June 20, 2005

Arbitration Agreements--Good Case!

The Texas Supreme Court has issued a favorable ruling for Medicare providers who use arbitration agreements. In a case involving a Texas nursing home, the Court ruled that the trial court should have compelled arbitration. You can find the case by clicking here.

The Court considered the question as to whether the Federal Arbitration Act should apply in the case or the Texas Arbitration Act. The Texas Act is not as favorable to providers as the Federal Act is because the Texas Act requires that the resident's attorney must sign the Arbitration Agreement.

How many residents have attorneys representing them upon admission to nursing homes and how many would be willing to retain one for the purpose of signing such an agreement. Furthermore, wouldn't most attorney's tell their clients not to sign such an agreement--especially if the attorney makes a living suing nursing homes?

Fortunately, in this case, the Texas Supreme Court recognizes that because of Medicare, these agreements involve interstate commerce and are preempted by Federal law. Thus, the federal statute applies and an attorney's signature is not required by the Federal Arbitration Act.

There is no mention of what happens if the resident is on Medicaid. However, the same reasoning should apply since federal monies are involved in that program as well.