Nursing Home Arbitration – New CMS Rules

Episode 1
Categories: Regulations

This is the Nursing Home Abuse Podcast. This show examines the latest legal topics and news facing families whose loved ones have been injured in a nursing home. It is hosted by lawyers Rob Schenk and Will Smith of Schenk Law LLC, a personal injury law firm based in Atlanta, Georgia. Welcome to the show.

Schenk: Hey out there. Thanks for joining us. I’m Rob Schenk.

Smith: And I’m Will Smith.

Schenk: And we are trial lawyers and we practice in the areas of nursing home abuse and neglect in the state of Georgia. We’re coming to you from our offices in Atlanta, Georgia, specifically our office library, a.k.a. the Dungeon.

Since this is the first episode of the podcast, a brief explanation of what this is all about is in order. The point of this podcast is going to be to talk about, explore and debate topics related to preventing and prosecuting nursing home abuse and neglect. And really, our intent of this is to do it from the perspective of our clients – people all over the country who have someone in a long-term care facility, and not necessarily from the perspective of a lawyer, although we’ll be talking about this from a legal perspective in a lot of ways, but that’s going to really be how we approach this show in total.

We’ll be looking at the latest news, statutes, case law and stories, and even some stories from our own cases, to hopefully educate and inform the listener or the viewer – whatever the case may be because this is a video and an audio podcast.

But that brings me to this point – since we are a video podcast, not just an audio podcast, you have several ways to consume each and every episode. First, you can download the audio on Stitcher and iTunes and be sure to subscribe to us there, or you can watch the episodes at either our website, which is – that is – or on YouTube. And new episodes will be brought to you in those forums every Monday morning.

So we hope that this show does a good service for people out there who are maybe suspecting neglect or abuse or maybe they’re thinking about putting their loved one in a nursing and they don’t know how to pick a nursing home. You can find this show as a resource for you. The first topic that we’re going to get into today has to do with how…

Smith: …The very first step, which is admitting your loved one into a nursing home, and one of the major documents that you sign, which is an arbitration agreement.

Schenk: So let’s kind of dig into that. So in October–November of 2016, so a few months ago, the Centers for Medicare and Medicaid Services released a final rule overhauling long-term care facility participation requirements for Medicare and Medicaid. The much-anticipated rule represents the first major update of these regulations in 25 years.

So one of the major changes in this rule is a prohibition against pre-dispute binding arbitration agreements So in other words, what CMS, or the Centers for Medicare and Medicaid Services have done is say, “Listen. If you’re a long-term care facility and you accept either Medicare or Medicaid, you are no longer able to have your residents sign arbitration agreements at all.

So arbitration is an alternative dispute resolution method, and it’s the alternative to filing a lawsuit, filing a civil lawsuit against someone or some company. The arbitration proceeding from a logistical standpoint can generally be faster and sometimes less expensive than traditional lawsuits, because usually the claimant in an arbitration will file a statement of the claim, which is a simple document most times – in some states it requires an attorney, in some states it does not – but a simple statement of a claim of what happened. The company will provide a response to that that’s very simple. That gets provided to the arbitrator or the company that does the arbitration, and you can get an arbitration hearing sometimes within 90 days, sometimes shorter than that, and the only fees that you’re paying is an initial fee to have the company arbitrate the matter and then whatever money is provided to the arbitrator, him or herself.

There are no appeals in arbitration, meaning that if you don’t like the result or you don’t think the result was gotten to fairly, there are no appeals. It’s final and binding. If you agree to arbitration, most of the time, almost 99.9 percent of all arbitration provisions provide that you cannot go to a civil jury trial if you so desire. The arbitrator’s decision is final.

Smith: And just so you’re clear, arbitration agreements are becoming more and more common in consumer contracts, and you’ll see them anytime you go on a cruise, anytime you buy a cell phone, and in the healthcare arena, you see them when you go to the hospital, when you go to the emergency room.

And what we’re specifically talking about is when you sign your loved one in or when they sign themselves into a nursing home, there’s going to be a provision in that contract that says any dispute arising out of your stay, including negligence, will be heard by an arbitration panel or an arbitrator rather than a jury trial. And so it takes it out of the civil arena and it puts it into a more predictable and conservative arena for the nursing home, which is arbitration.

Schenk: Yeah, so arbitration has advantages and disadvantages and up until this rule had come out, many states, there were laws that said you couldn’t require the resident to sign an arbitration agreement. It was up to them, but if they did, it was binding. But this is a major gain for people to be able to essentially put these nursing home companies in check.

Smith: Absolutely, although I mean it’s yet to be seen exactly how the new administration will react to this and whether or not this continues to be prohibited. We don’t know yet.

Schenk: That’s true, and we’ll have to address that when it happens. It looks like the CMS, the Centers for Medicare and Medicaid Services, cites doubts about residents’ abilities to understand the implications of such agreements, as well as concerns about the arbitration process. In general, I think that’s very true.

When I was I think maybe 18 years old, I worked at a major restaurant chain. And they had suffered some fairly debilitating lawsuits in the previous 10 years. And so I remember one day the lawyer and the GM from corporate came to our restaurant and got everybody – everybody had to sit down – this was before we opened, I can’t quite remember, but it was everybody that worked, even if they weren’t working that day, they were there. And they said, “Listen, if you want to continue to work here, you have to sign an arbitration agreement. You have five days to decide if you want to do it.”

And what was interesting to me, and again, this goes to CMS’s concerns about doubts of residents’ abilities to understand, none of us – none of us knew what it was. And in order to explain the process, they had a video where it showed this particular restaurant had a very famous pie they would bake and we were known for it, or they were known for it. And so what they did was say, “Listen, if you have to sue this restaurant, this is how much of the pie you would get,” and they would take all the slices out of it. “This is how much you would get if you arbitrated it,” and they only took one slice out. The video was in Spanish so the Latin workers could understand it.

There’s a reason why a large company that’s doing thousands of transactions wants arbitration rather than the ability for its customers to take things to court.

Smith: And a couple of the reasons why for a nursing home is that one – and this is extremely important – if a nursing home is sued for negligence and they have to go in front of a jury, that jury is going to be made up of people in the county, and these people potentially have – everyone has loved ones that are elderly – and the nursing home doesn’t want to be put on blast, doesn’t want to be advertising in front of all of these jurors, these 12 jurors, “Hey, we’ve been accused of neglecting the elderly,” because these are all potential consumers. You’re not going to find a jury pool that doesn’t have an elderly person in its family.

Schenk: So in short what you’re saying is the fact that the big motivator for these companies is to require or want arbitration is that arbitration is not a public proceeding.

Smith: Yeah, for nursing homes.

Schenk: Lawsuits are public proceedings. Arbitration is not a public proceeding. So you could have potentially dozens of arbitration matters filed against one facility, and none of those plaintiffs, none of those claimants will know one another. And to Will’s point, the public will not know it either because those records are confidential and it occurs in private, whereas part of the benefits of lawsuits is that you can see what’s happened before. You can see whether or not a long-term care facility has been sued, what they were sued for. It almost acts as a consumer protection method in that you can see what’s been going on in terms of lawsuits and verdicts.

Smith: And it’s a constitutional right, I mean the Seventh Amendment gives you the right to have a trial, a jury trial in these matters. And so it’s taking away your ability as a citizen to exercise your constitutional right, and it’s taking away the ability of consumers to see what’s going on in this field, not to mention that arbitrators, by and large have a more conservative history of awards for damages.

Schenk: Yeah, and I think statistics actually back that up, I mean if you look to what extent statistics are available, arbitrators, which are by and large chosen and selected by the companies that are requiring an arbitration, are statistically more likely to find in favor or the company, which is going to be the defendant most of the time. That’s not necessarily a conspiracy theory, but that’s something that statistics back up.

But I think to your point about a jury trial, you want your community to hear your allegations. You want to be able to convince 12 people that might have loved ones that this occurred and it was bad. And the arbitrator might be from another state. He or she might be from another region of the country that has no interest in this, and it means nothing to them.

Smith: And it’s really the only way – well it’s the most effective way to effect change in an industry is by exposing the negligence, by shining a light on what’s going on. If it’s just arbitration all the time and nobody finds out, yeah, there’s the monetary incentive because they’re losing some money, but it’s not quite the same unless it’s coupled with consumer awareness so that the entire community says, “Well we’re not going to go to this nursing home until they turn things around.”

Schenk: Right. And from a political standpoint, I feel like the trend from the late 1980s, 1990s, 2000s was Congress, the state agencies, federal agencies, it seemed they all pushed for arbitration in different industries, regardless of what it was, telecommunications, whatever it was, arbitration was a preferred method because of the fact that it generally can be faster. It can be less costly in some instances for both parties because there’s not a protracted discovery.

But I think that there has been in the past 10 years or so a blowback I guess would be the right word in the sense that, for the reasons we’re mentioning, we can use data to drive policy change, and when we don’t know the data, we can’t drive policy change, and that’s particularly necessary in the nursing home and long-term care facility industry.

Smith: Yeah, absolutely. And arbitration is not inherently bad. As a matter of fact, arbitration is excellent. It’s a wonderful, efficient model for certain types of disputes. But when you’re talking about the need for consumers to know what’s going on with their loved ones and the need for policy change, I think that exercising your Seventh Amendment right and going to a jury trial, a public trial, is the most effective means of doing that.

Schenk: So to your point, Will, yes, arbitration clauses and arbitrations and arbitrators are more effective depending on what the transaction is. So when you have two businesses…

Smith: Business to business.

Schenk: Business to business where you don’t want your dirty laundry aired out in public, like if IBM is merging with Apple or whatever it is, then you can arbitrate these things. But when you have a consumer to company transaction, particularly involving our most vulnerable citizens, our most vulnerable family members, it is not effective.

Smith: And it’s not just not effective. It’s not good for the community. It’s not good for the nation. The best antiseptic to this kind of negligence is shining a light on the practices, shining a light on the industry, which is hard to do because nursing homes and hospitals are a huge special interest and have just an army of lobbyists that are constantly trying to push favorable legislation, including the right to arbitrate.

Schenk: And speaking of that, it wasn’t long after the rule from CMS was announced that there was a lawsuit filed to prevent the rule from going into effect. So in October of 2016, very soon after that rule was handed down, the American Healthcare Association, an industry group that represents most nursing homes in the United States, has filed a lawsuit against the federal government over the new rule that protects the rights of patients and their families to sue nursing homes in court. The lawsuit was filed in Mississippi by the American Healthcare Association, and they argued that the ban on arbitration is arbitrary and capricious, and they are asking for an injunction to prevent the rule from going into play. They argue the opposite of what we’ve been saying and they say arbitration is “an equally fair yet far simpler and less costly means of seeking redress as compared to the complicated and slow-moving court system.”

And I’ll tell you what – that wording is almost verbatim what I heard when I was an 18-year-old kid and being told to arbitrate. “Hey listen, you’re going to get the whole pie if you arbitrate.”

Smith: And it’s so complicated in the court system… Hey look, we’re attorneys. Who’s it complicated for? You know what I mean? There are attorneys on both sides. This is what we do for a living. It really is just a spin job on something that harms the consumer.

Schenk: And actually what’s interesting is this article that I’m reading from that talks about this lawsuit for an injunction says that a 2009 study commission by this group that is filing the lawsuit to stop arbitration says, “Average awards after arbitration in nursing home cases were 35 percent lower than if the plaintiff had gone to court” – in other words, it’s exactly what I said earlier, that generally arbitration awards will end up with smaller verdicts than they would if they had gone to court. And we’ll have to keep up with this. We’ll see how this goes, if the injunction is granted or not granted in upcoming episodes.

Smith: And in the meantime, a question that people may have is, “Do I even sign the arbitration agreement?” My perspective is no, don’t sign it. We’ve had clients who’ve refused to sign it, and to be honest with you, the nursing home staff doesn’t know what to do and they just move on.

Schenk: Yeah, they’re generally not lawyers. And actually that’s another good point is what happens if you’re listening to this and you had signed an arbitration agreement but 10 years ago? And unfortunately, this new rule is not retroactive. This new rule only applies from the time the rule goes into effect, which is in November, to the present. So if you had signed an arbitration agreement before that, then this rule does not get you out of that.

Smith: Courts understand that if you signed an arbitration agreement and your suit has to be arbitrated, it is not the end of your suit. You can still take it to an arbitrator. You can still get an award and you can still punish the nursing home by making them pay you for any negligence that they’ve committed. So it’s not the end of the world.

Schenk: And that’s exactly right. And even to that, before we get into the whether or not you can do something in front of an arbitration panel, there are also definite rules regarding who can or cannot sign an arbitration agreement on behalf of the loved one. So there are ways you potentially…

Smith: You could fight these arbitration agreements.

Schenk: Exactly. Exactly. If you’ve already signed one, there are ways to get out of it.

Smith: What happens most of the time is that the nursing home, again, the individuals that work in intake in the nursing home are not lawyers and are not properly briefed on what is important for you to sign in order for you to sign an arbitration agreement for your loved one. In other words, you go in there, you’re putting your father in a nursing home, you don’t have the power of attorney to sign away his rights, his Seventh Amendment Rights. If you don’t have that power, then even though you signed for him, you don’t have the power, so it’s not a valid arbitration agreement.

Schenk: Yeah, definitely. So not all hope is lost if you’ve signed one. Just in short, I think that this new rule is a step in the right direction. I think that it has been much needed, and according to this article, this is the first major update that CMS has provided in 25 years, so you’ve got to think about how important this is from just a broad industry standpoint that this is the first move they’ve made this major in 25 years, and this is what they did with it. This is the move they made.

Smith: And as we record this podcast, at this point, President-Elect Trump has not indicated who he would appoint as the new head of the Department of Health and Human Services, which is the federal agency under which CMS falls. So we really can’t even read the tealeaves. He hasn’t even discussed that type of arena yet.

Schenk: That’s exactly right. Not to get deeply political, but as a general matter, a Republican Congress with a Republic Senate and a Republican President, history shows is more likely to pull back on the ability to bring a civil suit, whether it’s monetary caps, whether it’s access, whether it’s being able to bring class action suits. So I’m not saying this rule is going to be tossed out, but it’d be something I would watch out for in terms of whoever President-Elect Trump nominates would retract or rescind this rule.

Smith: For example, our current head of HHS, Sylvia Burwell, is someone who has exhibited conscientiousness towards the consumer. That’s the reason that CMS put forth this proscription on using arbitration agreements. So it’s possible that President-Elect Trump is going to get somebody who is a little more conservative and more conscientious towards the industry rather than the consumer. So if that happens, they could be rolling back the requirement that they not include arbitration agreements.

Schenk: But you never know. I feel like this dude’s a wild card.

Smith: He’s Yosemite Sam.

Schenk: He’s who?

Smith: Yosemite Sam?

Schenk: No, no. What are you saying?

Smith: Yosemite Sam?

Schenk: Okay, Yosemite Sam. You said Yo-sam-ite Sam. And you said it twice. Okay. And I’m not editing that out.

Smith: Okay, good.

Schenk: That’s right. He does have a populous streak in him. I don’t know if that’s going to translate into a rescission of this, but we’ll see how it goes.

Smith: Yeah. I’m curious to see what happens.

Schenk: Moving onto to actual individual specific story of nursing home neglect is out of Minnesota. In October of this year, a tiny burn on a nursing home resident’s foot inflicted when she touched a heat register in her room while in bed went neglected and triggered a rapid decline in her health until she died unnecessarily in the hospital. It looks though as though this is Minnesota – and a heat register, just so we’re all on the same page because we’re from Georgia and we don’t use the word “heat register,” we use the word “vent,” “heating vent.”

So according to this story, the nursing home in Minnesota, the young lady, the 91-year-old Mary C. Harris, her family members directed the nursing home staff to, if they could, wheel her over to the window so she could look out the window. And unfortunately, the heating vent was right under her foot, and so for several hours and hours and hours potentially, it doesn’t say how long the exposure was, but the burn, the heating vent ended up causing a burn, which went overlooked by the staff, and eventually caused an infection and then the infection got in the blood and she died of septic shock.

Smith: Yeah, so you have two areas of negligence here. One, it’s potential negligence that she pushed her up against the heat vent and she got a burn, but the big issues is that even after that happened, they neglected the burn, which continued to get worse and worse and worse, because the elderly, they have compromised systems, so their skin system, their immune system, all of these are compromised and weakened. So she’s got a burn that may have healed for anybody else, but being elderly, it didn’t and it got worse and worse and worse to the point where this sore infected her blood, which then infected the rest of her organs with bacteria, causing septic shock.

Schenk: That’s right. And that’s a good point, like a nursing home doesn’t have to be omnipotent. They can’t prevent every harm.

Smith: Yeah, you’re not going to be 100 percent without negligence. People will come to us sometimes and say, “Well is this negligent?” and what we’ll tell them is, “Yes. It’s negligence. But there’s really no damage.” So for example, in this case, if the nursing home had done that and instantly started applying cream and anti-bacterials and a wound care specialist jumped on top of it and she was healed up within a week, were they negligent in burning her foot? Yes. But she’s okay, so there’s really no point to a lawsuit.

Schenk: Right, or the actual opposite of that, which would be can somebody be injured without there being negligence, and that is absolutely possible as well. In this instance, that would be a question of whether or not they should have known she would have burned her foot – maybe or maybe not. But as Will was saying, the real issue here is of negligence, in my opinion of looking over this story, is what do you do after the injury has been incurred? And that can be the negligence that actually causes the major, grave, serious injuries, and in this case, death.

And according to the article, the nursing home staff failed to tell the doctor who comes by periodically that there was a wound on her foot that was growing larger, oozing liquid and turning red, then purple. And so that, I think, would be a fairly typical negligence case where even though the injury, how it occurred, might not have been the fault of the nursing home – nobody maybe could have foreseen that – where the negligence does come in, as you were saying…

Smith: …Is their failure to follow up and their failure to treat and respond properly.

Schenk: Exactly. So we’ll follow up with that story. I’m not sure if the family is going to bring a suit or not, but we’ll periodically check back up on that family in Minnesota and the patriarch of their family who died after burning herself on a heat vent.

Smith: Well she would be the matriarch.

Schenk: What did I say?

Smith: Patriarch.

Schenk: Right. That’s what I meant. Matriarch. I don’t see gender. I only see all of us as equal and people. And speaking of equal rights, you may now assert your right to discontinue listening to this podcast because that story concludes this episode of the Nursing Home Abuse podcast.

Again, you can download the audio portion of this program on Stitcher or iTunes, or you can watch the episode, you can see our faces, at our website –, again that is – or you can check us out on YouTube. And we hope to see you guys next time.

Smith: Absolutely. See you next time.

Thanks for tuning into the Nursing Home Abuse Podcast. Please be sure to subscribe to this podcast on iTunes or Stitcher and feel free to leave us some feedback. And for more information on the topics discussed on this episode, check out the show website – That’s See you next time.