Minnesota slams nursing home tactic to keep disputes out of court

The Minnesota Attorney General has joined 14 other state attorneys in asking the federal government to prohibit nursing homes from including binding arbitration clauses in contracts with patients.

The small type in many nursing home or long-term care facility contracts often contains a requirement that any disputes with the facility be decided through an arbitrator chosen by the facility, rather than in open court.

Minnesota Attorney General Lori Swanson said taking legal protections away from an already vulnerable population, who may be sick or in crisis. She said the practice is "unconscionable."

"You're checking it at a time of high trauma in your life, it's after oftentimes a very serious injury or illness or heart attack," Swanson said. "It's not the type of situation where people are in a great capacity to say, 'Gee, I noticed here on page 32 this clause.'"

Swanson said her office hears complaints about the practice, often from consumers who didn't know they'd signed away their right to sue in court.

"The claims that occur are very, very serious claims when they happen," Swanson said. "They're typically wrongful death actions or negligent actions where the patient is alleging that the nursing home neglected them or a loved one."

Binding arbitration clauses are widespread in industries like banking, cell phones and healthcare, said Swanson. She sued a company called the National Arbitration Forum in 2009, arguing that the company treated consumers unfairly and ruled against them in a disproportionate number of cases.

"It would hold itself as independent and fair and neutral, much like you'd expect from a court system," Swanson said. "But it wasn't telling consumers was that at the same time it was arbitrating claims, the arbitration firm was owned by some of the same interests bringing claims before it."

In the settlement with the state, the National Arbitration Forum agreed to stop handling consumer arbitration cases.

The attorney general's comments were filed with the Centers for Medicare and Medicaid Services. The federal government could take the step of prohibiting these kinds of arbitration clauses in nursing homes or long-term care facilities.

There are other signs that federal authorities are seeking to curtail the use of binding arbitration requirements. The Consumer Financial Protection Bureau announced last week that it was exploring new regulations to curtail the practice in the financial industry.