Court Blocks Nursing Home Arbitration Ban From Taking Effect

Finding that the Centers for Medicare and Medicaid Services' (CMS) is exceeding its authority, a U.S. district court judge has granted an injunction preventing the agency from implementing a new rule that prohibits binding pre-dispute arbitration agreements in nursing facilities.

In granting the preliminary injunction, Judge Michael Mills of the U.S. District Court for the Northern District of Mississippi said that “Congress' failure to enact positive legislation should not serve as an excuse for the executive branch to assume powers which are properly reserved for the legislative branch.” While maintaining that the CMS rule is “based upon sound public policy,” the court declared that it is “unwilling to play a role in countenancing the incremental ‘creep’ of federal agency authority beyond that envisioned by the U.S. Constitution.”

The injunction came in response to a final rule CMS issued in September 2016 prohibiting pre-dispute arbitration agreements in nursing facilities that accept Medicare and Medicaid patients. After a dispute arises, the resident and the long-term care facility could still voluntarily enter into a binding arbitration agreement if both parties agree. The rule was scheduled to take affect November 28, 2016.

The American Health Care Association (AHCA), a group representing non-profit and for-profit nursing facility and assisted living care providers, filed a lawsuit against the Department of Health and Human Services and CMS. In asking for a preliminary injunction preventing enforcement of the new rule pending the court’s final judgment in the case, the AHCA argued that Congress had not given CMS the authority to regulate the use of arbitration. 

Judge Mills agreed, ruling that the AHCA had a likelihood of succeeding on the merits, that it had demonstrated that nursing homes would suffer irreparable harm without injunctive relief, and that CMS had failed to adequately explain why the rule must got into effect immediately.  

To read the court’s 40-page decision, click here.

For the ABA Journal's coverage, click here.