A Victory for Consumer Rights

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Last Wednesday, the Center for Medicare and Medicaid Services announced a final rule that will reinstate the right of nursing home residents to sue in a court of law to resolve their complaints. The new rule, which takes effect on November 28, will cut off federal funds to nursing homes if their admission contracts require patients to agree to use arbitration as a condition of admission.   The rule is the result of a lengthy review by CMS that received over 10,000 comments.

In the past decade, many corporations have added fine print to their contracts requiring consumers to submit to arbitration, not a court of law, to resolve disputes. The stated rationale for this trend is that arbitration is faster and less expensive than legal proceedings. While that may be true among parties with equal bargaining power, a study commissioned by the American Health Care Association, a major trade group for the nursing home industry, found that

  • Arbitration awards involving nursing home claims are 35% lower than awards granted by courts; and
  • The costs to the nursing home for arbitration are 41% are lower.

Families filing claims against nursing homes are not necessarily seeking an expedited decision; they are seeking justice and compensation. A judicial proceeding protects families by providing an impartial judge and jury, the rules of evidence and due process, and the right to appeal if they lose. Families have none of these protections in an arbitration.  A law suit is also more affordable for many patients as attorneys take these cases on contingency, meaning that they are paid a percentage of any award.  In contrast, arbitration agreements often require the parties to split the cost of the arbitration hearing.
From a public policy standpoint, arbitration obscures patterns of poor nursing home practices. Unlike lawsuits, the results an arbitration are not part of the public record. By assuring that nursing home patients can bring their disputes to a court of law, the public will be aware of allegations of negligence, abuse and poor care. For all these reasons, the new CMS rule is a major victory for consumer rights and quality care.

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