Arbitration & Mediation

Can A State Prohibit a Nursing Home From Using an Arbitration Clause?

By Christopher B. Hopkins, Esq.

In early 2003, at the apex of nursing home litigation and the emergence of long term care arbitration provisions, the Center for Medicare and Medical Services fired a warning shot at the nursing home industry with this memo, suggesting there were going to be repercussions for using arbitration clauses in long term care admission agreements. At the time, the letter effectively sent shudders through the industry seeking to use arbitration to stem the litigation bloodbath. Such a threat by CMS revealed itself to be largely empty since no follow-up was pursued against the facilities. Arguably, the issue of the right to use arbitration clauses in nursing home contracts was left to the court system to weed out the acceptable and unacceptable arbitration provisions. Regardless, if CMS took any steps against nursing homes which use arbitration clauses, it generated little attention. Indeed, anecdotally, arbitration clauses seem to be the norm in nursing home and most commercial/consumer contracts.

In 2006/2007, the Oklahoma Department of Health issued two deficiency citations for nursing homes for their inclusion of arbitration clauses in the facilities' admission agreements. The facilities appealed the deficiency and sought to enjoin the directed plan of correction by seeking relief in federal court, where the District Court issued an Order in Sooner Geriatrics d/b/a Grace Living Center - Wildewood and - Edmond. Oklahoma, it seems, got no further than CMS.

The federal court judge went through the usual questioning of jurisdiction and standards for injunctions but ultimately noted that an injunction was appropriate since the facilities had been using arbitration clauses since 2003 but the State waited until 2006 to complain. Moreover, the State's request would require the facilities to change their admission form, then re-write all residents' existing agreements and then, if the state lost, the facilities would have to re-write their desired arbitration clause back into the agreements. The court likewise found the FAA readily applied.

We are no experts on Oklahoma long term care statutes but we do note that the court did NOT reference any statute which said arbitration was prohibited. Moreover, we wonder how that would jibe with the FAA's long reach. The facilities got their injunction and we will be watching to see when the court settles down to determining whether a state statute can extinguish FAA arbitration for nursing homes.

Full post as published by Florida Arbitration Law on December 13, 2007 (boomark / email).