By: Ashton Brock
Picture this – you have just received correspondence from your lawyer about your facility being served with a complaint from a family of a resident so you begin to gather all of the resident’s file, including the medical records and the admission documents. As you are going through the admission paperwork, you see that the resident or resident’s responsible party signed the arbitration agreement and that there is a Power of Attorney (“POA”) signed by the resident’s responsible party in the paperwork. You send all of those documents to your lawyer and feel good about knowing that the case can move into arbitration. However, shortly thereafter, you are told that the resident’s responsible party is claiming that the arbitration agreement should not be enforceable because it does not comply with federal law and is therefore invalid under Alabama law.
So, what now?
This scenario is not frequent, but it is stirring up talk in the healthcare field because plaintiffs are starting to argue that the arbitration agreement they signed voluntarily violates 42 C.F.R. § 483.70 (the “Rule”) and is therefore void under Alabama state law. Although Alabama case law on this specific issue is undeveloped, courts are split on whether an insufficiency under the Rule makes the agreement void under state law. This issue is important because, depending on how this is resolved, arbitration agreements and admission protocol to healthcare facilities could be forced to change. Prior to giving some practice pointers, let’s take a look at the Rule and the elements that arbitration agreements must possess.
The requirements under the Rule, 42 C.F.R. § 483.70(m), are that: (1) an arbitration agreement cannot be a condition of admission or requirement to receive care, (2) the facility must ensure that (i) the agreement is explained, (ii) the representative must acknowledge their understanding of the agreement, (iii) the agreement provides for a neutral arbitrator, and (iv) the agreement has a neutral venue, (3) the agreement must grant the right of rescission within thirty (30) days, and (4) the agreement must state that it is not a condition precedent to admission. The point of contention lies with the question of, “what happens if you do not meet the requirements of the Rule?” Does that failure automatically render arbitration agreements unenforceable?
According to the Centers for Medicare & Medicaid Services (“CMS”), the Rule simply sets out requirements for long-term care facilities to participate in Medicare and Medicaid; it was not intended to render agreements unenforceable if the Rule was not met. In recent court filings, CMS points to the Rule flowing from the FAA’s plain language that regulations that “d[o] not affect the enforceability of the arbitration agreement itself”—or presumably its validity or irrevocability—do not implicate the FAA’s provisions.
Instead of acknowledging the Rule for what it is, a regulation on facility participation in Medicare and Medicaid, we are seeing trends in litigation where a plaintiff will argue that a violation of the Rule should render an arbitration agreement invalid and void.
In order to help defend against this stance from the plaintiff, here are some steps that facilities can take to help prevent challenges to their arbitration agreements.
1. Revamp Admission Protocols to Build in Time:
Train admissions staff to slow down the process and give residents or their representatives ample time to read and ask questions about the arbitration agreement.
Create a policy requiring staff to pause and explain the agreement, rather than simply collecting signatures with the rest of the admission paperwork.
2. Verbal Explanation
and Acknowledgment
of Understanding
Require staff to verbally explain the key terms of the arbitration agreement in plain language: what arbitration is, how it differs from court, and that it is optional.
3. Ensure Neutral Arbitrator and Venue Are Named
Explicitly include language designating a neutral arbitration organization (such as JAMS) or similar neutral forum.
Designate a neutral venue (e.g., arbitration will occur in the county where the facility is located or where the resident resides).
4. Include a 30-Day Right
of Rescission
The agreement should clearly state that the resident or representative may revoke the agreement within 30 days of signing.
Provide a simple revocation form or instructions and keep any rescission notices in the resident’s file.
5. Clarify It Is Not a Condition of Admission or Care
Prominently state that signing the arbitration agreement is voluntary and not a condition of admission, continued residency, or care.
Admissions staff could offer the agreement after all other admission paperwork is complete to reinforce its voluntary nature.
6. If Possible, Verify the Authority of the Signer
Require admissions staff to confirm and document that the person signing has legal authority (e.g., through a valid Power of Attorney or guardianship order).
Place copies of the authority documents in the resident’s chart.
7. Provide a Copy to the Signer and Keep a Signed Copy
Provide the resident or representative a fully executed copy of the agreement immediately after signing.
Have them initial that they received a copy and keep the original securely stored in the facility’s records.
8. Review Agreement Language Periodically
Have legal counsel periodically review and update the arbitration agreement language to ensure compliance with:
• 42 C.F.R. § 483.70(m)
• The Federal Arbitration Act
• Any emerging case law trends.
By implementing these steps, long-term care facilities can build a clear record that: the arbitration agreement was voluntary, the signer understood it, it complied with the Rule’s elements (neutral arbitrator, neutral venue, 30-day rescission, not a condition of care), and the signer had authority to bind the resident. This strengthens the facility’s ability to enforce arbitration agreements and helps avoid arguments that they are void under federal regulations or Alabama law.
Ashton Brock is an Associate at Burr & Forman LLP. Ashton may be reached at (205) 458-5340 or abrock@burr.com.
