Northport Health Servs. of Ark., LLC v. U.S. Dep't of Health & Human Servs.

• Decision Date: 07 April 2020
• Docket Number: CASE NO. 5:19-CV-5168
• Citation: 438 F.Supp.3d 956
• Court: U.S. District Court — Western District of Arkansas
• Parties: NORTHPORT HEALTH SERVICES OF ARKANSAS, LLC d/b/a Springdale Health and Rehabilitation Center ; NWA Nursing Center, LLC d/b/a The Maples; et al., Plaintiffs v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; Alex M. Azar II, in his official capacity as Secretary of the United States Department of Health and Human Services; Centers for Medicare & Medicaid Services; and Seema Verma, in her official capacity as the Administrator of the Centers for Medicare & Medicaid Services, Defendants

438 F.Supp.3d 956

NORTHPORT HEALTH SERVICES OF ARKANSAS, LLC d/b/a Springdale Health and Rehabilitation Center ; NWA Nursing Center, LLC d/b/a The Maples; et al., Plaintiffs

v.UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; Alex M. Azar II, in his official capacity as Secretary of the United States Department of Health and Human Services; Centers for Medicare & Medicaid Services; and Seema Verma, in her official capacity as the Administrator of the Centers for Medicare & Medicaid Services, Defendants

CASE NO. 5:19-CV-5168

United States District Court, W.D. Arkansas, Fayetteville Division.

Signed April 7, 2020

Erin E. Murphy, Pro Hac Vice, Paul D. Clement, Pro Hac Vice, Damon Clarke Andrews, Kasdin Miller Mitchell, Kirkland & Ellis LLP, Washington, DC, Kirkman T. Dougherty, Hardin, Jesson & Terry, PLC, Fort Smith, AR, for Plaintiffs Northport Health Services of Arkansas, LLC, NWA Nursing Center, LLC.

Kirkman T. Dougherty, Hardin, Jesson & Terry, PLC, Fort Smith, AR, for Plaintiffs Ashland Place Health and Rehabilitation, LLC, Aspire Physical Recovery Center at Cahaba River, LLC, Aspire Physical Recovery Center at Hoover, LLC, Aspire Physical Recovery Center of West Alabama, LLC, Athens Health and Rehabilitation, LLC, Civic Center Health and Rehabilitation, LLC, Columbiana Health and Rehabilitation, LLC, Cordova Health and Rehabilitation, LLC, Crossville Health and Rehabilitation, LLC, Florala Health and Rehabilitation, LLC, Georgiana Health and Rehabilitation, LLC, Gulf Coast Health and Rehabilitation, LLC, Hunter Creek Health and Rehabilitation, LLC, Huntsville Health and Rehabilitation, LLC, Jacksonville Health and Rehabilitation, LLC, Legacy Health and Rehabilitation of Pleasant Grove, LLC, Lineville Health and Rehabilitation, LLC, Luverne Health and Rehabilitation, LLC, Moundville Health and Rehabilitation, LLC, Northport Health Services of Florida, LLC, Northport Health Services of Missouri, LLC, Northway Health & Rehabilitation, LLC, Oak Knoll Health and Rehabilitation, LLC, Opp Health and Rehabilitation, LLC, Ozark Health and Rehabilitation, LLC, Palm Gardens Health and Rehabilitation, LLC, Park Manor Health and Rehabilitation, LLC, Prattville Health and Rehabilitation, LLC, South Haven Health and Rehabilitation, LLC, South Health and Rehabilitation, LLC, Sumter Health and Rehabilitation, LLC, Tallassee Health and Rehabilitation, LLC, Valley View Health and Rehabilitation, LLC, Wetumpka Health and Rehabilitation, LLC, AFNC, Inc., Beebe Retirement Center, Inc., BNNC, Inc., BVNC, Inc., CNNC, Inc., FPNC, Inc., GVNC, Inc., HBNC, Inc., HLNC, Inc., HSNC, Inc., JBNC, Inc., Jonesboro Care and Rehabilitation Center, LLC, JRNRC OPS, Inc., Linco Health, Inc., MHCNC, Inc., MLBNC, Inc., MMNC, Inc., MSNRC OPS, Inc., Nashville Nursing & Rehab, Inc., Northwest Health and Rehab, Inc., OCNC, Inc., OR OPS, Inc., PM OPS, Inc., RTNC, Inc., Salco NC, Inc., Salco NC 2, Inc., SCNC, Inc., Senior Living Management Group, LLC, SLNC, Inc., SRCNC, Inc., Timberlane Care and Rehabilitation Center, LLC, TXKNC, Inc., WCNC, Inc., Westwood Health and Rehab, Inc., Windcrest Health and Rehab, Inc., WRNC, Inc., Apple Creek Health and Rehab, LLC, Ashton Place Health and Rehab, LLC, Atkins Care Center, Inc., Belvedere Nursing and Rehabilitation Center, LLC, Bradford House Nursing and Rehab, LLC, Briarwood Nursing and Rehabilitation Center, Inc., Cabot Health and Rehab, LLC, Chapel Ridge Nursing Center, LLC, Colonel Glenn Health and Rehab, LLC, Dardanelle Nursing and Rehabilitation Center, Inc., Nursing and Rehabilitation Center at Good Shepherd, LLC, Greenbrier Care Center, Inc., Greystone Nursing and Rehab, LLC, Heather Manor Care Center, Inc., Hickory Heights Health and Rehab, LLC, Innisfree Health and Rehab, LLC, Jamestown Nursing and Rehab, LLC, Johnson County Health and Rehab, LLC, Country Club Gardens, LLC, Lakewood Health and Rehab, LLC, Legacy Heights Nursing and Rehab, LLC, Lonoke Health and Rehab Center, LLC, Oak Manor Nursing and Rehabilitation Center, Inc., Perry County Care Center, Inc., Quapaw Care and Rehabilitation Center, LLC, Robinson Nursing & Rehabilitation Center, LLC, Russellville Care Center, Inc., Salem Place Nursing and Rehabilitation Center, Inc., Sherwood Nursing and Rehabilitation Center, Inc., Shiloh Nursing and Rehab, LLC, Stella Manor Care Center, Inc., Superior Health & Rehab, LLC, Eufaula Care Center, Inc., Cherokee County Nursing Center, Inc., Parks Edge Care Center, Inc., Hendrix Health Care Center, Inc.

Alexander V. Sverdlov, DOJ, Washington, DC, Seth Creed, DOJ-USAO, Fort Smith, AR, for Defendant.

MEMORANDUM OPINION AND ORDER

TIMOTHY L. BROOKS, UNITED STATES DISTRICT JUDGE

Before the Court are the Plaintiffs' Motion for Summary Judgment (Doc. 26) and Memorandum Brief in Support (Doc. 27) and Defendants' Cross-Motion for Summary Judgment and Response to Plaintiffs' Motion (Doc. 28) and a Memorandum Brief in Support (Doc. 29). Plaintiffs filed a Reply to Defendants' Cross-Motion and Response (Doc. 36), and Defendants filed a Reply brief (Doc. 42), so the matter has now been fully briefed and is ripe for decision.¹ For the reasons given below, the Plaintiffs' Motion for Summary Judgment (Doc. 26) is DENIED and the Defendants' Cross-Motion for Summary Judgment (Doc. 28) is GRANTED .

I. BACKGROUND

The federal government subsidizes medical care for eligible individuals, including the elderly, people with disabilities, and families with limited income. These subsidies are distributed through two programs: the federal Medicare program and Medicaid, which is a federal-state partnership. The Secretary of Health and Human Services ("Secretary") administers both programs through the Centers for Medicare & Medicaid Services ("CMS"), an agency within the Department of Health and Human Services ("HHS"). Medicare and Medicaid were created as amendments to the Social Security Act, and the governing statutes for each program are found at 42 U.S.C. § 1395 et seq. , and 42 U.S.C. § 1396 et seq. , respectively. Medical providers may request to enter into a provider agreement with CMS, in the case of Medicare, and with the state administrator for Medicaid. The provider agreements place myriad requirements on participating providers, including, but not limited to, establishing standards for treatment and setting reimbursement rates for services provided to eligible participants. See 42 U.S.C. §§ 1395cc & 1396a. See also 42 C.F.R. § 489. Funds are disbursed by CMS or the administering state agency directly to the facility providing care. If a participating provider violates the terms of the provider agreement, the provider can be denied reimbursement, subject to civil penalties, or even excluded from further participation in the Medicare and Medicaid programs. See 42 C.F.R. § 488.406.

The Medicare and Medicaid programs both provide coverage for care in long-term care, or "LTC," facilities. Participating LTC facilities must meet the program requirements laid out at 42 U.S.C. § 1395i-3 (Medicare) and 42 U.S.C. § 1396r (Medicaid).² The Plaintiffs in this case are "dually certified" facilities, providing long-term care under both the Medicare and Medicaid programs. In 2015, the federal government spent almost 30 billion dollars on payments to skilled nursing facilities, and payments to nursing facilities under Medicaid topped $50 billion. Reform of Requirements for Long-Term Care Facilities, 81 Fed. Reg. 68688, 68690 (Oct. 4, 2016).

In July 2015, CMS solicited public comments on a comprehensive evaluation and restructuring of the consolidated Medicare and Medicaid requirements for LTC facilities to ensure that the requirements reflect enhanced "knowledge about resident safety, health outcomes, individual choice, and quality assurance and performance improvement." Reform of Requirements for Long-Term Care Facilities, 80 Fed. Reg. 42168, 42169 (proposed July 16, 2015). Among the changes on which CMS sought comment were new restrictions on the use of pre-dispute binding arbitration agreements between facilities and their patients. CMS indicated its concern that "the increasing prevalence of these agreements could be detrimental to residents' health and safety and may create barriers for surveyors and other responsible parties to obtain information related to serious quality of care issues." Id. at 42211. Therefore, CMS suggested placing several conditions and requirements on a facility's use of pre-dispute binding arbitration agreements. For example, CMS proposed requiring the facility to "explain the agreement to the resident in a form, manner and language that he or she understands and have the resident acknowledge that he or she understands the agreement." Id. CMS also proposed stipulating that an agreement to arbitrate "will not be considered to have been entered into voluntarily by the resident if the facility makes it a condition of admission, readmission, or the continuation of his or her residence at the facility," and that it therefore "should be a separate agreement" and "should not be contained within any other agreement or paperwork addressing any other issues." Id. In addition to proposing these and other conditions, CMS noted that it was "also aware that there are concerns that these agreements should be prohibited in the case of nursing home residents. Therefore, we are also soliciting comments on whether binding arbitration agreements should be prohibited." Id.

As the 60-day comment period drew to a close, CMS agreed to extend the comment period by another thirty days in response to requests for more time to respond and in recognition of the "scope and complexity" of the proposals on which the agency had sought comment. Reform of Requirements for Long-Term Care Facilities, 80 Fed. Reg. 55284, 55284–85 (Sept. 15, 2015). The extended comment period closed on October 14, 2015. On October 4, 2016, CMS published notice of the final rule in the Federal Register. The final rule prohibited the use of pre-dispute arbitration...