CMS rules against SNFs

The skilled nursing sector does not need any more bad news, but it received some this week. The Centers for Medicare and Medicaid has issued a new rule that will prohibit SNFs that receive Medicare or Medicaid payments (so that would be the overwhelming majority) from requiring residents to resolve any disputes through a formal arbitration process as opposed to the court system. Obviously, the trial lawyers are celebrating because arbitration usually is less costly for providers, not to mention it is a faster process. Patient rights advocates prefer the judicial system because they want poor quality of care exposed for what it is, and they also believe patients are not properly compensated in arbitration compared with a jury trial. But that is the problem, as juries get much more emotional than professional arbitrators, and outlandish jury awards often are far removed from reality, get appealed and settled later on, often much later on. And that is the industry’s point. Arbitration is quick, and few people have the time or money for long trials.
So, what are the ramifications? Higher costs for SNFs when reimbursement is declining. More lawsuits, tougher liability insurance options, and investors will get a little more scared. But there could be opportunity as well. Remember what the liability insurance crisis in Florida 15 years ago did for one company based in Georgia? We believe, however, that industry trade groups will most likely try to appeal this rule, but they won’t have much support from other areas. And those trial lawyers will fight them all the way to the bank.


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