Northport Health Services of Arkansas, LLC v. U.S. Department of Health and Human Services, No. 20-1799 (8th Cir. 2021)Annotate this Case
The Eighth Circuit affirmed the district court's grant of summary judgment in favor of HHS and CMS in an action brought by Northport, alleging that a regulation promulgated by CMS through notice and comment rulemaking is unlawful and should be set aside for violating the Administrative Procedure Act (APA), the Federal Arbitration Act (FAA), and the Regulatory Flexibility Act (RFA). The revised HHS regulations (Revised Rule) prohibits long-term care facilities from conditioning the admission of Medicare and Medicaid residents on their agreement to pre-dispute, binding arbitration and gives the residents the right to rescind the binding arbitration agreements, as well as certain other rights.
The court concluded that the Revised Rule does not, in words or effect, render arbitration agreements entered into in violation thereof invalid or unenforceable, and thus it does not conflict with the FAA. Furthermore, the Revised Rule represents a reasonable accommodation of manifestly competing interests and is entitled to deference, and thus the district court properly concluded that it is not ultra vires. The court also concluded that the Revised Rule reflects CMS's reasoned judgment in light of competing considerations, and is not arbitrary or capricious. Finally, although CMS failed to provide a factual basis in support of its section 605(b) certification in the Revised Rule, the court concluded that failing to do so was harmless error.
Court Description: [Kelly, Author, with Smith, Chief Judge, and Erickson, Circuit Judge] Civil case - Administrative Procedure. The district court did not err in rejecting claims that revised HHS regulations prohibiting long-term care facilities from conditioning the admission of Medicare and Medicaid residents on their agreement to pre-dispute, binding arbitration and giving the residents the right to rescind the binding arbitration agreements, as well as certain other rights, did not violate the Administrative Procedure Act or the Federal Arbitration Act; the regulation was a permissible exercise of the agency's authority under the Medicare and Medicaid statutes and was not arbitrary or capricious under the APA standards; while the agency failed to comply with the procedural requirements of the Regulatory Flexibility Act, the error was harmless.