Plaintiff’s challenges to pre-suit, binding arbitrations in nursing homes
Monday, October 03, 2016
Posted by: Craig Giangiulio
Plaintiff’s challenges to pre-suit, binding arbitrations in nursing homes: CMS giveth and the Pennsylvania Supreme Court taketh away
By: Rob Sachs, Esq.
Shrager, Spivey & Sachs I Philadelphia
September 27th and 28th were very significant, yet wholly opposite, days for nursing home residents in Pennsylvania. On Wednesday, September 27th, the Centers for Medicare and Medicaid Services (“CMS”), which administers more than $1 trillion of federal funds, issued final rules1 which will prohibit binding, pre-dispute arbitration clauses in federally funded “skilled nursing facilities” (“SNFs”; commonly called nursing homes). This news led to headlines in leading news outlets such as the New York Times, Washington Post and many others, all of which proclaimed the end of binding arbitration being forced on nursing home residents. Sadly, just one day later, the Pennsylvania Supreme Court declared itself bound by United States Supreme Court precedent and upheld an arbitration clause which will have the effect of forcing separate arbitrations of survival actions bound by arbitration clauses, and trials of the wrongful death action.
CMS explained in the “summary” that the new final rules will revise the requirements that Long-Term Care facilities must meet to participate in the Medicare and Medicaid programs. The scope of the new CMS rule is limited to nursing homes because only SNFs are Medicare funded, while “personal care homes” (formerly called “assisted living facilities), are not covered by Medicare. This rule will be introduced gradually through 2019 so the elimination of all pre-suit binding arbitration clauses in SNFs will realistically not disappear for several more years.
Until then, and even after full effectiveness of the new regulations in Long-Term Care facilities not funded by Medicare, the decision by the Pennsylvania Supreme Court in Taylor v. Extendicare Health Facilities, No. 19 WAP 2015, 2016 Pa. LEXIS 2166 (September 28, 2016), will significantly impact the arbitrability of pre-dispute, binding arbitration clauses. In Taylor, our supreme court held that a pre-suit, binding arbitration clause, signed immediately prior to a nursing home admission by plaintiffs’ decedent, was effective to mandate bifurcating the § 8302 Survival Action from the § 8301 Death Action (wrongful death) so that the Survival Action can be arbitrated. Despite the possible duplication of recovery, our court found that Pa.R.Civ.P. 213 (e)2 was pre-empted by the Federal Arbitration Act (“FAA”). The majority opinion in Taylor explained that the court was constrained by United States Supreme Court precedents:
[T]he prospect of inefficient, piecemeal litigation proceeding in separate forums is no impediment to the arbitration of arbitrable claims. Indeed, where a plaintiff has multiple disputes with separate defendants arising from the same incident, and only one of those claims is subject to an arbitration agreement, the Court requires, as a matter of law, adjudication in separate forums.
Taylor, 2016 Pa. LEXIS 2166, 12. Specifically, the court held that “declining to bifurcate the wrongful death and survival actions against Extendicare in the interest of efficiency would nullify the ADR Agreement, a result not permitted by the Supreme Court's FAA jurisprudence.” Id. at 13.
Why, one may ask, are arbitration clauses the focus of federal regulation and litigation before our supreme court? The nursing homes and their lawyers include these clauses in admission contracts and vigorously enforce them once suit is filed in order to insure that the proceedings remain secret, because the extraordinary cost of private arbitration will have a chilling effect on the amount of litigation, and to make sure they will have lower verdicts with no risk of a runaway. Less obvious, but every bit as devious, is that if arbitration is denied, that ruling is ALWAYS appealable immediately,3 whereas an order compelling arbitration is not appealable on an interlocutory basis. The SNFs can almost always buy an extra 1 ½ - 2 years in litigation time. What does that mean for plaintiffs? Consider these factors:
1. The plaintiff (or the widow/widower), if they survived until the case was filed, will MUCH more likely be deceased by the time it reaches trial. This most often means lower damages.
2. It will have a chilling effect on the trial bar. Our costs in these cases are front-loaded. We can’t file suit unless/until we have our experts in place. That means we’ve obtained full records – which are typically voluminous in many NH admissions – and fronted the costs for our experts. These preliminary objections to enforce arbitration are an easy way to make it more difficult for some lawyers to proceed with these cases.
3. SNFs, their carriers, and their counsel are repeat hitters before the typical arbitrator. Familiarity is an intangible that doesn’t benefit us or our clients at arbitration.
The old adage is certainly true here: justice delayed is justice denied. For the time being, many of these cases will be bound by Taylor. Once the new regulations kick in, at least the SNFs won’t be able to include these clauses in their admission agreements. You can bet that facilities which are not dependent on CMS for payments – like personal care homes – will continue to include these clauses even after the new regulations are fully effective.
Let’s take the good news of the new CMS regulations as a positive step. To combat the Taylor decision, tell every estate lawyer you know that they need to counsel clients that POAs should never be allowed to sign away a constitutional jury trial in a contract. They also need to make sure that clients know to consult them when a family member is being admitted to an SNF. People need to say “I want my lawyer to review this” before giving up their constitutional right to a jury trial. No SNF can deny admission if someone refuses to sign the pre-suit binding arbitration clause..
2. Pa.R.Civ.P. 213 (e) states:
(e) A cause of action for the wrongful death of a decedent and a cause of action for the injuries of the decedent which survives his or her death may be enforced in one action, but if independent actions are commenced they shall be consolidated for trial.
(1) If independent actions are commenced or are pending in the same court, the court, on its own motion or the motion of any party, shall order the actions consolidated for trial.
(2) If independent actions are commenced in different courts, the court in which the second action was commenced, on its own motion or the motion of any party, shall order the action transferred to the court in which the first action was commenced.
(3) If an action is commenced to enforce one cause of action, the court, on its own motion or the motion of any party, may stay the action until an action is commenced to enforce the other cause of action and is consolidated therewith or until the commencement of such second action is barred by the applicable statute of limitation.
3. Pa. R. App. P. 311 (g)(1)(iv).