Long-Term Care Facilities Bound by Medicare Arbitration Rule


October 4, 2021 9:35 am

Long-term care facilities must fully explain predispute arbitration agreements to their residents if they want to continue getting paid by Medicare and Medicaid, as the requirement doesn’t conflict with federal arbitration laws, the Eighth Circuit said.

A U.S. Health and Human Services Department rule placing conditions on payments when nursing homes use such agreements isn’t preempted by the Federal Arbitration Act, is a valid exercise of the agency’s authority, and was adopted in compliance with federal administrative rules, the U.S. Court of Appeals for the Eighth Circuit said.

The rule doesn’t prohibit nursing homes from including predispute arbitration clauses in their residents’ contracts, the court said. This distinguishes it from a 2016 rule—blocked by a federal district court in Mississippi—that expressly banned facilities from requiring patients or their representatives to agree to arbitrate any disputes that arose while the patient was being treated there.

The district court in the Mississippi case found the 2016 rule inconsistent with the FAA. 

Under the newer rule, nursing homes can continue to insist on such clauses, the court said. But they must fully explain what the arbitration clause means in the patient’s or representative’s language and make clear that admission and ongoing care aren’t dependent on their agreement in order to participate in the Medicare and Medicaid programs, it said.

HHS reasonably interpreted the Medicare and Medicaid laws to allow conditioning payments on the arbitration rule, the court said. The agency could reasonably conclude that predispute arbitration clauses could frustrate residents’ access to care “or jeopardize their health and well-being,” it said. 

The rule is “a reasonable exercise” of the Centers for Medicare and Medicaid Services’ authority to protect residents’ rights, the court said.

The agency relied on sufficient evidence when adopting the rule, including “academic literature and court opinions” suggesting that predispute arbitration clauses are detrimental to residents’ health and safety, it said Oct. 1 in an opinion by Judge Jane Kelly.

The court affirmed summary judgment for HHS and CMS.

Chief Judge Lavenski R. Smith and Judge Ralph R. Erickson joined.

Kirkland & Ellis LLP and Hardin, Jesson and Terry PLC represent the nursing homes. The U.S. Department of Justice represents the government.

The case is Northport Health Servs. of Ark. v. U.S. Dep’t of Health & Human Servs., 2021 BL 375572, 8th Cir., No. 20-1799, 10/1/21.