An arbitration victory that raises trust issues

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John O'Connor
John O'Connor

In a year already brimming with regulatory victories, Monday's win might prove to be the biggest of them all.

For that's when the Centers for Medicare & Medicaid Services announced its intention to remove a ban on pre-dispute arbitration agreements.

The rule, released after the agency abandoned its appeal in a lawsuit over the matter, would allow arbitration agreements that meet certain standards. For example, such documents would need to be written in plain language, be thoroughly explained to residents and their representatives, and be understood.

The American Health Care Association/National Center for Assisted Living, the group that launched the lawsuit against federal health officials over last year's ban, quickly applauded the government's decision to back off.

“The ban was an overreach, flying in the face of the Federal Arbitration Act and congressional intent,” President and CEO Mark Parkinson said in a statement. “Arbitration has been proven and tested to be fair and effective. Arbitration produces swifter resolution to disputes, compensates residents without undue litigation expense for either party, and reduces the funding burden on the Medicare and Medicaid programs.”

Those are all fair points. And it would be the rare senior living operator who did not embrace the government's change of heart.

Yet there is a part of me that feels a bit uneasy about this development. I'm not saying it was wrong. It surely wasn't.

But as Abraham Lincoln famously said, a house divided against itself cannot stand.

The senior living industry always has a tough job on its hands. In effect, it asks its prospects (or to be more accurate, their oldest daughters), to say goodbye to the familiar. And how does it do this? By making this promise: trust us. Trust us to keep you safe. Trust us to help you make new friends. Trust us to give you the help you need, when you need it. And for the most part, this field does a remarkable job of keeping those promises.

But not always. And no matter how earnestly arbitration agreements are sold, they are based on the belief that when push comes to shove, residents might not be trustworthy. Should an avoidable or unavoidable problem occur, those same people just might lawyer up. Then what?

An arbitration agreement accomplishes what the sector's many attempts at tort reform have failed to do. It provides insurance against zealous plaintiffs' attorneys and unpredictable juries. To be sure, those are wonderful benefits. 

But to insist mandatory arbitration agreements are the best possible option for both parties? Sorry, but that's a stretch.

John O'Connor is editorial director of McKnight's Senior Living. Email him at john.oconnor@mcknights.com.

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