Arkansas will be a forum for the next stage of a years-old national struggle over whether the federal government can stop nursing homes from forcing residents to accept arbitration as a precondition to receiving care.
A pair of Springdale-based nursing homes filed a 45-page federal lawsuit Wednesday in Fayetteville against President Donald Trump's administration to try to stave off a new rule that would ban the practice at long-term care facilities.
Industry groups defeated a similar but more stringent rule three years ago in a Mississippi federal courtroom. The Centers for Medicare and Medicaid Services announced a new approach earlier this year that is scheduled to take effect Sept. 16.
Springdale Health and Rehabilitation Center and The Maples at Har-Ber Meadows filed the lawsuit and asked U.S. District Judge Timothy Brooks to block the rule until the case is heard.
Arbitration is a private way to decide disputes -- such as accusations of negligence or personal injury -- outside of public courtrooms. A third-party arbitrator decides the case after weighing evidence and listening to statements. "Pre-dispute" agreements are a pledge to use arbitration in the event a future conflict arises.
Administrators of both Springdale facilities filed 12-page affidavits that, nearly identically written, say those nursing homes' admission agreements with residents include a "mandatory pre-dispute arbitration provision."
"In my experience, arbitration is a faster and more cost-efficient means of resolving a dispute than litigating in the court system," both affidavits say. "My experience also leads me to believe that arbitration is a fair process."
Northport Health Services of Arkansas LLC holds the Springdale Health and Rehabilitation license. Northport, which operates four other nursing homes, is based in Tuscaloosa, Ala.
Conway-based RHC Operations Inc. controls The Maples at Har-Ber Meadows. RHC Operations is co-owned by brothers Anthony and Bryan Adams.
Joshua Silverstein, a professor at the W.H. Bowen School of Law at the University of Arkansas at Little Rock, said businesses argue that the legal expenses for arbitration are lower than those for litigation, but experience doesn't bear that out.
"The real reason to go to an arbitration provision is to prevent people from having their day in court," he said.
He said provisions protect businesses from facing class action lawsuits and limit their exposure to damages.
"Businesses wouldn't be using arbitration if they didn't think it really helped them," he said.
Since the waning days of President Barack Obama's administration, the Centers for Medicare and Medicaid Services has approached pre-dispute arbitration rules in widely varying fashion, according to a summary from the American Bar Association, which has supported a complete ban on nursing home arbitration.
The first rule, developed in 2015 and scheduled to go into effect the next year, would have prohibited nursing homes from engaging in binding pre-dispute arbitration agreements with residents.
Nursing homes in November 2016 won a federal court order in Mississippi blocking enforcement of that rule. Three nursing homes, the national nursing home association and that state's association filed that suit. That preliminary injunction was continued indefinitely in 2017, when the government said it would propose a new rule.
The Centers for Medicare and Medicaid Services ultimately proposed a rule that went in the opposite direction -- not only would it have allowed nursing homes to engage residents in arbitration agreements, it would have granted them permission to make it a precondition for admission.
Noting it received more than 1,000 comments on that version of the rule, the agency later decided to take a different approach.
The latest iteration, set to be challenged in Arkansas, would allow pre-dispute arbitration agreements but prohibit nursing homes from making them a prerequisite to care. The new rule would also allow residents 30 days to rescind their agreements to such clauses.
"The CMS proposal supports patients and their caregivers by removing the ban on binding arbitration agreements while requiring nursing homes to ensure residents have the ability to choose the method of dispute resolution they want," the agency said in a July 2019 news release.
The Springdale nursing homes contend that the differences in the 2016 and the current proposal are "more cosmetic than material."
Their complaint primarily argues that the agency cannot restrict their arbitration mandates without running afoul of the Federal Arbitration Act of 1925 or exceeding its rule-making authority. The argument is similar to what the industry relied on in the 2016 Mississippi case.
"Indeed, nothing in the [new rule] resolves the fundamental problems that the Northern District of Mississippi recognized when it" blocked the 2016 rule, the filing says.
Fort Smith attorney Kirkman Dougherty and the Washington, D.C., firm Kirkland & Ellis are representing the Springdale facilities. Dougherty did not immediately respond to a message left at his office Thursday.
Rachel Bunch, director of the Arkansas Health Care Association, which represents nursing homes, said the lawsuit is "definitely something" that members of her group support.
She said the rule "seeks to carve out long term care providers" from a federal law that allows hospitals, telephone companies, banks and other businesses to use arbitration.
"We feel like this is unfair," she said.
Herb Sanderson, Arkansas director of the AARP, said his group "opposes mandatory arbitration in most cases, but especially involving consumers in nursing homes."
"Most people, when they sign a piece of paper, they don't even realize they're signing a binding arbitration agreement," he said. "We just don't think their rights to legal action should be removed from them."
Silverstein, the law professor, said the federal arbitration law prevents states and local governments from placing restrictions on arbitration agreements, but that federal agencies sometimes have more leeway.
"What's critical is they have to be acting pursuant to some federal statute that gives them the authority to regulate the contractual relationships between the patient in the nursing homes and the nursing homes themselves," he said.
The lawsuit names the U.S. Department of Health and Human Services; department Secretary Alex Azar; the Centers for Medicare and Medicaid Services; and agency Administrator Seema Verma.
Centers for Medicare and Medicaid Services spokesman Tony Salters said the agency doesn't comment on pending litigation.
A Section on 09/06/2019