Rule Requiring Nursing Homes to Better Explain Arbitration Agreements to Residents Does Not Violate Federal Law

The 8th Circuit rejects a challenge to a Centers for Medicare and Medicaid Services (CMS) rule regulating the use of arbitration agreements by nursing homes. Northport Health Services of Arkansas, LLC, et al v. U.S. Department of Health and Human Services (8th Cir., No. 20-1799, Oct. 1, 2021).

CMS proposed a rule regulating the use of arbitration agreements by long-term care facilities. After some revisions, the final rule prohibited nursing homes from requiring a binding arbitration agreement as a condition for admission, required the facility to explain the arbitration agreement in clear terms, and gave the resident the right to rescind the agreement within 30 days.

Northport Health Services of Arkansas and numerous other nursing home sued to enjoin enforcement of the rule, arguing that the rule violates the Federal Arbitration Act (FAA), exceeded the Department of Health and Human Services’ authority, and was arbitrary and capricious. The district court granted the government summary judgment, and the nursing homes appealed.

The U.S. Court of Appeals for the Eighth Circuit affirms, holding that the rule is valid. The court holds that because the rule “does not, in words or effect, render arbitration agreements entered into in violation thereof invalid or unenforceable, it does not conflict with the FAA.” The court further rules that 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.”

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For a news article on the decision by Skilled Nursing News, click here.