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Plaintiffs’ attorneys love it. Defense attorneys hate it. But everyone agrees on one thing: The new rule barring federally funded nursing home facilities from forcing disputes into arbitration will likely face a legal challenge.

Atlanta attorney Jason Bring, co-chair of Arnall Golden Gregory’s long-term care industry group, which represents nursing home companies, said the new rule was more sweeping than the industry had anticipated and will likely face multiple legal tests. “It’s a complete shift that doesn’t have a legal foundation and goes against many court decisions,” he said.

A challenge, Bring said, will likely be based on whether the federal agency overstepped its bounds, effectively interceding in the area of arbitration. For the rule to withstand judicial scrutiny, Bring said, “Congress would have had to delegate this authority to CMS [the Centers for Medicare and Medicaid], which it clearly has not done.” Bring said other agencies have attempted to circumvent arbitration clauses, but their efforts have been widely rejected by the courts.

Two national tort reform organizations echoed that sentiment, expressed disappointment in the regulation and said the agency overstepped its boundaries.

Mark Parkinson, president and CEO of the American Health Care Association, said his organization was “extremely disappointed” in the provision banning all predispute arbitration agreements, claiming it “clearly exceeds” the agency’s statutory authority and “is wholly unnecessary to protect residents’ health and safety.”

Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform called the new rule “very unfortunate” and said it “will put money in the pockets of trial lawyers at the expense of nursing home patients and their families.

Bring noted that the proposed rule was “much less intrusive although still an objectionable entry into the arbitration realm.” But that earlier version did not do away with arbitration altogether because the federal Centers for Medicare and Medicaid, which developed the proposal, indicated a recognition of the value of arbitration. But, he said, “In the face of political pressure and influence, they have now gone way beyond what they said they considered before.”

Bring predicted serious consequences for the long-term care industry and its attorneys if the rule is upheld, including increased litigation costs and an increase in “litigation abuse,” the costs of which ultimately will be passed to consumers and federal and state governments through the Medicare and Medicaid programs.

Walter Bush Jr., a partner at Carlton Fields in Atlanta who has long represented Kentucky-based long-term care firm Kindred Healthcare, predicted that limiting the right of nursing homes to employ arbitration agreements will cause the industry to “get back to the old situation where we had unlimited litigation and unlimited costs” that could force major operators to pull up stakes and leave a geographic area. “Because the profit margins are already thin in many of these jurisdictions, they can’t stay in business if they can’t make some form of profit. Litigation costs are a big part of operating these businesses.”

Plaintiffs attorneys, on the other hand, lauded the rule promulgated by an agency within the U.S. Health and Human Services Department. Leland de la Garza, shareholder at Hallett & Perrin in Dallas, who has handled nursing home medical malpractice cases for years, also focused on costs—but for arbitration. He noted that, while filing a lawsuit costs an average of $350 in filing fees, arbitration includes fees for the arbitrators that must be split by both sides. “If you file a lawsuit, you could get through the door for about $350, but it takes thousands to get through the door of arbitration,” he said.

Philadelphia attorney Martin Kardon said abolishing the arbitration clauses, which have become standard in nursing home contracts, will prevent cases involving the abuse, injury or wrongful death of nursing home residents from being obscured, rather than publicly litigated. Kardon, a plaintiffs’ lawyer with Philadelphia’s Kanter Bernstein & Kardon, whose clients include elderly residents of long-term care facilities and their families, said the new rule “serves the public interest because people need to know what’s going on. If somebody commits a wrong and is never called to account for it, they do it again.”

Marko Cerenko, a partner at Kluger, Kaplan, Silverman, Katzen & Levine in Miami, agreed, saying the rule “will make nursing homes more accountable because their transgressions and wrongdoing will now be in full public view.”

Plaintiffs’ attorneys across the country who engage in nursing home litigation echoed Kardon and Cerenko’s comments. All said they expected the industry to challenge the new regulation, but most expressed hope that any challenge ultimately would fail.

De la Garza also took aim at what he said are the shortcomings of arbitration, including limited discovery. “Arbitrators don’t like discovery disputes,” he said, “and so it’s more difficult to get relief from an arbitrator compelling discovery. If you don’t get what you’re looking for from the arbitrator, you’re done.” Because much of the evidence “is in the hands of the medical professionals,” he added, “you need the discovery to prove your case.”

Michael Brusca at Stark & Stark, with offices in Pennsylvania and New Jersey, said that, when admitting a relative to a nursing facility, family members often are faced with pages of legal documents, and “they are going to sign whatever you put in front of them because they have no room to negotiate.”

Such clauses used to be illegal in New Jersey, he said. But an appellate ruling several years ago overturned the ban, finding that the Federal Arbitration Act, which favors arbitration, trumped the state statute.

“I’ve been fighting these things for years,” he said.

Bush, the defense attorney from Atlanta, contended arbitration has brought “positive change” to the nursing home industry. “It’s an impartial and fair way of resolving claims,” he said. “It’s not an effort to sideline these people and take away their rights. It’s just a way to get cases resolved.”

Jeffrey Dunn, an attorney at Missouri firm Sandberg Phoenix, who represents long-term care facilities across the Midwest, predicts that the new rule will cause many long-term care firms to stop using arbitration agreements for fear they will no longer be able to participate in Medicare and Medicaid.

The only path to arbitration going forward is for the parties to agree to arbitrate a dispute after an incident has occurred, he said. “Undoubtedly, that is what the plaintiffs’ bar wanted,” he said. “I think it’s going to be a very, very rare occasion where you will see an arbitration agreed to by the parties after an incident has occurred because, generally, plaintiffs’ lawyers like to be in civil courts.”

Samantha Joseph and Amanda Bronstad contributed to this article. 

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