By Megan Leonhardt
September 30, 2016
Hinterhaus Productions—Getty Images

New nursing home patients and their families now will be able to sue nursing homes when things go wrong.

A new rule rolled out this week by the Department of Health and Human Services bars nursing homes from forcing patients and their families into private arbitration.

Many times, these restrictions—known as mandatory arbitration clauses—are usually hidden in contract fine print.

Prior to this, many nursing home residents and their families had no recourse within the federal court system, even in cases where medical malpractice or negligence was suspected.

The long awaited rule only applies to new contracts, and only to facilities that accept Medicare or Medicaid—although that is nearly all of them. The new rule is scheduled to go into affect in November.

Though the agency is barring nursing homes from using forced arbitration clauses, it’s leaving the door open for facilities and consumers to enter into voluntary arbitration agreements.

“Even then, these agreements will need to be clearly explained to residents, including the understanding that these arbitration agreements are voluntary, and that these agreements should not prevent or discourage residents and families from talking to authorities about quality of care concerns,” Andy Slavitt, the acting administrator for the agency, wrote in a blog post for the Centers for Medicare & Medicaid Services.

Vermont Senator Patrick Leahy praised the new rule this week, saying it was small, but important victory in reducing the number of mandatory arbitration clauses. “Too often, long-term care facilities require potential residents and their families to decide whether to waive their legal rights by signing mandatory arbitration clauses that are slipped into a contract and written in legal jargon,” he said in a statement.

The new rule is the latest measure by the Obama administration to curb the use of mandatory arbitration, which critics claim gives unfair advantages to big companies over individual consumers.

Earlier this year, the Consumer Financial Protection Bureau proposed new regulations that would prevent lenders, credit card companies and other financial firms from using mandatory arbitration provisions to block class action lawsuits.

The public comment period for the rule closed at the end of August, drawing in over 13,000 responses. The agency is reviewing the comments before moving forward on a finalized rule.

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