Arbitration Agreements: Bad for Consumers, Good for Nursing Homes

Last month, Kaiser Health News published a story about mandatory arbitration agreements in nursing home contracts. Such agreements are common when signing up for services such as credit cards and cell phones. Increasingly, medical consumers are asked to sign arbitration agreements at doctors’ appointments (see our post about binding arbitration ).

Essentially, agreeing to arbitrate disputes denies your right for a grievance to heard by a court of law. Arbitration agreements are promoted as saving the protracted time it can take to resolve a lawsuit, and, by saving legal fees, to reserve for the patient a larger percent of any award. Never mind that many people still retain counsel in arbitrated disputes, and are responsible for their share of the arbitrator fees.

Consumer advocates dislike arbitration agreements because although arbitrators are selected jointly by the parties involved, their objectivity can be suspect: Arbitrators with a reputation for patient awards might find their names lopped from the industry’s list of suitable candidates.

In the case of a dispute with a doctor, or as in the KHN story, a nursing home, consumers who sign arbitration agreements are not able to file a medical malpractice or wrongful death lawsuit.

Unlike court proceedings, which are public and whose public records inform industry practice and help develop case law, arbitration hearings are conducted in private. The proceedings and documents usually are protected by confidentiality rules.

And if there is an award, it’s often less if it’s determined by an arbitrator than it would be if the case went to trial. No wonder businesses want consumers to agree to arbitration in case they mess up.

According to KHN, Aon Global Risk Consulting analyzed 1,449 closed claims involving long-term care providers (such as nursing homes) between 2003 and 2011. No money was awarded in nearly 1 in 3 claims for which a valid arbitration agreement was in place. But no money was awarded in only 1 in 5 claims for which there was no arbitration agreement or the agreement was determined to be unenforceable.

Nearly 12 in 100 claims without arbitration agreements resulted in awards of $250,000 or more, versus 8.5 in 100 with arbitration agreements.

The study was conducted by the American Health Care Association, which represents long-term care facilities. Greg Crist, the association’s spokesman, said increasing liability costs for providing care has prompted the popularity of arbitration agreements, which help to reduce them.

The news story pointed out that consigning someone to a long-term care facility is an anxious ordeal; a mandatory arbitration agreement is often overlooked within the reams of admissions documents many nursing homes require to be signed.

Of course you should always read the fine print in any contract. Crist told KHN that if people don’t want to be forced into arbitration in the event of a future dispute, they shouldn’t sign the arbitration agreement. “It’s not a condition of admission to the facility,” he said.

The KHN article concluded that rather than invoking the 30-day “opt-out” provision that allows you to change your mind about arbitration and retain your rights to sue, “Better yet, experts agree, is not to sign in the first place.”

Whoa Nelly! “On what planet?” asked the Center for Justice & Democracy’s Pop Tort blog. “These folks have obviously never had to deal with the misfortune of trying to find a decent nursing home for a family member.”

“[Y] ou cannot ‘not sign’ what a nursing home is asking you to sign,” said Pop Tort. “Nursing homes aren’t things families leisurely shop around for like condos or summer vacation rentals. Usually, families are dealing with a situation where a family member is being thrown out of hospital after suffering some terrible illness or injury. If the family is lucky, they’ll quickly find a facility with a decent reputation, not too many state violations and hopefully accepts Medicaid. … If you refuse to submit to a nursing home’s terms, good luck getting in.”

Pop Tort also called out the KHN story for suggesting that if an arbitration clause is buried in the paperwork you’ve unwittingly signed, and then something actionable happens to your loved one, you can sue the nursing home, the judge will find fault with the arbitration clause and throw it out, as one judge did in one case the story mentioned.

Hardly. “Even the U.S. Supreme Court has spoken on this topic,” said Pop Tort, “and how do I put it: They don’t care!” (Read about its ruling on arbitration clauses here.) In a further indictment of the objectivity of arbitration, Pop Tort noted, the court ruled that it was OK for arbitrators themselves to decide if their own system was fair.

Arbitration is stacked against people whose loved ones have been harmed. The U.S. has a perfectly good legal system to adjudicate medical disputes. What’s unconscionable is denying medical consumers its remedies before the process even starts.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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