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Arbitration Agreements: What You Need to Know to be in Compliance with CMS and the Court

Arbitration is a process that has been used effectively across many different industries since the New York Arbitration Act of 1920 and the Federal Arbitration Act of 1925 were passed.  This is not surprising when you consider the benefits of resolving disputes via arbitration versus litigation. 

Benefits to arbitrating a conflict include:

  • Cost Effectiveness – While the costs associated with arbitrating a claim are on the rise, they are still quite modest in comparison to litigating through the traditional judicial system
  • Timely Resolution – A recent study by the Federal Mediation and Conciliation Services found that the lifespan of an arbitrated claim is roughly 475 days, while claims litigated in the courts took anywhere from 18 months to three years or more to resolve
  • Privacy – Parties generally agree to keep the proceedings and the outcome of the arbitration process confidential.  This can save embarrassment on the part of either the claimant or the defendant, and protects personal, private information (i.e., corporate documents or a resident’s medical records) from becoming public knowledge

Despite the advantages of arbitration, some people are skeptical about the process, and challenges to the validity of arbitration agreements have been before the Courts on numerous occasions.  However, the Courts have held that as long as the agreement is not considered “unconscionable,” it can be upheld.  According to legal precedent and CMS’ 2019 Final Rule on Arbitration Agreements, the following must be applicable to a community’s agreement for it to be both in compliance with CMS and enforceable in Court:

  • The arbitration agreement should be a separate, stand-alone document, not included as part of a singular admission agreement document
  • Signing the agreement cannot be a condition of admission to a community or for the continuation of care, and the agreement must explicitly state this
  • The individual who presents the agreement to a resident or responsible party must ensure that the agreement is explained “in a form and manner that he or she understands, including in a language the resident and his or her representative understands” (new § 483.70(n)(2)(i)
  • The community must ensure and document that the resident and/or their responsible party acknowledges their understanding of the agreement
  • The agreement must state that a neutral arbitrator would be agreed upon by the parties
  • The agreement must indicate that any arbitration proceeding would take place in a venue or location that is convenient to both parties
  • The resident and/or responsible party must be provided with a 30-day period of time to rescind the agreement if they elect to sign it.  This must also be stated explicitly in the language of the agreement
  • The agreement must not contain any language that discourages a resident or responsible party from communicating with governing agencies, such as surveyors, ombudsmen, or health department employees

If you are a member of the American Health Care Association, you can access a revised model arbitration agreement that can be used to ensure your organization is in compliance on their website:  If you are not a member, additional support and information can be obtained by contacting your AssuredPartners Senior Living insurance professional.

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