Federal Court Sides With CMS on Nursing Home Arbitration Rule

The 8th U.S. Circuit Court of Appeals gave the green light to a federal regulation that allows nursing homes to use arbitration agreements with residents, but prevents them from making the agreements a prerequisite for admission.

The court’s opinion, issued Friday by a three-judge panel, rejected arguments made by a group of nursing homes who in a September 2019 lawsuit claimed the regulation was “just as unlawful” as a rule instituted by the Obama administration in 2016 that banned the practice altogether. 

The ruling was first reported by legal outlet Law360.


Filed just a few months after the rule was finalized, the lawsuit alleged the Centers for Medicare & Medicaid Services (CMS) regulation was in direct conflict with a host of federal arbitration laws including the Administrative Procedure Act, the Federal Arbitration Act and the Regulatory Flexibility Act.

The case made its way to the St. Louis, Mo.-based appeals court after U.S. District Judge Timothy L. Brooks in 2020 determined that the government did not violate federal arbitration laws when it sought to limit the use of such agreements between skilled nursing operators and residents.

“In our view, it is reasonable for CMS to conclude that regulating the use of arbitration agreements in LTC facilities furthers the health, safety, and well-being of residents, particularly during the critical stage when a resident is first admitted to a facility,” the judges wrote in their Oct. 1 opinion.


The court also determined that CMS and the U.S. Department of Health and Human Services are not exceeding their authorities when regulating the administrative side of skilled nursing facilities.

“Congress gave HHS the power to develop standards for the qualification of LTC facility administrators, to establish criteria for the administration of LTC facilities, and to specify data to be collected by LTC facilities,” the judges wrote.

“These provisions, though not themselves the statutory bases of the Revised Rule, demonstrate that HHS is not restricted to regulating only matters concerning residents’ standard of medical care.”

The arbitration rule also allows residents or their representatives to rescind an arbitration agreement within 30 days of signing, requires that any agreement be fully explained to the resident, it cannot include language that bans residents or their families from contacting state, federal, and local authorities and that the facility must keep copies of the signed agreement and any final arbitration decisions for five years.

Attempts by Skilled Nursing News to contact the attorneys representing both sides were unsuccessful.

CMS declined to issue a statement on the court’s decision as it does not comment on litigation, a spokesperson told SNN.

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