In a recent move to increase transparency in the nursing home industry, one state attorney is taking on operating giant The Ensign Group (Nasdaq: ENSG), with plans to invalidate secret arbitration and block any similar agreements in the future.

Kris Mayes, Arizona Attorney General, is seeking to intervene in a lawsuit involving Sun West Choice Health and Rehab, which had required the family of a resident to agree to keep any arbitration secret. Ensign is the parent company of Sun West, according to a report from AZ Central, and owns about 30% of Arizona’s nursing home beds.

Mayes said the state legislature banned such secrecy clauses “decades ago,” but facilities were using them anyway. The legislature passed the Adult Protective Services Act to increase transparency and enhance the powers and duties of the Attorney General, according to a statement issued by Mayes’ office. The state Attorney General successfully voided secrecy clauses back in February at senior living campus Ridges at Peoria.

Such state action follows July 2022’s federal guidance tied to arbitration agreements, with official changes published by the Centers for Medicare & Medicaid Services (CMS) back in 2019. Specifically, certain F-tags trigger new requirements of participation that forbid nursing homes from using arbitration as a condition of admission.

A facility could receive one of these F-tags if a surveyor felt, through a line of questioning, the resident, facility staff, ombudsman and others didn’t understand the arbitration process they signed up for.

While the changes technically went into effect in 2019, surveyors didn’t start citations until that summer guidance was added. In terms of litigation tied to the arbitration process, the nation’s highest court in October 2022 declined to weigh in on a case involving the federal arbitration rule, a blow for nursing home operators at the time.

Coupled with Mayes’ actions, the state Health Department is inspecting and citing more frequently. Sun West Choice was cited by state surveyors 16 times over the past several years for infection control, quality of life and quality of care, as well as resident rights, among other items.

The arbitration picked up by Mayes involved a resident with dementia who in March 2022 was found face-down at Sun West with a massive bedsore. The patient died a few days later from bacterial pneumonia and a bone infection from the bedsore, reports said. His wife sued the nursing home.

“The Arizona Attorney General’s Office will continue to sue to invalidate such clauses as many times as it takes to ensure care facilities stop presenting these illegal secret arbitration agreements to stressed-out families as part of the admissions paperwork,” Mayes’ office said in a statement.