language'' is vague and 
could result in confusion. Therefore, we are not finalizing that 
proposed change to the requirements. As discussed above, we are also 
not finalizing the proposed change that would have allowed these 
agreements to be used as a condition of admission. However, we are 
retaining the requirement at Sec.  483.70(n)(2)(i) and (ii) that the 
facility must ensure that the agreement be explained to the resident 
and his or her representative in a form and manner that he or she 
understand, including in a language the resident understands and the 
resident or his or her representative acknowledges that he or she 
understands the agreement. We believe these requirements are essential 
to ensure transparency in the arbitration process.
    Comment: Some commenters were concerned about removing some of the 
specific requirements concerning arbitration or the arbitration 
agreement. For example, the proposed removal of the requirement that 
another individual could only sign for the resident if that individual 
had no interest in the facility and was authorized by state law to sign 
for the resident, could result in a person who is affiliated with the 
facility or has some type of interest in the facility signing for the 
resident. This would remove a critical protection for residents that 
may lack decision-making capacity. Others expressed concern about the 
possibility that residents and potential residents could have a family 
member, friend, or other personal contact affiliated with the facility.
    Response: In drafting and entering into an arbitration agreement 
with its residents, LTC facilities must still comply with state law 
governing the rights of an individual to represent or legally bind a 
resident through a power of attorney or similar instrument. We are 
confident that state law would protect the rights of residents if 
someone signs one of these agreements without having the appropriate 
authority.

E. Costs

    Comment: Some commenters pointed out the different advantages and 
disadvantages of arbitration. Some stated that arbitration results in 
faster, more flexible, less costly, and less adversarial resolution of 
disputes than litigation. One commenter quoted the 2016 final rule, 
``arbitration agreements are, in fact, advantageous to both providers 
and beneficiaries because they allow for the expeditious resolution of 
claims without the costs and expense of litigation'' (82 FR 26651). One 
commenter cited an article that showed that in the context of labor-
management disputes the costs of arbitration were less for lower-income 
employees (Elizabeth Hill, Due Process at Low Cost: An Empirical Study 
of Employment Arbitration Under the Auspices of the American 
Arbitration Association, 18 Ohio St. J on Disp. Resol. 777, 802 
(2003)). They also pointed out that other advantages of arbitration 
included not needing an attorney, not having to show up at court since 
arbitration could be accomplished over the telephone or, perhaps, just 
submitting documents to the arbitrator. In addition, the commenter 
noted that reductions in funding to both federal and state courts could 
also lengthen the time needed to resolve a dispute through judicial 
proceedings. The commenter noted that arbitration proceedings do not 
have similar backlogs and can resolve disputes much faster.
    However, there were also commenters pointed out that there were 
disadvantages. Some pointed out that arbitration could be more costly, 
especially for the resident. While LTC facilities may pay the costs for 
arbitration, this is not always the case. Since arbitration is a 
private process, there are costs for the venue, discovery, and the 
arbitrator. These costs can amount to thousands of dollars. It may also 
not result in a much faster or less adversarial resolution than 
litigation. In addition, some commenters contended that if arbitrators 
apply the applicable law incorrectly or make mistakes concerning what 
the appropriate law is for a particular claim and that state law 
generally limits the reasons for challenging the arbitrator's decision.
    Privacy was another area in which commenters differed. Many 
commenters believed the secrecy of the arbitration process could be a 
disadvantage because LTC facilities could prevent disclosure of 
instances of poor or substandard care. However, another commenter, a 
non-profit provider, pointed out that some residents may not want to 
settle disputes in a court, especially disputes that involve physical 
or emotional injuries. Due to the relationship between non-profits and 
their residents, the residents may also prefer a less adversarial forum 
in which to settle disputes. Hence, judicial proceedings might not be 
preferable for all disputes.
    Response: We agree with the commenters that arbitration has both 
advantages and disadvantages. Nonetheless, despite these claimed 
advantages and disadvantages, arbitration is an accepted form of 
dispute resolution and the FAA expresses a favorable view of 
arbitration. In addition, we agree that judicial proceedings may not be 
a preferable way for resolving all disputes. There are substantial 
hurdles to get a dispute into court. The resident must find an attorney 
willing to take the case. The attorney will generally decide to take a 
case based upon the potential damages and the difficulty of the case. 
If the attorney believes the case will be difficult to prove or that 
the damages are not adequate to justify the time and expense of 
judicial proceedings, he or she may not take the case. Cases of this 
nature would appear, therefore, to be good candidates for arbitration. 
Of course, there are also disadvantages to arbitration. It is not 
always faster or less expensive. In some cases, the costs associated 
with settling a dispute through arbitration could exceed those if the 
dispute was settled through judicial proceedings, especially for the 
resident or his or her representative. As commenters noted, settling a 
dispute in arbitration may not be faster. In addition, the losing party 
has limitations on contesting an arbitrator's decision in court. We 
acknowledge these advantages and disadvantages to arbitration and 
believe that the requirements in this final rule provide the 
transparency and opportunity for the resident and his or her 
representative to evaluate those advantages and disadvantages and make 
a choice that is best for them. This rule in no way would prohibit two 
willing and informed parties from entering voluntarily into an 
arbitration agreement.
    Comment: Some commenters stated that prohibiting arbitration 
agreements would lead to more litigation and higher legal costs. These 
higher legal costs would result from increased insurance premiums and 
jury verdicts that would likely be higher than awards given in 
arbitration. One commenter cited a declaration from the AHCA 
litigation, that indicated that the insurer for Mississippi LTC 
facilities was likely to increase premiums if these arbitration 
agreements were not enforceable (citing Decl. of Suzanne Meyer at para. 
14, Am. Health Care Ass'n v. Burwell, 217 F. Supp. 3d 921 (N.D. Miss. 
2016) (No. 3:16-cv-00233), Dkt. No. 20-3). These higher legal costs 
could result in fewer resources for resident care and improving the 
quality of care for all residents. It would also increase the cost

[[Page 34733]]

of care, which would affect residents who are self-pay, their insurance 
companies, and government programs, especially Medicare and Medicaid.
    Response: As discussed above, we are removing the prohibition on 
pre-dispute, binding arbitration agreements. Facilities are allowed to 
ask their residents to sign arbitration agreements so long as they 
comply with the requirements we are finalizing in this rule. This 
should address the commenters' concerns.
    Comment: One commenter was concerned about higher costs to the 
facility as a result of the prohibition on pre-dispute, binding 
arbitration agreements. Since the amount of reimbursement from the 
Medicare and Medicaid programs is fixed, LTC facilities cannot raise 
their rates for residents whose care is paid for by those programs. 
Hence, LTC facilities could only cover higher costs by increasing the 
costs of care to residents who are paying for their care themselves 
and/or reduce the amount of resources that go to resident care. This 
could result in less care to all of the residents. Government programs 
could even face increased costs due to increased injuries or 
complications that result from poorer care.
    Response: At this point, the evidence on the financial effects of 
prohibiting arbitration or allowing unfettered arbitration is 
anecdotal. However, the commenters tend to agree that when a claim is 
settled through arbitration, facilities save money. The resident 
advocacy groups contend that residents lose more often and, when they 
win, receive smaller awards than they would likely have had in judicial 
proceedings. LTC facilities assert that this same set of facts results 
in a positive financial impact because arbitration reduces their costs 
and ensures that more of their money can be spent on providing quality 
care to the residents. As discussed above, we are removing the 
prohibition on pre-dispute, binding arbitration agreements and 
permitting LTC facilities to enter into arbitration agreements if they 
comply with the requirements that are being finalized in this rule. We 
believe that the finalized requirements address these commenters' 
concern to a large extent.
    Comment: Another commenter stated that arbitration prevents the 
government from seeking reimbursement for the costs of the resident's 
care related to any negligence by the LTC facility. Arbitration is not 
a public process and the government would not be made aware of any 
award by the arbitrator to a resident. Without notice, the government 
could not seek to recover any part of the cost of care to the resident 
as a result of any negligence or substandard care provided on the part 
of the facility from that award.
    Response: We note that CMS generally does not seek to recover its 
costs from any award of damages to a resident when services are 
negligently provided. Instead, we enforce our health and safety 
standards through Requirements of Participation, Conditions of 
Participation, Conditions for Coverage, and the authority to terminate 
a negligent provider. For LTC facilities, we can also impose civil 
monetary penalties.

IV. Provisions of the Final Regulations

    In this final rule, we are adopting the provisions in the June 8, 
2017 proposed rule, with the following changes:
     Revised Sec.  483.70(n)(1) to specify that a facility must 
not require any resident or his or her representative to sign an 
agreement for binding arbitration as a condition of admission to, or as 
a requirement to continue receiving care at, the facility and must 
explicitly inform the resident or his or her representative of his or 
her right not to sign the agreement as a condition of admission to, or 
as a requirement to continue receiving care at, the facility.
     Removed Sec.  483.70(n)(1)(i).
     Redesignated Sec.  483.70(n)(1)(ii) and (iii) as Sec.  
483.70(n)(2)(i) and (ii).
     Revised the redesignated Sec.  483.70(n)(2)(ii) to specify 
that the facility must ensure that the resident or his or her 
representative acknowledge that he or she understands the agreement.
     Added Sec.  483.70(n)(2)(iii) to specify that the 
agreement provides for the selection of a neutral arbitrator agreed 
upon by both parties.
     Added Sec.  483.70(n)(2)(iv) to specify that the agreement 
provides for the selection of a venue that is convenient to both 
parties.
     Redesignated Sec.  483.70(n)(2) as Sec.  483.70(n)(5).
     Redesignated Sec.  483.70(n)(3) as Sec.  483.70(n)(6).
     Added Sec.  483.70(n)(3) to specify that the agreement 
must explicitly grant the resident or his or her representative the 
right to rescind the agreement within 30 calendar days of signing it.
     Revised Sec.  483.70(n)(4) to state that an arbitration 
agreement must explicitly state that neither the resident nor his or 
her representative is required to sign an agreement for binding 
arbitration as a condition of admission to, or as a requirement to 
continue to receive care at, the facility.
     Revised redesignated Sec.  483.70(n)(6) to read that when 
a facility and a resident resolve a dispute through arbitration, a copy 
of the signed agreement for binding arbitration and the arbitrator's 
final decision must be retained by the facility for 5 years after 
resolution of that dispute and be available for inspection upon request 
by CMS or its designee.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.

Omnibus Budget Reconciliation Act of 1987 Waiver

    Ordinarily, we are required to estimate the public reporting burden 
for information collection requirements for this regulation in 
accordance with chapter 35 of title 44, United States Code. However, 
sections 4204(b) and 4214(d) of the Omnibus Budget Reconciliation Act 
of 1987 (OBRA '87) (Pub. L. 100-204) provide for a waiver of the PRA 
requirements for this regulation. Thus, we have not provided an 
estimate for any paperwork burden related to these revisions and 
additions.

VI. Regulatory Impact Statement

A. Statement of Need

    The district court's decision in granting the preliminary 
injunction against enforcement of the prohibition on pre-dispute, 
arbitration agreements indicated that CMS would at a minimum face some 
substantial legal hurdles from pursuing the arbitration policy set 
forth in the 2016 final rule. We have reviewed the provisions and 
determined that the arbitration requirements should be revised. We 
believe that the protections for residents that we have finalized in 
this rule strike a better balance of competing policy

[[Page 34734]]

concerns. The revisions to these requirements in the 2017 final rule 
will increase transparency in LTC facilities that chose to use 
arbitration while, at the same time, allowing facilities to use 
arbitral forums as a means of resolving disputes.

B. Overall Impact

    The overall impact of this final rule is to provide transparency in 
the arbitration process in nursing homes to the residents, his or her 
family and representatives, and the government. It also ensures that no 
resident will be required to sign a pre-dispute, binding arbitration 
agreement as a condition for receiving the care he or she needs. In 
addition, by ensuring that the resident has the right to rescind the 
agreement within 30 calendar days of signing it, residents can get 
beyond the admissions process and have adequate time to consider the 
agreement and get legal advice.
    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), the Congressional 
Review Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing 
Regulation and Controlling Regulatory Costs (January 30, 2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A RIA 
must be prepared for major rules with economically significant effects 
($100 million or more in any 1 year). This rule does not reach the 
economic threshold and thus is not considered a major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $7.5 million to $38.5 million in any 1 year. Individuals and 
states are not included in the definition of a small entity. We are not 
preparing an analysis for the RFA because we have determined, and the 
Secretary certifies, that this final rule will not have a significant 
economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 604 of the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a Metropolitan Statistical Area for Medicare 
payment regulations and has fewer than 100 beds. We are not preparing 
an analysis for section 1102(b) of the Act because we have determined, 
and the Secretary certifies, that this final rule will not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2019, the 
UMRA threshold is approximately $154 million. This rule will have no 
consequential effect on state, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on state 
or local governments, the requirements of Executive Order 13132 are not 
applicable.

C. Cost to the Federal Government

    We do not believe that these revisions would impose any additional 
costs.

D. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret a final rule, we should 
estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that the number of commenters on 
the proposed rule is the number of reviewers who will thoroughly review 
the final rule. We acknowledge that this assumption may understate or 
overstate the costs of reviewing this rule. It is possible or even 
likely that not all of those prior reviewers will extensively reread 
this rule, and may instead focus on changes to the regulatory text or 
only specific responses to comments. On the other hand, it is 
conceivable that there may be more than one individual reviewing the 
rule for some of the affected entities, or that many entities 
thoroughly reviewed the rule without commenting. For those reasons, we 
thought that the number of commenters on the proposed rule would be a 
fair estimate of the number of reviewers of this rule. We also 
recognize that different types of entities are in many cases affected 
by mutually exclusive sections of some final rules, or that some 
entities may not find it necessary to fully read each rule, and 
therefore for the purposes of our estimate we assume that each reviewer 
reads approximately 50 percent of the rule.
    Using the wage information from the Bureau of Labor Statistics 
(BLS) for medical and health service managers (Code 11-9111), we 
estimate that the cost of reviewing this rule is $107.38 per hour, 
including overhead and fringe benefits https://www.bls.gov/oes/2017/may/oes_nat.htm. Assuming an average reading speed, we estimate that it 
would take 0.65 hours for the staff to review half of this final rule. 
For each entity that reviewed the rule, the estimated cost is $69.80 
(0.65 hours x $107.38). Therefore, we estimate that the total cost of 
reviewing this regulation is $70,000 ($69.80 x 1,020 reviewers).

E. Executive Order 13771

    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017 and requires that the 
costs associated with significant new regulations ``shall, to the 
extent permitted by law, be offset by the elimination of existing costs 
associated with at least two prior regulations.'' OMB's interim 
guidance, issued on April 5, 2017, https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/M-17-21-OMB.pdf, explains that 
for Fiscal Year 2017 the above requirements only apply to each new 
``significant regulatory action that imposes costs.'' It has been 
determined that this final rule is an action that does not impose more 
than de minimis costs and thus is not a regulatory or deregulatory 
action for the purposes of Executive Order 13771.

F. Benefits of the Rule

    With the exception of the requirement that facilities post notices 
of their

[[Page 34735]]

arbitration policies, the requirements finalized in this rule maintain 
the transparency requirements promulgated in the 2016 final rule. 
Specifically, this rule ensures that LTC facilities must make every 
effort to inform the resident of the nature and existence of any 
proposed arbitration agreement. The agreement must be explained to the 
resident in a form and manner he or she understands and the must 
resident acknowledge that he or she understands the agreement. 
Additionally, we are retaining the requirement that the agreement may 
not contain any language that prohibits or discourages the resident or 
anyone else from communicating with federal, state, or local officials.
    We believe that these transparency requirements address many 
stakeholder concerns regarding the fairness of arbitration in LTC 
facilities. These requirements also support the resident's right to 
make informed choices about important aspects of his or her healthcare 
and ensure that we can protect resident health and safety.
    We have also finalized the requirement that, when a facility and a 
resident resolve a dispute through arbitration, a copy of the signed 
agreement for binding arbitration and the arbitrator's final decision 
must be retained by the facility for 5 years after the resolution of 
that dispute and also be available for inspection by CMS or its 
designee. This requirement will provide CMS an opportunity to gather 
data about the extent to which quality of care issues are addressed in 
arbitration, to ensure that quality of care concerns that are the 
subject of arbitration can be thoroughly investigated, if needed, in 
specific cases, or in aggregate, and the overall impact that 
arbitration may have on residents of LTC facilities. Based on the 
comments we received, we have also added a requirement that the 
agreement must explicitly grant the resident the right to rescind the 
agreement within 30 calendar days of signing it. This provides the 
resident approximately one month to adjust to the LTC facility, 
consider and understand the implications of the agreement, and, if he 
or she desires, seek legal advice about rescinding the agreement.
    In addition, based on comments we received, we are not finalizing 
the proposal to allow facilities to use pre-dispute, binding 
arbitration agreements as a condition of admission to the facility. As 
discussed above, residents, their families, and caregivers consider 
various factors in choosing a LTC facility. We doubt that one of those 
potential factors, whether a nursing home requires signing a pre-
dispute, binding arbitration agreement as a condition of admission, is 
often a deciding factor for residents, caregivers, or representatives. 
This is especially important since the choice of nursing homes may be 
limited based on various factors. This requirement will enable 
residents, their families, and caregivers to choose a LTC facility 
based upon what is best for the resident's health and safety without 
having to be required to sign a pre-dispute, binding arbitration 
agreement. It will also ensure that no resident, his or her family, or 
caregiver will have to decide between signing this type of agreement 
and the resident receiving the care he or she needs.

G. Alternatives Considered

    As discussed above, the district court granted a preliminary 
injunction against enforcement of the prohibition against pre-dispute, 
binding arbitration agreements. We considered removing all of the 
arbitration requirements and returning to the position in the previous 
requirements, that is, the requirements would be silent on arbitration. 
We also considered continuing to defend the 2016 regulation. While we 
do not agree with the district court's decision, it provided us the 
opportunity to explore other ways to balance the interests of LTC 
facilities that wish to arbitrate claims with the need to ensure that 
LTC residents have the ability to make an informed decision about 
whether or not to sign an arbitration agreement and resolve issues when 
necessary in the best and most reasonable way they see fit.
    In light of the comments we received, we have determined that such 
a balance can be struck by removing the prohibition of pre-dispute, 
binding arbitration agreements while maintaining and modifying the 
transparency requirements promulgated in the 2016 regulation. The 
comments we received demonstrated that many LTC residents are not aware 
they have signed an arbitration agreement until after a dispute arises. 
We have concluded, therefore, that transparency is essential, and that 
CMS may properly exercise its statutory authority to ensure 
transparency under its statutory authority to promote the health and 
safety of LTC residents. Consequently, with the exception of posting 
notices and requiring ``plain language,'' we have retained those 
requirements that provide for transparency. We are also not finalizing 
our proposal that would have allowed facilities to use pre-dispute, 
binding arbitration agreements as a condition of admission to, or a 
requirement to continue to receive care at, the facility for the 
reasons discussed above. We believe the finalized requirements will 
provide sufficient transparency to protect residents' health and 
safety, including supporting their right to make informed decisions 
about their health care. These finalized requirements should also 
alleviate many of the residents and advocates' concerns about the 
arbitration process while also allowing LTC facilities to arbitrate 
claims should they so choose.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.

List of Subject in 42 CFR Part 483

    Grant programs--health, Health facilities, Health professions, 
Health records, Medicaid, Medicare, Nursing homes, Nutrition, Reporting 
and recordkeeping requirements, Safety.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 483--REQUIREMENTS FOR STATES AND LONG TERM CARE FACILITIES

0
1. The authority citation for part 483 is revised to read as follows:

    Authority: 42 U.S.C. 1302, 1320a-7, 1395i, 1395hh and 1396r.


0
2. Section 483.70 is amended by revising paragraph (n) to read as 
follows:


Sec.  483.70   Administration.

* * * * *
    (n) Binding arbitration agreements. If a facility chooses to ask a 
resident or his or her representative to enter into an agreement for 
binding arbitration, the facility must comply with all of the 
requirements in this section.
    (1) The facility must not require any resident or his or her 
representative to sign an agreement for binding arbitration as a 
condition of admission to, or as a requirement to continue to receive 
care at, the facility and must explicitly inform the resident or his or 
her representative of his or her right not to sign the agreement as a 
condition of admission to, or as a requirement to continue to receive 
care at, the facility.
    (2) The facility must ensure that:
    (i) The agreement is explained to the resident and his or her 
representative in a form and manner that he or she understands, 
including in a language the resident and his or her representative 
understands;
    (ii) The resident or his or her representative acknowledges that he 
or she understands the agreement;

[[Page 34736]]

    (iii) The agreement provides for the selection of a neutral 
arbitrator agreed upon by both parties; and
    (iv) The agreement provides for the selection of a venue that is 
convenient to both parties.
    (3) The agreement must explicitly grant the resident or his or her 
representative the right to rescind the agreement within 30 calendar 
days of signing it.
    (4) The agreement must explicitly state that neither the resident 
nor his or her representative is required to sign an agreement for 
binding arbitration as a condition of admission to, or as a requirement 
to continue to receive care at, the facility.
    (5) The agreement may not contain any language that prohibits or 
discourages the resident or anyone else from communicating with 
federal, state, or local officials, including but not limited to, 
federal and state surveyors, other federal or state health department 
employees, and representatives of the Office of the State Long-Term 
Care Ombudsman, in accordance with Sec.  483.10(k).
    (6) When the facility and a resident resolve a dispute through 
arbitration, a copy of the signed agreement for binding arbitration and 
the arbitrator's final decision must be retained by the facility for 5 
years after the resolution of that dispute on and be available for 
inspection upon request by CMS or its designee.
* * * * *

    Dated: February 6, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: February 13, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.

    Editorial Note: This document was received by the Office of the 
Federal Register on July 10, 2019.
[FR Doc. 2019-14945 Filed 7-16-19; 4:15 pm]
BILLING CODE 4120-01-P