US Supreme Court Confirms Enforceability of Health Care Arbitration Agreements

Last week the US Supreme Court confirmed that long term care facilities can enforce binding arbitration agreements with its residents. The Court, in Kindred Nursing Centers v. Clark, held that mandatory arbitration agreements are enforceable even when an individual with a power of attorney binds someone else to mandatory arbitration agreements and that such agreements should not be disfavored compared to other agreements. The Court ruled 7-1 in favor of Kindred Nursing Centers. A full copy of the opinion is available here.

In this case, the patients separately gave their family members power of attorney for their respective affairs. Using this power of attorney, family members of both patients signed a mandatory arbitration agreement with Kindred on behalf of the respective patients, effectively giving up their right to go to court in the event of a dispute. Both patients passed away and their respective family members separately sued Kindred Nursing Centers in court for causing the deaths. The lower courts decided that the arbitration agreements were not binding and that the litigation may proceed.

Following an appeal, the Kentucky Supreme Court held that the mandatory arbitration agreements were not binding because the individuals with power of attorney were not specifically granted permission to enter into a mandatory arbitration agreement, violating the "clear-statement rule." The Kentucky Supreme Court held that a person's right to go to court should be "held sacred" and that a person wishing to give up his own rights should be required to make an explicit statement forfeiting this right.

The US Supreme Court reversed, holding that mandatory arbitration agreements should be treated the same as other agreements. The Supreme Court also stated that defenses against a contract should not be used by parties or applied by lower courts in a way that disfavors arbitration agreements. The Federal Arbitration Act ("FAA") states that an arbitration agreement must ordinarily be treated as “valid, irrevocable, and enforceable.” 9 U. S. C. §2.

This ruling continues a line of cases requiring states to enforce the FAA and discouraging states from adopting laws that would undermine it. Additionally, we expect this decision to further decrease the likelihood that CMS will be able to move forward with its rule that would prohibit nursing facilities from entering into arbitration agreements with Medicare beneficiaries.

If you or your organization have any questions about the potential effects of this decision or other issues, please contact Mark Bina at 312-715-5051/mark.bina@quarles.com or your local Quarles & Brady attorney.