Two Arkansas Skilled Nursing Facilities Sue Federal Government Over Arbitration Rule

Two nursing facilities in Arkansas filed a lawsuit last week against the U.S. federal government over the final rule regarding arbitration in skilled nursing facilities, arguing that the newest iteration of the regulation “is just as unlawful” as the 2016 rule that banned the practice altogether.

The two plaintiffs are Northport Health Services of Arkansas LLC, which does business as Springdale Health and Rehabilitation Center in Springdale; and the NWA Nursing Center LLC, which does business as The Maples, also in Springdale. Both facilities have 140 beds and participate in the Medicare and Medicaid programs.

Multiple local and legal outlets have reported on the suit, including the Arkansas Democrat-Gazette and Law360.

The Centers for Medicare & Medicaid Services (CMS) in July finalized a rule that allows SNF operators to use arbitration agreements with residents, while preventing them from making the agreements a prerequisite for admission.

Residents who sign arbitration agreements waive the ability to pursue legal action related to disputes, and instead submit to private arbitration proceedings. Supporters of arbitration argue that the method is a fair and less-costly method of dispute resolution, while opponents claim the agreements deprive nursing home residents of their right to legal relief through the courts.

The CMS rule represented a reversal from the Obama administration’s ban on such agreements in 2016 — a restriction that ran into several legal roadblocks.

That said, multiple attorneys stressed the strength of the consumer protections in the most recent arbitration rule in interviews with Skilled Nursing News.

“From my perspective, the final rule is perhaps the strongest version of consumer protections in connection with arbitration agreements, short of an outright ban on pre-dispute arbitration agreements,” Brian McGovern, a partner at the New York office of the law firm Crowell & Moring, told SNN in July.

In the Wednesday lawsuit, the plaintiffs argued that the restrictions on the use of arbitration make the final rule as problematic legally as the 2016 ban on arbitration; in addition to prohibiting their use as a prerequisite for admission, the rule allows residents or their representatives to rescind the agreements within 30 days of signing.

“Indeed, the differences between the rules are more cosmetic than material,” the plaintiffs wrote. “For instance, the Amended Arbitration Rule still prevents long-term care facilities from requiring agreement to arbitrate as a condition for admission, even though such agreements benefit both facilities and residents. Because the government has long taken the view that existing residents cannot be forced to enter arbitration agreements, the ‘new’ Rule still effectively prevents long-term care facilities from insisting on pre-dispute arbitration agreements.”

The plaintiffs also argued that the new rule’s new requirements, such as the 30-day recession option, apply only to arbitration, and that these and other parts of the rule amount to a violation of the Federal Arbitration Act.

In the lawsuit, they requested that the court enter a declaratory judgment that the new rule is unlawful, stay the effective date of the rule, and keep the defendants — the U.S. Department of Health and Human Services (HHS), HHS Secretary Alex Azar, and CMS Administrator Seema Verma — from enforcing it.

CMS does not comment on active litigation, a spokesperson told SNN.