Centers for Medicare and Medicaid releases proposed rule and final rule as part of its Requirements for Long-Term Care Facilities: Regulatory Provisions to Promote Efficiency and Transparency

August 02, 2019

Health Care Alert


In this alert, we discuss what health care facilities need to know about the two rules CMS released recently as part of its Requirements for Long-Term Care Facilities: Regulatory Provisions to Promote Efficiency and Transparency.

By Ed Clancy and Jacalyn Smith

On July 16, 2019, the Centers for Medicare and Medicaid (CMS) released two rules, one proposed and one final, as part of its Requirements for Long-Term Care Facilities: Regulatory Provisions to Promote Efficiency and Transparency.

The proposed rule reflects several amendments to Phase III of long-term care (LTC) facilities’ requirements for participation. CMS recommended delaying enforcement of parts of the Quality Assurance and Performance Improvement (QAPI) and compliance and ethics programs until one year after the rule is finalized.

The final rule lifts the ban on binding arbitration agreements for LTC facilities, also known as skilled nursing facilities, with no recommendation for delayed enforcement.

Despite publishing its revisions, CMS failed to incorporate an important detail of its recommendations for the compliance and ethics programs: the delayed effective date. As a result, both the proposed rule and the final rule have November 28, 2019, as the effective date.

How does the proposed rule affect compliance and ethics programs?

The proposed rule for compliance and ethics programs allows each skilled nursing facility to develop a program that is appropriate for its size and organization. For example, the rule eliminates the requirements that organizations with more than five facilities select a compliance liaison and that each facility in the organization appoint a compliance officer. CMS also recommends that each facility invests in the development and enforcement of its program, rather than solely relying on a governing body or officer. The rule removes the requirement that the chief executive officer or board of directors oversee the facility’s compliance and ethics program. Instead, each facility must develop, implement, and maintain an effective program.

Under the proposed rule, LTC facilities no longer need a contact person to whom employees can report suspected violations. Rather, they must have written compliance and ethics standards as well as policies and procedures reasonably capable of reducing the prospect of criminal, civil, and administrative violations.

The proposed rule also reduces arbitrary assessments of compliance and ethics programs. In an effort to keep the focus on patient care, the rule proposes substituting each facility’s annual review for a biennial review with periodic assessments of its programs. Depending on size and complexity, some organizations may need multiple reviews each year, while others may require only an assessment every other year.

In addition to these revisions, CMS recommends delaying enforcement of several aspects of Phase III, including the new compliance and ethics program requirements—to give skilled nursing facilities enough time to respond to the changes. According to CMS, it suggested the one-year delay “to avoid confusion and promote transparency.” Yet, CMS potentially created more confusion when it failed to update the effective date in the language of 42 C.F.R. § 438.85(b).

Why did CMS leave the compliance and ethics program effective date as November 28, 2019?

CMS has yet to provide any formal clarification about why it left November 28, 2019, as the effective date for the compliance and ethics program changes. When it announced a multi-phase update to LTC regulations in 2016, CMS stated that Phase III requirements were those that would need more time to implement. In its July 16, 2019 announcement, CMS suggested that several rules, including the compliance and ethics program changes, might need more development.

However, CMS may be hesitant to update formally the effective date within the rule because providers have until 5:00 p.m. on September 16, 2019, to submit comments about the proposed changes. Depending on the comments, CMS may find that providers are satisfied with the compliance and ethics program changes, and the rule may be ready to take effect on November 28, 2019.

Furthermore, updating the language of 42 C.F.R. § 438.85(b) may give LTC facility administrators a false sense of security that they have more than a year to update their compliance and ethics programs. In the event that CMS does not delay enforcement, administrators may need to be ready this Thanksgiving. For small skilled nursing facilities, a November 28, 2019, deadline may be too tight to meet. As a result, CMS’s failure to change the effective date may be more of a precaution than an oversight.

What does the final rule mean for arbitration agreements?

While CMS recommended delaying some aspects of the proposed rule, it finalized the 2017 proposed rule that repealed the prohibition of binding arbitration agreements for skilled nursing facilities. The new rule allows LTC facilities to offer residents the option of signing a binding arbitration agreement. However, the rule does not allow LTC facilities to condition care on a resident signing it. Instead, skilled nursing facilities must explain the agreement and inform residents that they have the option not to sign a binding arbitration agreement.

The new final rule prohibits nursing homes from explaining the agreement in legal jargon or other confusing language that would prevent residents or their representatives from understanding the implications of signing the agreement.

In order to comply with the final rule, LTC facilities should update any binding arbitration agreements to clarify confusing or technical language and educate staff on how to explain the agreements to residents and their representatives.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

Back to top