Schmidt, Sethi & Akmajian Blog

Federal Government Bars Arbitration Clauses for Certain Nursing Homes

Posted by Matt Schmidt | Sep 29, 2016 | 0 Comments

The federal government has passed a new rule barring arbitration clauses for any nursing homes that accept federal funding. Though this rule is likely to be challenged in court, this is a huge victory for nursing home patients and their families.

Companies in all industries have taken advantage of the consumer by making them sign a contract with an arbitration clause in exchange for products or services.  Arbitration clauses come in all shapes and sizes, but essentially bar consumers from taking any conflicts to court, instead requiring them to go through an arbitration set up by terms of the contract. Many times, the arbitration clause is non-negotiable, forcing the consumer to give up their right to court if they want the product or service, including medical care.

Companies argue arbitration is faster, cheaper and more informal, but the reality is that arbitration heavily benefits the company. Arbitrations are primarily confidential, leaving the company's legal issues out of the limelight of the public. The arbitration clause is often buried in the contract or signed by elderly with poor vision or competency, leaving many unaware of the rights they are giving up. Importantly, the arbitrator in charge of making the decision is often chosen by the company. Because the company drafts the clause the consumer must sign, the company sets up the arbitration in a way that will give it an advantage. 

Absent a rule like the one that has just passed, the courts have heavily favored and upheld arbitration clauses in contracts, leaving the consumer with limited options when an issue arises. 

With this rule, a pending rule to limit credit card companies' use of arbitration clauses and the recent decision to close federal prisons, it appears the federal government is cracking down on companies who are using federal benefits and contracts for their own personal benefit and to the detriment of the public. Though nursing homes not using federal funding are still at liberty to use arbitration clauses, this is a move in the right direction. 

Other blogs we have written about arbitration clauses:

Beware: A Car Maker's Latest Ploy

Beware of the Arbitration Clause

About the Author

Matt Schmidt

Matt graduated from the James E Rogers College of Law at the University of Arizona in passing the Arizona bar exam in 2010. Matt's primary interest in law focuses on general personal injury and insurance bad faith.


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