Petition for Writ of Certiorari — Northport Health Services of Arkansas, LLC, dba Springdale Health and Rehabilitation Center, et al., Petitioners v. Department of Health and Human Services, et al.

Supreme Court briefMay 13, 2022

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APPENDIX

TABLE OF APPENDICES

Appendix A

Opinion, United States Court of Appeals

for the Eighth Circuit, Northport Health

Servs. of Ark., LLC v. U.S. Dep’t of Health

& Human Servs., No. 20-1799 (Oct. 1,

2021)............................................................. App-1

Appendix B

Order, United States Court of Appeals for

the Eighth Circuit, Northport Health

Servs. of Ark., LLC v. U.S. Dep’t of Health

& Human Servs., No. 20-1799 (Dec. 14,

2021)........................................................... App-38

Appendix C

Memorandum Opinion & Order, United

States District Court for the Western

District of Arkansas, Northport Health

Servs. of Ark., LLC v. U.S. Dep’t of Health

& Human Servs., No. 5:19-cv-5168

(Apr. 7, 2020) ............................................. App-39

Appendix D

Relevant Statutes and Regulations .......... App-85

42 C.F.R. §483.70(n) ........................... App-85

9 U.S.C. §2 .......................................... App-86

42 U.S.C. §1395i-3(f)(1) ...................... App-87

42 U.S.C. §1396r(f)(1) ......................... App-87

42 U.S.C. §1395i-3(d)(4)(B) ................ App-88

42 U.S.C. §1396r(d)(4)(B) ................... App-88

42 U.S.C. §1395i-3(c)(1)(A)(xi) ........... App-89

42 U.S.C. §1396r(c)(1)(A)(xi) .............. App-89

App-1

Appendix A

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

________________

No. 20-1799

________________

NORTHPORT HEALTH SERVICES OF ARKANSAS, LLC,

doing business as Springdale Health and

Rehabilitation Center, et al.,

Plaintiffs-Appellants,

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES,

XAVIER BECERRA, 1 in his official capacity as Secretary

of the U.S. Department of Health & Human Services;

CENTERS FOR MEDICARE & MEDICAID SERVICES;

CHIQUITA BROOKS-LASURE, 2 in her official capacity as

the Administrator of the Centers of Medicare &

Medicaid Services,

Defendants-Appellees.

________________

Submitted: January 15, 2021

Filed: October 1, 2021

________________

Before SMITH, Chief Judge, KELLY and

ERICKSON, Circuit Judges.

1 Xavier Becerra is automatically substituted pursuant to

Federal Rule of Appellate Procedure 43(c)(2).

Chiquita Brooks-LaSure is automatically substituted

pursuant to Federal Rule of Appellate Procedure 43(c)(2).

App-2

________________

OPINION

________________

KELLY, Circuit Judge.

Northport Health Services of Arkansas, LLC, and

other similarly situated long-term care (LTC) facilities

(collectively, Northport) appeal the decision of the

district court 3 granting summary judgment in favor of

the U.S. Department of Health and Human Services

(HHS) and the Centers for Medicare and Medicaid

Services (CMS, and collectively, the government).

Northport argues 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), 5 U.S.C. § 706,

the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq.,

and the Regulatory Flexibility Act (RFA), 5 U.S.C.

§ 601 et seq. Having jurisdiction under 28 U.S.C.

§ 1291, we affirm.

Background

A. Factual and Regulatory Background

The federal government subsidizes eligible

individuals’ health care through two large programs:

Medicare and Medicaid. Medicare, the second largest

federal program, spends approximately $800 billion

annually “to provide health insurance to nearly 60

million aged or disabled Americans.” Azar v. Allina

Health Servs., 139 S. Ct. 1804, 1808 (2019); see NHE

Fact Sheet, Ctrs. for Medicare & Medicaid Servs.,

3 The Honorable Timothy L. Brooks, United States District

Judge for the Western District of Arkansas.

App-3

https://www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/NationalHealth

ExpendData/NHE-Fact-Sheet (last modified Dec. 16,

2020). “Medicaid is a cooperative federal-state

program through which the Federal Government

provides [approximately $600 billion in] financial

assistance to States so that they may furnish medical

care to needy individuals.” Wilder v. Va. Hosp. Ass’n,

496 U.S. 498, 502 (1990); see NHE Fact Sheet, supra.

The Secretary of HHS administers both programs

through CMS, a sub-agency of HHS. To provide

services to Medicare- and Medicaid-covered

individuals, medical providers must enter into

provider agreements that establish treatment

standards and set reimbursement rates for available

services. See 42 U.S.C. §§ 1395cc, 1396a.

Medicare and Medicaid provide coverage for longterm residents of nursing homes, commonly referred

to as LTC facilities. Participating LTC facilities must

comply with the requirements set forth in 42 U.S.C.

§ 1395i-3 (Medicare) and 42 U.S.C. § 1396r

(Medicaid), as well as the regulations promulgated

thereunder, see 42 C.F.R. §§ 483.1-.95. The plaintiffs

in this matter are “dually-certified” LTC facilities,

meaning they provide long-term care under both the

Medicare and Medicaid programs.

In 2015, CMS initiated notice and comment

rulemaking

comprehensively

revise

the

requirements for LTC facilities to participate in the

Medicare and Medicaid programs. See Reform of

Requirements for Long-Term Care Facilities, 80 Fed.

Reg. 42,168, 42,168-69 (proposed July 16, 2015). The

regulatory reforms were intended to “improve the

App-4

quality of life, care, and services in LTC facilities,

optimize resident safety, reflect current professional

standards, and improve the flow of the regulations” in

light of “evidence-based research . . . [that] enhanced

[CMS’s] knowledge about resident safety, health

outcomes, individual choice, and quality assurance

and performance improvement.” Id. at 42,169. In that

vein, CMS noted the potential benefits of alternative

dispute resolution, including arbitration, but also

expressed its concern that LTC facilities’ “superior

bargaining power could result in a resident feeling

coerced into signing the agreement,” that residents

might be waiving the right to judicial relief without

full understanding, and that the prevalence of predispute arbitration agreements “could be detrimental

to residents’ health and safety.” Id. at 42,211. CMS

therefore proposed certain limitations on LTC

facilities’ use of arbitration agreements, including

requirements that the facilities explain such

agreements to residents in a form, manner, and

language that they understand and that they not treat

arbitration agreements as a “condition of admission,

readmission, or the continuation of [one’s] residence at

the facility.” Id. In addition, reflecting a more general

concern regarding the use of such agreements by LTC

facilities, CMS stated it was considering and soliciting

comments

“whether

binding

arbitration

agreements should be prohibited” in the case of

nursing home residents. Id.

On October 4, 2016, after an extended comment

period, CMS published the final version of the rule

(Original Rule) in the Federal Register. See Reform of

Requirements for Long-Term Care Facilities, 81 Fed.

Reg. 68,688 (Oct. 4, 2016). In a shift from the proposed

App-5

rule, the final rule prohibited LTC facilities from

entering into pre-dispute, binding arbitration

agreements with residents or their representatives.

See id. at 68,690. CMS clarified further that, “[a]fter a

dispute arises, the resident and the LTC facility may

voluntarily enter into a binding arbitration agreement

if both parties agree and comply with the relevant

requirements” of the final rule. Id. at 68,800.

Several weeks later, before the Original Rule was

to take effect on November 28, 2016, see id. at 68,688,

a group of Mississippi nursing homes sued to

preliminarily and permanently enjoin enforcement of

the rule’s arbitration provision. See Am. Health Care

Ass’n v. Burwell, 217 F. Supp. 3d 921, 926 (N.D. Miss.

2016). Similar to this case, the nursing homes claimed

that the rule’s blanket prohibition of LTC facilities’

use of pre-dispute arbitration agreements violated the

APA, the FAA, and the RFA. See id. at 929-42. Finding

that the nursing homes were likely to prevail, the

district court granted a nationwide preliminary

injunction of the challenged provision of the Original

Rule. See id. at 946.

Rather than appeal the district court’s decision,

CMS initiated another round of notice and comment

rulemaking several months later to revise the

enjoined portion of the Original Rule. CMS proposed

removing the requirement that precluded LTC

facilities from entering into pre-dispute, binding

arbitration agreements, reasoning that, “[u]pon

reconsideration, [it] believe[d] that arbitration

agreements are, in fact, advantageous to both

providers and beneficiaries because they allow for the

expeditious resolution of claims without the costs and

App-6

expense of litigation.” Revision of Requirements for

Long-Term Care Facilities: Arbitration Agreements,

82 Fed. Reg. 26,649, 26,650-51 (proposed June 8,

2017). CMS nevertheless acknowledged some

concerns about the use of arbitration agreements in

LTC facilities and proposed strengthening some

requirements “to ensure the transparency of

arbitration agreements in LTC facilities” and to strike

the “best policy balance.” Id. at 26,651.

After the comments period concluded, CMS

published the final version of the rule (Revised Rule)

in the Federal Register, to go into effect on September

16, 2019. See Revision of Requirements for Long-Term

Care Facilities: Arbitration Agreements, 84 Fed. Reg.

34,718, 34,718 (July 18, 2019) (codified at 42 C.F.R.

§ 483.70(n)). It provided:

(n) Binding arbitration agreements. If a

facility chooses to ask a resident or his or her

representative to enter into an agreement for

binding arbitration, the facility must comply

with all of the requirements in this section.

(1) The facility must not require any

resident or his or her representative to

sign

agreement

for

binding

arbitration as a condition of admission to,

or as a requirement to continue to receive

care at, the facility and must explicitly

inform the resident or his or her

representative of his or her right not to

sign the agreement as a condition of

admission to, or as a requirement to

continue to receive care at, the facility.

(2) The facility must ensure that:

App-7

(i) The agreement is explained to the

resident

and

his

her

representative in a form and manner

that he or she understands,

including in a language the resident

and his or her representative

understands;

(ii) The resident or his or her

representative acknowledges that he

or she understands the agreement;

(iii) The agreement provides for the

selection of a neutral arbitrator

agreed upon by both parties; and

(iv) The agreement provides for the

selection of a venue that is

convenient to both parties.

(3) The agreement must explicitly grant

the resident or his or her representative

the right to rescind the agreement within

30 calendar days of signing it.

(4) The agreement must explicitly state

that neither the resident nor his or her

representative is required to sign an

agreement for binding arbitration as a

condition of admission to, or as a

requirement to continue to receive care

at, the facility.

(5) The agreement may not contain any

language that prohibits or discourages

the resident or anyone else from

communicating with federal, state, or

local officials, including but not limited

App-8

to, federal and state surveyors, other

federal or state health department

employees, and representatives of the

Office of the State Long-Term Care

Ombudsman,

accordance

with

§ 483.10(k).

(6) When the facility and a resident

resolve a dispute through arbitration, a

copy of the signed agreement for binding

arbitration and the arbitrator’s final

decision must be retained by the facility

for 5 years after the resolution of that

dispute on and be available for inspection

upon request by CMS or its designee.

Id. at 34,735-36

§ 483.70(n)).

(quoting

proposed

C.F.R.

B. Procedural History

On September 4, 2019, Northport filed this

lawsuit challenging multiple aspects of the Revised

Rule: (i) the requirement that a binding arbitration

agreement not be made a condition for the admission

to, or the continuation of care in, an LTC facility, 42

C.F.R. § 843.70(n)(1); (ii) the requirement that

residents be granted a right to rescind a binding

arbitration agreement within 30 days of signing, id.

§ 843.70(n)(3); (iii) the requirement that any

arbitration agreement (a) be explained to the resident

so he or she understands it and (b) explicitly state that

signing it is not a condition of admission to the LTC

facility, id. § 843.70(n)(2)(i)-(ii), (4); and (iv) the

requirement that the LTC facility retain copies of the

signed arbitration agreement and any final

arbitration decisions for five years, id. § 843.70(n)(6).

App-9

Northport moved to preliminarily enjoin the

enforcement of the Revised Rule or, in the alternative,

to stay enforcement pending judicial review. While

that motion was pending, the parties agreed to stay

enforcement of the Revised Rule until the district

court ruled on the merits of the case, and they crossmoved for summary judgment based on the

administrative record.

On April 7, 2020, the district court denied

Northport’s motion for summary judgment and

granted the government’s motion for summary

judgment, upholding the Revised Rule. The court

reasoned that the rule (i) did not violate the FAA, 9

U.S.C. § 2; (ii) was a permissible exercise of HHS’s

statutory authority under the Medicare and Medicaid

statutes; (iii) was not “arbitrary and capricious” under

the APA, 5 U.S.C. § 706(2)(A); and (iv) was

promulgated in compliance with the RFA, 5 U.S.C.

§ 605(b). Northport now appeals, and we have granted

a stay of the Revised Rule’s enforcement pending

resolution of this appeal.

II. Discussion

Northport revives its four challenges to the

Revised Rule on appeal. “We review de novo a district

court’s decision on whether an agency action violates

the APA.” Simmons v. Smith, 888 F.3d 994, 998 (8th

Cir. 2018) (quoting Friends of the Norbeck v. U.S.

Forest Serv., 661 F.3d 969, 975 (8th Cir. 2011)); see

also 5 U.S.C. § 706 (“[T]he reviewing court shall decide

all relevant questions of law, interpret constitutional

and statutory provisions, and determine the meaning

or applicability of the terms of an agency action.”). We

may set aside agency action under the APA if it is

App-10

“arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law”; “in excess of

statutory jurisdiction, authority, or limitations, or

short of statutory right”; or “without observance of

procedure required by law.” 5 U.S.C. § 706(2)(A), (C)(D).

A. Conflict with the Federal Arbitration Act

Northport first argues that the Revised Rule

violates the FAA and is therefore “not in accordance

with law,” id. § 706(2)(A), because it subjects

arbitration agreements to “disfavored treatment.”

Enacted in 1925 “in response to widespread judicial

hostility to arbitration agreements,” AT&T Mobility

LLC v. Concepcion, 563 U.S. 333, 339 (2011), the FAA

provides that the terms of a written arbitration

agreement “shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or

in equity for the revocation of any contract.” 9 U.S.C.

§ 2. As described by the Supreme Court, this provision

“establishes an equal-treatment principle,” requiring

“courts to place arbitration agreements ‘on equal

footing with all other contracts.’” Kindred Nursing

Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1424, 1426

(2017) (quoting DIRECTV, Inc. v. Imburgia, 577 U.S.

47, 48 (2015)).

Northport argues that the Revised Rule

contravenes the equal-treatment principle because it

“singles out” arbitration agreements, including by

regulating LTC facilities’ ability to enter into them

with residents. For example, Northport reasons that

prohibiting LTC facilities from requiring residents to

sign arbitration agreements as a condition for

admission, 53 C.F.R. § 483.70(n)(1), “restricts the use

App-11

of arbitration agreements” and violates the FAA. We

disagree. Such a construction of the FAA ignores the

statute’s plain language and interpreting precedent

and would significantly expand the scope of the FAA

to manufacture a conflict with the Revised Rule where

none exists. Simply put, the Revised Rule does not

come up against the FAA because it does not limit or

frustrate the enforceability of valid arbitration

agreements.

As noted above, the “savings clause” of the FAA

“permits arbitration agreements to be declared

unenforceable ‘upon such grounds as exist at law or in

equity for the revocation of any contract.’” Concepcion,

563 U.S. at 339 (emphasis added) (quoting 9 U.S.C.

§ 2). That is, an agreement to arbitrate a dispute may

“be invalidated by ‘generally applicable contract

defenses, such as fraud, duress, or unconscionability,’

but not by defenses that apply only to arbitration or

that derive their meaning from the fact that an

agreement to arbitrate is at issue.” Id. (emphasis

added) (quoting Doctor’s Assocs., Inc. v. Casarotto, 517

U.S. 681, 687 (1996)). Thus, in AT&T Mobility LLC v.

Concepcion, the Supreme Court held that a California

rule that treated class-action waivers in arbitration

agreements as per se unconscionable was preempted

by the FAA. See id. at 340, 352. Although

unconscionability typically is a “generally applicable

contract defense,” the Court reasoned that California

was applying the doctrine discriminately to

arbitration agreements by finding class-action

waivers particularly unconscionable when included

therein. See id. at 341-44, 346-48. And under the FAA,

California courts could not avoid enforcing arbitration

agreements, including their class-action waivers,

App-12

“according to their terms.” Id. at 344 (quoting Volt

Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior

Univ., 489 U.S. 468, 478 (1989)).

In our reading, the Supreme Court has never

applied the FAA to prohibit a federal agency from

generally regulating the use of arbitration agreements

as CMS does here. Rather, it has construed the FAA

simply to limit the circumstances in which arbitration

agreements, once entered into, can be rendered invalid

or unenforceable. So, for example, in Kindred Nursing

Centers Ltd. Partnership v. Clark, the Court held that

the FAA preempted a Kentucky rule that would have

rendered invalid (and thereby unenforceable)

arbitration agreements entered into by a principal’s

legal representative if the governing power of attorney

did not specifically state that the representative was

entitled to enter into arbitration agreements on the

principal’s behalf. See 137 S. Ct. at 1425-27; see also

id. at 1428 (“A rule selectively finding arbitration

contracts invalid because improperly formed fares no

better under the Act than a rule selectively refusing to

enforce those agreements once properly made.”).

Likewise, in Preston v. Ferrer, the Court held that the

FAA preempted a California rule that required

exhaustion of state administrative remedies before

arbitration, despite the fact that the parties had

“agree[d] to arbitrate all questions arising under [the]

contract.” 552 U.S. 346, 359 (2008). Because requiring

parties to initially refer their disputes to a state

administrative body would frustrate the benefits of

utilizing arbitration in the first instance, see id. at

357-58 (“A prime objective of an agreement to

arbitrate is to achieve streamlined proceedings and

expeditious results.” (cleaned up)), the rule effectively

App-13

rendered valid arbitration agreements unenforceable

and violated the FAA. See id. at 359. And in Epic

Systems Corp. v. Lewis, the Supreme Court considered

whether the National Labor Relations Act (NLRA)

rendered certain agreements requiring individualized

(as opposed to classwide) arbitration unenforceable.

See 138 S. Ct. 1612, 1620 (2018); see also id. at 1622

(discussing the contract defenses that are preempted

by the FAA: “defenses that target arbitration by name

or by more subtle methods, such as by interfering with

fundamental attributes of arbitration” (cleaned up)).

Assuming the NLRA rendered class and collective

action waivers in arbitration agreements illegal, the

Court concluded that such a rule would violate the

FAA because it would operate as a defense applicable

to arbitration agreements only. See id. at 1622-23.

The Revised Rule, in comparison to the rules

challenged in the above cases, does not invalidate or

render unenforceable any arbitration agreement. See

84 Fed. Reg. at 34,718 (“This final rule does not

purport to regulate the enforcement of any arbitration

agreement . . . .”); id. at 34,729 (“CMS does not have

the power to annul valid contracts.”); see also id. at

34,732 (“This rule in no way would prohibit two willing

and informed parties from entering voluntarily into an

arbitration agreement.”). Instead, it establishes the

conditions for receipt of federal funding through the

Medicare and Medicaid programs. See id. at 34,733

(noting that LTC facilities may enter into arbitration

agreements “so long as they comply with the

requirements” finalized in the Revised Rule). So, for

example, if an LTC facility entered into an arbitration

agreement with a resident without complying with the

Revised Rule by requiring the resident to sign as a

App-14

condition of admission to the facility, see 42 C.F.R.

§ 483.70(n)(1), the arbitration agreement would

nonetheless be enforceable, absent a showing of

“generally applicable contract defenses, such as fraud,

duress, or unconscionability,” Concepcion, 563 U.S. at

339; see 9 U.S.C. § 2. CMS would simply enforce the

regulation through a combination of administrative

remedies, including denial of payment and civil

monetary penalties. See 42 C.F.R. § 488.406; 84 Fed.

Reg. at 34,733.

In summary, Northport expansively argues that

the FAA established “a liberal federal policy favoring

arbitration agreements,” Moses H. Cone Mem’l Hosp.

v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), that is

frustrated by the Revised Rule’s regulation of nursing

homes’ use of arbitration agreements. 4 However,

“courts do not apply federal policies; they apply federal

statutes, and the FAA speaks only to the validity,

irrevocability and enforceability of arbitration

agreements.” Cal. Ass’n of Priv. Postsecondary Schs. v.

DeVos, 436 F. Supp. 3d 333, 344 (D.D.C. 2020),

vacated as moot, No. 20-5080, 2020 WL 9171125 (D.C.

Cir. Oct. 14, 2020). Because the Revised Rule does not,

in words or effect, render arbitration agreements

Northport largely ignores the extent to which the Revised

Rule favors arbitration as “an appropriate forum to resolve

disputes.” 84 Fed. Reg. at 34,729; see also id. at 34,732 (“We

acknowledge the[] advantages and disadvantages to arbitration

and believe that the requirements in this final rule provide the

transparency and opportunity for the resident and his or her

representative to evaluate those advantages and disadvantages

and make a choice that is best for them. This rule in no way would

prohibit two willing and informed parties from entering

voluntarily into an arbitration agreement.”).

App-15

entered into in violation thereof invalid

unenforceable, it does not conflict with the FAA. 5

B. HHS’s Statutory Authority Under the

Medicare and Medicaid Statutes

Next, Northport argues that the Revised Rule

should be set aside because it exceeds HHS’s statutory

authority under the Medicare and Medicaid statutes

to promulgate regulations (i.e., that it is ultra vires).

See 5 U.S.C. § 706(2)(C); see also U.S. ex rel. O’Keefe v.

5 Because we find no conflict between the FAA and the Revised

Rule, we need not address Northport’s argument that Congress

has not evinced a “clear and manifest” intention to empower CMS

to promulgate rules overriding the FAA. See Epic Sys., 138 S. Ct.

at 1624 (“A party seeking to suggest that two statutes cannot be

harmonized, and that one displaces the other, bears the heavy

burden of showing a clearly expressed congressional intention

that such a result should follow.” (cleaned up)). Such an intention

is unnecessary where there is “no conflict at all.” Id. at 1625. Nor

do we address Northport’s argument that the Revised Rule

engages in “economic dragooning,” leaving LTC facilities “no real

option but to acquiesce” to its regulations of arbitration

agreements. Nat’l Fed. of Indep. Bus. v. Sebelius, 567 U.S. 519,

582 (2012) (plurality opinion). For one, a plurality of the Supreme

Court used that language to describe the federal government’s

limited constitutional authority under the Spending Clause to

regulate the states, see id. at 575-85, not a federal agency’s ability

to regulate LTC facilities’ use of federal funding, as in this case.

Indeed, it is irrelevant for the purposes of the FAA whether LTC

facilities—private businesses that voluntarily participate in the

Medicare and Medicaid programs, see Minn. Ass’n of Health Care

Facilities, Inc. v. Minn. Dep’t of Pub. Health, 742 F.2d 442, 446

(8th Cir. 1984); Livingston Care Ctr., Inc. v. United States, 934

F.2d 719, 720-21 (6th Cir. 1991)—must comply with the Revised

Rule as the price of admission to obtain federal funding. The

Revised Rule’s regulations do not affect the validity or

enforceability of LTC facilities’ arbitration agreements, and they

therefore do not conflict with the FAA.

App-16

McDonnell Douglas Corp., 132 F.3d 1252, 1257 (8th

Cir. 1998) (“An agency’s promulgation of rules without

valid statutory authority implicates core notions of the

separation of powers, and we are required by Congress

to set these regulations aside.”). We review such a

claim using the familiar Chevron framework. See Iowa

League of Cities v. E.P.A., 711 F.3d 844, 876 (8th Cir.

2013). “Under that framework, we ask whether the

statute is ambiguous and, if so, whether the agency’s

interpretation is reasonable.” King v. Burwell, 576

U.S. 473, 485 (2015) (citing Chevron, U.S.A., Inc. v.

Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-43

(1984)). The two-step Chevron framework “is premised

on the theory that a statute’s ambiguity constitutes an

implicit delegation from Congress to the agency to fill

in the statutory gaps.” Id. (quoting FDA v. Brown &

Williamson Tobacco Corp., 529 U.S. 120, 159 (2000)).

The government relied on three sections of the

Medicare and Medicaid statutes as the bases for its

statutory authority to promulgate the Revised Rule.

See 84 Fed. Reg. at 34,718, 34,725.

It is the duty and responsibility of the

Secretary to assure that requirements which

govern the provision of care in [participating

LTC facilities], and the enforcement of such

requirements, are adequate to protect the

health, safety, welfare, and rights of residents

and to promote the effective and efficient use

of public moneys.

42 U.S.C. §§ 1395i-3(f)(1), 1396r(f)(1).

A [participating LTC facility] must meet such

other requirements relating to the health,

safety, and well-being of residents or relating

App-17

to the physical facilities thereof as the

Secretary may find necessary.

Id. § 1395i-3(d)(4)(B); cf. id. § 1396r(d)(4)(B).

A [participating LTC facility] must protect

and promote the rights of each resident,

including . . . [a]ny other right established by

the Secretary.

Id. §§ 1395i-3(c)(1)(A)(xi), 1396r(c)(1)(A)(xi). 6

To determine whether a statute is ambiguous, we

start with its plain language. See Ark. AFL-CIO v.

F.C.C., 11 F.3d 1430, 1440 (8th Cir. 1993) (en banc).

“If congressional intent is clearly discernable, the

agency must act in accordance with that intent and

the court need not defer to the agency’s interpretation

of its mandate.” Id. Thus, we must determine whether

Congress intended HHS to have the authority to

regulate LTC facilities’ use of arbitration agreements.

See Friends of the Boundary Waters Wilderness v.

Bosworth, 437 F.3d 815, 823 (8th Cir. 2006).

6 Northport argues that the government “disclaimed reliance”

on this last pair of provisions because it was not cited in the

section titled “Statutory Authority” of the Revised Rule. See 84

Fed. Reg. at 34,718; see also Michigan v. E.P.A., 576 U.S. 743,

758 (2015) (noting “the foundational principle of administrative

law that a court may uphold agency action only on the grounds

that the agency invoked when it took the action”). However, the

Revised Rule did cite these provisions as statutory authorities for

promulgating the Original Rule, which was “designed to

accomplish the same goals” as the Revised Rule, 84 Fed. Reg. at

34,725; see also 82 Fed. Reg. at 26,651 (claiming statutory

authority to issue the Revised Rule under these three provisions),

and we consider all three statutory bases proffered by the

government, see Union Pac. R.R. Co. v. Surface Transp. Bd., 863

F.3d 816, 824 (8th Cir. 2017).

App-18

Looking to the above statutory provisions, we

conclude that the Medicare and Medicaid statutes are

ambiguous as to whether HHS has the authority to

regulate the use of arbitration agreements. The

statutes are broadly worded to give HHS significant

leeway in deciding how best to safeguard LTC

residents’ health and safety and protect their dignity

and rights. For example, the statutes delegate

authority to the Secretary to promulgate regulations

ensuring the “provision of care” at LTC facilities is

adequate to “protect the health, safety, welfare, and

rights of residents and to promote the effective and

efficient use of public moneys.” 42 U.S.C. §§ 1395i3(f)(1), 1396r(f)(1). More capaciously, the statutes

confer authority to the Secretary to promulgate

regulations “relating to the health, safety, and wellbeing of residents” as deemed “necessary.” Id. § 1395i3(d)(4)(B); cf. id. § 1396r(d)(4)(B). And most

expansively, the Secretary is empowered to “protect

and promote” the rights of residents he or she may

deem

important.

Id.

§§ 1395i-3(c)(1)(A)(xi),

1396r(c)(1)(A)(xi).

We disagree with Northport’s arguments that the

statutes are sufficiently unambiguous to conclude that

Congress did not intend for HHS to have the authority

to regulate the use of arbitration agreements. First,

Northport contends that arbitration is not

“meaningful[ly] connect[ed]” to residents’ “healthy,

safety, and well-being,” e.g., id. § 1395i-3(d)(4)(B), and

falls outside HHS’s wheelhouse—the “provision of

care,” id. §§ 1395i-3(f)(1), 1396r(f)(1). In effect,

Northport implies that although HHS is empowered

to regulate the terms of residents’ medical, palliative,

or residential care, HHS does not have the authority

App-19

to regulate the administrative side of LTC facilities.

Looking to the “text and context” of the statute, Union

Pac. R.R. Co., 863 F.3d at 825, we reject such a narrow

reading of HHS’s authority. In addition to conferring

the general responsibility to promulgate regulations

governing the “provision of care . . . adequate to

protect the health, safety, welfare, and rights of

residents,” 42 U.S.C. §§ 1395i-3(f)(1), 1396r(f)(1),

Congress gave HHS the power to develop standards

for the qualification of LTC facility administrators, id.

§§ 1395i-3(f)(4), 1396r(f)(4), to establish criteria for

the administration of LTC facilities, id. §§ 1395i3(f)(5), 1396r(f)(5), and to specify data to be collected

by LTC facilities, id. §§ 1395i-3(f)(6), 1396r(f)(6).

These provisions, though not themselves the statutory

bases of the Revised Rule, demonstrate that HHS is

not restricted to regulating only matters concerning

residents’ standard of medical care.

Next, relying on the interpretive canon that

expressing some items of a group excludes the omitted

items, see N.L.R.B. v. SW General, Inc., 137 S. Ct. 929,

940 (2017) (defining expressio unius est exclusio

alterius), Northport argues that Congress did not

intend HHS to regulate LTC facilities’ ability to

condition residents’ admission on signing arbitration

agreements. In Northport’s view, by enacting express

provisions governing LTC facilities’ admissions

practices without mentioning arbitration agreements,

see 42 U.S.C. §§ 1395i-3(c)(5), 1396r(c)(5), Congress

intentionally withheld authority from HHS to

promulgate regulations on that issue. “But that canon

[is] a feeble helper in an administrative setting,”

Child.’s Hosp. Ass’n of Tex. v. Azar, 933 F.3d 764, 77071 (D.C. Cir. 2019) (cleaned up), particularly when, as

App-20

here, Northport points to no evidence suggesting that

“Congress considered the unnamed possibility and

meant to say no to it,” Barnhart v. Peabody Coal Co.,

537 U.S. 149, 168 (2003). Moreover, Northport’s

argument would suggest that HHS lacks the authority

to regulate admissions practices beyond that specified

in the pertinent statutory provisions, a claim

undermined by other HHS regulations that do just

that. See, e.g., 42 C.F.R. § 483.15(a)(2)(iii), (6).

Finally, Northport infers from the fact that HHS

had not tried to promulgate regulations governing the

use of arbitration agreements until 2016, when it

published the Original Rule, that HHS had implicitly

recognized it lacked the statutory authority to do so.

Northport points to no authority suggesting that an

agency’s inaction defines the boundaries of that

agency’s statutory authority. Indeed, we do not draw

comparable inferences from legislative inaction. See

Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S.

633, 650 (1990) (“Congressional inaction lacks

persuasive significance because several equally

tenable inferences may be drawn from such inaction.”

(cleaned up)). But more directly, whether or not an

agency has previously attempted to exercise statutory

authority it may or may not have does not answer the

question before us—whether the statute is ambiguous,

thereby implicitly leaving a gap in the statute to be

filled. See Iowa League of Cities, 711 F.3d at 877.

Having determined that the Medicare and

Medicaid statutes are ambiguous, we look to whether

the agency’s interpretation “is based on a permissible

construction of the statute[s].” Andrade-Zamora v.

Lynch, 814 F.3d 945, 951 (8th Cir. 2016) (quoting City

App-21

of Arlington v. F.C.C., 569 U.S. 290, 296 (2013)); see

Ark. AFL-CIO, 11 F.3d at 1441 (noting “the agency’s

construction of [a] statute must be reasonable”). An

agency’s reasonable interpretation of a statute is

entitled to “substantial deference.” Bosworth, 437 F.3d

at 821. In conducting our analysis, we need not

identify the interpretation we would have taken had

the question been presented to us initially in a judicial

proceeding, as “a court may not substitute its own

construction of a statutory provision for a reasonable

interpretation made by the administrator of an

agency.” Simmons, 888 F.3d at 998 (quoting Chevron,

467 U.S. at 844); see also Unity Healthcare v. Azar, 918

F.3d 571, 578 (8th Cir. 2019) (“[T]he question before

us is not whether an agency interpretation represents

the best interpretation of the statute, but whether it

represents a reasonable one.” (quoting Smiley v.

Citibank (S.D.), N.A., 517 U.S. 735, 744-45 (1996))).

Rather, we will uphold the agency’s interpretation “so

long as we can reasonably conclude that the grants of

authority in the statutory provisions cited by the

government contemplate the issuance.” Iowa League

of Cities, 711 F.3d at 877 (cleaned up).

Reviewing the provisions of the Revised Rule, we

conclude that they are reasonable interpretations of

the Medicare and Medicaid statutes. As noted by

CMS, the Revised Rule reflects the agency’s belief that

“arbitration has both advantages and disadvantages”

and permits LTC facilities “to ask their residents to

sign arbitration agreements so long as they comply

with the [Revised Rule’s] requirements.” 84 Fed. Reg.

at 34,732-33. Generally, these requirements ensure

that residents who enter into arbitration agreements

with LTC facilities do so knowingly and voluntarily,

App-22

without the specter that the facility will deny care

should they refuse. For example, LTC facilities may

not require a resident to sign an arbitration

agreement either as a condition of admission or as a

requirement to continue receiving care. See 42 C.F.R.

§ 483.70(n)(1); see also id. § 483.70(n)(4). LTC

facilities must explain the function of the arbitration

agreement before a resident signs it, and they must

afford residents the right to rescind the agreement

within 30 days of signing it. See id. § 483.70(n)(2)(i),

(3). And to assist CMS in monitoring the efficacy of

arbitration in resolving disputes between residents

and LTC facilities, the Revised Rule requires LTC

facilities to keep for five years the applicable

arbitration agreement and the arbitrator’s final

decision if ever a dispute is resolved. See id.

§ 483.70(n)(6).

In our view, it is reasonable for CMS to conclude

that regulating the use of arbitration agreements in

LTC facilities furthers the health, safety, and wellbeing of residents, particularly during the critical

stage when a resident is first admitted to a facility. See

42 U.S.C. § 1395i-3(d)(4)(B), (f)(1); id. § 1396r(d)(4)(B),

(f)(1). We can appreciate how conditioning care on

entering into a binding arbitration agreement may

frustrate residents’ access to treatment or jeopardize

their health and well-being. See 84 Fed. Reg. at 34,726

(noting that the Revised Rule “holds the [LTC] facility

accountable by ensuring that [it] cannot coerce or

apply unreasonable pressure on a resident . . . by

implying the resident would not receive the care he or

she needs without signing the agreement”); see also id.

at 32,727 (noting that “residents are frequently

admitted during a time of stress and often after a

App-23

decline in their health or directly from the

hospital . . . mak[ing] it extremely difficult for LTC

residents . . . to make an informed decision about

arbitration”). Likewise, we think the Revised Rule is a

reasonable exercise of CMS’s authority to protect

residents’ rights. See 42 U.S.C. §§ 1395i-3(c)(1)(A)(xi),

1396r(c)(1)(A)(xi).

In summary, the Revised Rule “represents a

reasonable accommodation of manifestly competing

interests and is entitled to deference.” Chevron, 467

U.S. at 865. We affirm the district court’s conclusion

that it is not ultra vires.

C. Northport’s Challenge to the Rule as

Arbitrary and Capricious

Next, Northport argues that the Revised Rule

should be set aside because it is “arbitrary, capricious,

[and] an abuse of discretion.” See 5 U.S.C. § 706(2)(A).

When promulgating a rule, an agency “must examine

the relevant data and articulate a satisfactory

explanation for its action including a ‘rational

connection between the facts found and the choice

made.’” Motor Vehicles Mfrs. Ass’n of U.S., Inc. v. State

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)

(quoting Burlington Truck Lines v. United States, 371

U.S. 156, 168 (1962)). “Normally, an agency rule would

be arbitrary and capricious if the agency has relied on

factors which Congress has not intended it to consider,

entirely failed to consider an important aspect of the

problem, offered an explanation for its decision that

runs counter to the evidence before the agency, or is so

implausible that it could not be ascribed to a difference

in view or the product of agency expertise.” Id.; see also

F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502,

App-24

536 (2009) (Kennedy, J., concurring in the judgment)

(“The question in each case is whether the agency’s

reasons for the change, when viewed in light of the

data available to it, and when informed by the

experience and expertise of the agency, suffice to

demonstrate that the new policy rests upon principles

that are rational, neutral, and in accord with the

agency’s proper understanding of its authority.”). Our

scope of review is narrow, and we are “not to

substitute [our] judgment for that of the agency.” State

Farm, 463 U.S. at 43. Although “[w]e may not supply

a reasoned basis for the agency’s action that the

agency itself has not given,” id. (quoting SEC v.

Chenery Corp., 332 U.S. 194, 196 (1947)), we will

“uphold a decision of less than ideal clarity if the

agency’s path may reasonably be discerned,” id.

(quoting Bowman Transp., Inc. v. Ark.-Best Freight

Sys., Inc., 419 U.S. 281, 286 (1974)).

Northport raises two arguments as to why the

Revised Rule is arbitrary and capricious. First, it

suggests that the rule was “based on sheer

speculation” because CMS relied principally on

anecdotal evidence rather than quantitative social

science evidence to support the rule. See, e.g., 84 Fed.

Reg. at 34,722, 34,726 (noting that CMS believed the

Revised Rule was “the best way to strike a balance”

between “a great deal of anecdotal evidence and

reportage” critical of LTC facilities’ use of arbitration

agreements and the “lack of statistical data” showing

“that arbitration agreements necessarily have a

negative effect on quality of care”). But “[t]he APA

imposes no general obligation on agencies to produce

empirical evidence,” Stilwell v. Office of Thrift

Supervision, 569 F.3d 514, 519 (D.C. Cir. 2009), and

App-25

CMS was entitled to justify the rule using the

available anecdotal evidence so long as it provided a

rational, reasoned explanation for doing so. See id.; see

also Sacora v. Thomas, 628 F.3d 1059, 1069 (9th Cir.

2010) (noting that although “[i]t may have been

preferable for the [agency] to support its conclusions

with empirical research,” “it was reasonable for the

[agency] to rely on its experience, even without having

quantified it in the form of a study”).

Having reviewed the regulatory record of both the

Original Rule and the Revised Rule, we are satisfied

that the evidence CMS relied upon is sufficient to

support the Revised Rule. See 84 Fed. Reg. at 34,722

(noting that CMS relied on the evidence and

comments gathered during the Original Rule’s

rulemaking process to justify the Revised Rule). For

example, CMS took into consideration commenters’

stated beliefs that arbitration agreements in some

instances permitted LTC facilities “to avoid

responsibility for providing poor or substandard care

to their residents,” jeopardizing residents’ health and

safety. 81 Fed. Reg. at 68,793; see also id. (noting that

some commenters “had personally witnessed resident

neglect and attributed it to facilities believing that

they were immune to any legal consequences for their

mistreatment because of the likelihood that they

would prevail in binding arbitration”). Furthermore,

CMS conducted a review of academic literature and

court opinions, which “provided evidence that predispute arbitration agreements were detrimental to

the health and safety of LTC facility residents.” Id.

(noting various evidence-based critiques of LTC

facilities’ use of arbitration agreements, including “the

unequal bargaining power between the resident and

App-26

the LTC facilities; inadequate explanations of the

arbitration agreement; the inappropriateness of

presenting the agreement upon admission, an

extremely stressful time for the residents and their

families; negative incentives on staffing and care as a

result of not having the threat of a substantial jury

verdict for sub-standard care; and the unfairness of

the arbitration process for the resident”). Although

these observations were not supported by statistical

data that quantified their aggregate effect, they were

sufficient to justify CMS “implement[ing] a regulation

that accommodates arbitration while also protecting

LTC facility residents from unfairly coerced

agreements.” 84 Fed. Reg. at 34,726. Likewise, it was

not arbitrary or capricious for CMS to have adopted a

rule recognizing the importance of amassing data

going forward to continue monitoring the propriety of

the rule, see id. at 34,723 (“[T]he requirement to retain

copies of the arbitration agreement and the

arbitrator’s final decision will allow us to learn how

arbitration is being used by LTC facilities and how

this is affecting the residents.”), as agencies are

empowered to “adopt prophylactic rules to prevent

potential problems before they arise,” see Stilwell, 569

F.3d at 519.

Second, Northport argues that CMS did not

adequately explain the rule’s alleged departure from

the agency’s historical support for the use of

arbitration agreements by LTC facilities. Northport

relies on two documents that supposedly reflect HHS

and CMS’s prior policy toward arbitration

agreements: a January 2003 memorandum from

Steven Pelovitz, the former Director of the Survey and

Certification Group of CMS, Dist. Ct. Dkt. 25-5 at 2-3

App-27

(the Pelovitz Memo), and a July 2008 letter from

Michael Leavitt, the former Secretary of HHS, to the

House Judiciary Committee, Dist. Ct. Dkt. 24-25 at

691-93 (the Leavitt Letter). In the Pelovitz Memo,

CMS set forth its policy regarding LTC facilities that

conditioned residents’ admission to or ability to

remain in an LTC facility on their signing of a predispute, binding arbitration agreement. Noting that

the agency’s “primary focus should be on the quality of

care actually received by nursing home residents that

may be compromised by such agreements,” CMS

declared that it would enforce existing federal

regulations to prevent LTC facilities from discharging,

transferring, or retaliating against current residents

who refused to enter into binding arbitration

agreements. Dist. Ct. Dkt. 25-2 at 2-3. And in the

Leavitt Letter, HHS articulated its general support for

pre-dispute arbitration agreements as “an excellent

way for patients and providers to control costs, resolve

disputes, and speed resolution of conflicts.” Dist. Ct.

Dkt. 24-25 at 691. The agency noted its opposition to

legislation that would “deprive patients and providers

of the opportunity to agree voluntarily to resolve their

disputes through arbitration,” id., and suggested

along similar lines as the Pelovitz Memo that existing

regulations “provide[d] ample safeguards to ensure

that nursing home residents are protected from

harm,” id. at 692.

To the extent the Revised Rule departs from these

prior policies, 7 we find that CMS has provided a

7 Although Northport argues that the Revised Rule departs

from CMS’s historical position on arbitration agreements by

being more restrictive of the use of arbitration agreements, the

App-28

sufficiently reasonable explanation for doing so. When

an agency reverses its prior policy, “it need not

demonstrate . . . that the reasons for the new policy

are better than the reasons for the old one.” Fox

Television, 556 U.S. at 515. “[I]t suffices that the new

policy is permissible under the statute, that there are

good reasons for it, and that the agency believes it to

be better, which the conscious change of course

adequately indicates.” Id. At the outset, we note that

the Revised Rule is generally in harmony with the

Pelovitz Memo and the Leavitt Letter. Indeed, the rule

appreciates the advantages of arbitration and

expressly permits LTC facilities and their residents to

enter into arbitration agreements transparently and

voluntarily. See 84 Fed. Reg. at 34,722. But even if the

Revised Rule changed direction slightly by deciding

that existing federal and state regulations are

insufficient to protect residents’ quality of care vis-ávis arbitration agreements, CMS has provided a

rational justification for that change. As noted above,

CMS relied on evidence suggesting that LTC facilities’

use of arbitration agreements had a larger impact on

residents’ health and safety than had previously been

realized. CMS noted comments “rais[ing] a number of

concerns that convinced us that [existing federal and

state] protections are limited and do not protect the

unique needs of Medicare and Medicaid beneficiaries.”

Id.

34,720

(noting

that

“state

laws

Revised Rule is in fact less restrictive than CMS’s immediately

preceding policy: the Original Rule’s per se ban on pre-dispute,

binding arbitration agreements. See 84 Fed. Reg. at 34,719,

34,722 (noting that the “overwhelming majority of commenters”

opposed the Revised Rule because it “revers[ed] course” on the

Original Rule).

App-29

differ . . . offer[ing] varying levels of protection” and

that residents may not be financially capable of

challenging unconscionable arbitration agreements in

court, requiring CMS to step in to further safeguard

residents). Relatedly, CMS determined that the fiveyear recordkeeping requirement was necessary to

“evaluate quality of care complaints . . . and assess the

overall impact of these agreements on the safety and

quality of care provided in LTC facilities.” Id. at

34,730.

Finally, Northport argues that the change of

policy was arbitrary and capricious because it did not

consider LTC facilities’ “substantial reliance

interests” on CMS’s historical arbitration agreement

policy. See Fox Television, 556 U.S. at 515 (noting that

an agency may need to provide greater explanation

“when its prior policy has engendered serious reliance

interests that must be taken into account”).

Specifically, it argues that LTC facilities have “built

their economic and pricing models in reliance on the

prior policy” and that the Revised Rule will require

LTC facilities to henceforth allocate more money to

cover their dispute resolution costs. To begin, we echo

the district court’s reasonable skepticism of

Northport’s claimed reliance interests. Under the

Revised Rule, existing arbitration agreements will

continue to be enforceable, and LTC facilities can still

enter into arbitration agreements with their residents

and obtain federal funding so long as they comport

with the rule’s requirements. Therefore, the

availability of arbitration and any associated cost

savings are largely unaffected by the Revised Rule,

and LTC facilities can continue to rely on historical

economic models. But even setting that aside, we find

App-30

that CMS reasonably explained the departure from

CMS’s prior policy in spite of those reliance interests.

See Encino Motorcars, LLC v. Navarro, 136 S. Ct.

2117, 2126 (2016) (noting that an agency need only

provide “a reasoned explanation . . . for disregarding

facts and circumstances that underlay or were

engendered by the prior policy” (quoting Fox

Television, 556 U.S. at 515-16)). As noted above, the

Revised Rule continues to recognize the advantage of

permitting LTC facilities to rely on arbitration as a

fast and economic means to resolve disputes with

residents. See 84 Fed. Reg. at 34,722. But CMS also

explained that the cost-efficiency and expediency of

arbitration had to be counter-balanced by the need to

protect residents by ensuring that they enter into

arbitration agreements voluntarily and in a

transparent way. See id.

We conclude that the Revised Rule reflects CMS’s

reasoned

judgment

light

competing

considerations, see State Farm, 463 U.S. at 43, and we

affirm the district court’s conclusion that the Revised

Rule is not arbitrary or capricious.

D. Compliance

with

Flexibility Act

the

Regulatory

Finally, Northport argues that the promulgation

of the Revised Rule violated the RFA. Enacted in 1980

as a “response to the complaints of small business

about the burdens of federal regulation,” see Paul R.

Verkuil, A Critical Guide to the Regulatory Flexibility

Act, 1982 Duke L.J. 213, 226 (1982), the RFA requires

an agency undergoing informal rulemaking to prepare

and publish a regulatory flexibility analysis that

details, among other things, the rule’s “significant

App-31

economic impact on small entities” and the steps the

agency has taken to minimize that impact. See 5

U.S.C. § 604; see also id. § 601(6) (defining “small

entities” to include small businesses, certain nonprofit organizations, and small governmental

jurisdictions). However, an agency may forego the

regulatory flexibility analysis “if the head of the

agency certifies that the rule will not, if promulgated,

have a significant impact on a substantial number of

small entities.” Id. § 605(b). And central to this appeal,

the certification must be published in the Federal

basis for such certification.” Id. In reviewing a party’s

claim that an agency violated the “[p]urely

procedural” requirements of the RFA, Nat’l Tel. Coop.

Ass’n v. F.C.C., 563 F.3d 536, 540 (D.C. Cir. 2009), we

consider whether the agency made a “reasonable,

good-faith effort to carry out the RFA’s mandate.” Zero

Zone, Inc. v. U.S. Dep’t of Energy, 832 F.3d 654, 683

(7th Cir. 2016) (cleaned up) (quoting U.S. Cellular

Corp. v. F.C.C., 254 F.3d 78, 88 (D.C. Cir. 2001)); see

Alenco Commcn’s, Inc. v. F.C.C., 201 F.3d 608, 625

(5th Cir. 2000)); Associated Fisheries of Maine, Inc. v.

Daley, 127 F.3d 104, 114 (1st Cir. 1997); see also 5

U.S.C. § 611(a)(1) (permitting judicial review of a

claim that an agency failed to comply with the

requirements of, among other provisions of the RFA, 5

U.S.C. § 605(b)).

The parties agree that the Secretary of HHS

certified that the Revised Rule would not have a

significant economic impact on a substantial number

of small entities. See 84 Fed. Reg. at 34,734. But

Northport argues that CMS failed to provide the

requisite factual basis for that certification. At first

App-32

blush, it appears that Northport is correct; CMS

seemingly did not provide any evidence or reasoning

to support the certification, let alone make a

“reasonable, good-faith effort” to do so. In publishing

the final Revised Rule, CMS provided the following,

cursory explanation of its decision to certify:

The RFA requires agencies to analyze options

for regulatory relief of small entities. For

purposes of the RFA, small entities include

small businesses, nonprofit organizations,

and small government jurisdictions. Most

hospitals and most other providers and

suppliers [subject to the Revised Rule] are

small entities, either by nonprofit status or by

having revenues of less than $7.5 million to

$38.5 million in any 1 year. . . . We are not

preparing an analysis for the RFA because we

have determined, and the Secretary certifies,

that this final rule will not have a significant

economic impact on a substantial number of

small entities.

Id. Considered alone, this paragraph falls short of

other certifications that have passed muster. See, e.g.,

Carpenter, Chartered v. Sec’y of Veterans Affs., 343

F.3d 1347, 1356-57 (Fed. Cir. 2003) (upholding

§ 605(b) certification that clarified that the rule would

not affect small businesses because it “would affect

only the processing of claims by VA” (cleaned up)); Sw.

Penn. Growth All. v. Browner, 121 F.3d 106, 123 (3d

Cir. 1997) (upholding § 605(b) certification that

explained that the rule “d[id] not affect any existing

requirements applicable to small entities nor d[id] it

impose new requirements”).

App-33

In response, CMS argues that the required factual

basis was provided in the prefatory statement to the

agency’s RFA certification. See 84 Fed. Reg. at 34,73334. There, the agency noted that the Revised Rule “will

increase transparency in LTC facilities that cho[o]se

to use arbitration while, at the same time, allowing

facilities to use arbitral forums as a means of resolving

disputes.” Id. at 34,734. It also explained the Revised

Rule’s “Overall Impact,” noting that it will “ensure[]

that no resident will be required to sign a pre-dispute,

binding arbitration agreement as a condition for

receiving the care he or she needs.” Id. We struggle to

see how these statements provide a factual basis for

certifying that the rule will not have a significant

economic impact on a substantial number of small

entities. Although they might describe the Revised

Rule’s intended effects, these statements do not even

purport to consider which entities the rule will affect

or to what degree.

CMS also argues that the required factual basis

for the RFA certification was provided earlier in the

rulemaking process. In the Original Rule, which

covered significantly more than LTC facilities’ use of

arbitration agreements, CMS estimated that the rule

in its entirety would impact less than one percent of

LTC facilities’ annual revenues, an insignificant

economic impact. See 81 Fed. Reg. at 68,846.

Similarly, in the notice of proposed rulemaking of the

Revised Rule, CMS noted that one of its proposals

(ultimately amended for the final rule) would not

impose significant costs or burdens on LTC facilities

because it required what was already a standard

business practice. See 82 Fed. Reg. at 26,652 (“We are

proposing that LTC facilities post a notice regarding

App-34

the use of arbitration agreements in an area that is

visible to residents and visitors. . . . We believe that

notices concerning facility practices are periodically

developed, reviewed, and updated as a standard

business practice. We also believe that facilities that

are already using arbitration agreements post some

type of notice. Thus, there is no burden associated

with the posting of this notice.”).

Yet CMS has not provided any convincing

authority to suggest that an agency may satisfy its

requirements under § 605(b) by relying on factual

bases sprinkled throughout the Federal Register.

Indeed, the plain language of the statute suggests that

the certification and corresponding factual basis

should be supplied by the agency in tandem. See 5

U.S.C. § 605(b) (“If the head of the agency makes a

certification . . . , the agency shall publish such

certification in the Federal Register. . . along with a

statement providing the factual basis for such

certification.” (emphasis added)). And the cases cited

by CMS do not establish that we may consider the

“entire administrative record,” expansively defined to

include the record of a precedent rule, to determine

that CMS satisfied its procedural obligations under

the RFA.

For example, CMS relies upon Michigan v.

Thomas to argue that we must analyze Northport’s

RFA claim in “the context of [CMS’s] overall

rulemaking analysis.” 805 F.2d 176, 188 (6th Cir.

1986). But in Thomas, the Environmental Protection

Agency (EPA) expressly cited in its challenged rule a

previous notice that categorically certified that rules

of that type (i.e., approvals of State Implementation

App-35

Plans) would not affect small entities because they

stood only to approve state regulations already in

place. Id. at 187-88; see also Council for Urological

Interests v. Burwell, 790 F.3d 212, 227 (D.C. Cir. 2015)

(upholding certification as sufficient where HHS

expressly incorporated the rule’s preamble into its

RFA analysis). Similarly, CMS relies upon Carpenter,

Chartered v. Secretary of Veterans Affairs to argue we

must assess compliance with the RFA “in view of the

record as a whole,” including the administrative

record of the Original Rule. 343 F.3d at 1357. But

there, the Federal Circuit found that the Department

of Veterans Affairs (DVA) satisfied § 605(b) because it

expressly noted, when certifying that a regulatory

flexibility analysis was unwarranted, that the rule

would “affect only the processing of claims.” See id. at

1356 (quoting 67 Fed. Reg. at 36,104). Moreover, the

court looked to the record as a whole not to find

whether the DVA provided a factual basis at all but

rather to assess whether the DVA’s certification was

reasonable in light of the factual basis it provided. See

id. at 1357. California Farm Bureau Federation v.

U.S. E.P.A. is similarly not on point. 72 F. App’x 540

(9th Cir. 2003). There, although the court mentioned

in passing that the EPA’s certification “was supported

by [the] EPA’s earlier impact analysis,” it more

importantly noted that the EPA provided a factual

basis along with its certification that the rule would

not have a significant economic impact on a

substantial number of small entities. Id. at 541 (noting

that the “EPA reasoned that few agricultural

operations that qualify as a small business for

purposes of the Act will also qualify as a major source

of pollution,” the subject of the challenged regulation).

App-36

Thus, looking to the Revised Rule and the

certification provided therein, we conclude that CMS

failed to comply with the procedural requirements of

the RFA. However, we conclude that such an error is

harmless. See Env’t Def. Ctr. v. U.S. E.P.A., 344 F.3d

832, 879 (9th Cir. 2003); cf. Nat’l Mining Ass’n v. Mine

Safety & Health Admin., 512 F.3d 696, 701 (D.C. Cir.

2008) (finding that the agency did not need to certify

under § 605(b) that an alternative method of

compliance did not create a significant economic

burden on small businesses because the agency had

already determined that the primary method of

compliance did not). “Failure to comply with the RFA

may be, but does not have to be, grounds for

overturning a rule.” Cement Kiln Recycling Coalition

v. E.P.A., 255 F.3d 855, 868 (D.C. Cir. 2001) (cleaned

up). In granting relief for a violation of the RFA, we

may take corrective actions, including “remanding the

rule to the agency” to conduct a regulatory flexibility

analysis under § 604(a) or to properly certify that such

an analysis is unwarranted under § 605(b). 5 U.S.C.

§ 611(a)(4)(A). But such a remedy is unnecessary

because, as a factual matter, the Revised Rule

unquestionably has less of an economic impact than

the Original Rule had.

Recall that the Original Rule entirely prohibited

LTC facilities from entering into pre-dispute, binding

arbitration agreements with residents. See 81 Fed.

Reg. at 68,690. In promulgating the Original Rule and

pursuant to the RFA, CMS certified that the entire

rule—encompassing not only the arbitration

prohibition but also regulations impacting, among

other things, resident rights, nursing services, food

and nutrition services, and infection control—would

App-37

not result in a significant economic impact to LTC

facilities, costing them less than one percent of their

annual revenue. See 81 Fed. Reg. at 68,846; see also

id. at 68,844 tbl.5 (breaking out by category the

estimated costs to LTC facilities attributable to the

Original Rule’s regulations). In contrast, the Revised

Rule permits LTC facilities to enter into arbitration

agreements with residents so long as they meet the

rule’s other requirements, allowing facilities to reduce

their overall costs by using arbitration as a means of

dispute resolution. See 84 Fed. Reg. at 34,733-34.

Accordingly, the Revised Rule lessens whatever

financial burden was placed on LTC facilities by the

Original Rule, an obvious factual basis for CMS’s

certification that the rule will not have a significant

economic impact on a substantial number of small

entities. See 5 U.S.C. § 605(b).

Therefore, although CMS failed to provide a

factual basis in support of its § 605(b) certification in

the Revised Rule, we conclude that failing to do so was

harmless error.

III. Conclusion

For the foregoing reasons, we affirm the district

court’s grant of summary judgment in favor of HHS

and CMS.

App-38

Appendix B

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

________________

No. 20-1799

________________

NORTHPORT HEALTH SERVICES OF ARKANSAS, LLC,

doing business as Springdale Health and

Rehabilitation Center, et al.,

Plaintiffs-Appellants,

U.S. DEPARTMENT OF HEALTH AND

HUMAN SERVICES, et al.,

Defendants-Appellees.

________________

Filed: Dec. 14, 2021

________________

ORDER

________________

The petition for rehearing en banc is denied. The

petition for rehearing by the panel is also denied.

December 14, 2021

Order Entered at the Direction of the Court:

Clerk, U.S. Court of Appeals, Eighth Circuit.

_________________________________________

/s/ Michael E. Gans

App-39

Appendix C

UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF ARKANSAS

________________

No. 5:19-cv-5168

________________

NORTHPORT HEALTH SERVICES OF ARKANSAS, LLC,

doing business as Springdale Health and

Rehabilitation Center, et al.,

Plaintiffs,

U.S. DEPARTMENT OF HEALTH AND

HUMAN SERVICES, et al.,

Defendants.

________________

Filed: Apr. 7, 2020

________________

MEMORANDUM OPINION AND ORDER

________________

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’ CrossMotion and Response (Doc. 36), and Defendants filed

a Reply brief (Doc. 42), so the matter has now been

App-40

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.

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,

Defendants also filed the administrative record associated

with the rulemaking at issue here. (Doc. 24). Additionally, the

Court received an Amicus Brief in Opposition to Plaintiffs’

Motion for Summary Judgment and In Support of the

Government’s Motion (Doc. 39) filed on behalf of National

Consumer Voice for Quality Long-term Care, American

Association for Justice, Arkansas Trial Lawyers Association, and

Justice in Aging.

App-41

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

2 The Medicare statute refers to “skilled nursing facilities,” and

the Medicaid statute refers to “nursing facilities.” Despite this

difference in terminology, the requirements placed on these

facilities by each statute are materially identical, and the Court

will use the term “facility,” “LTC facility,” or “nursing home” to

refer to both skilled nursing facilities under the Medicare statute

and nursing facilities under the Medicaid statute.

App-42

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

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

App-43

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 LongTerm 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

receiving Medicare and Medicaid funding. Residents

and facilities could still agree to arbitrate once a

dispute arose, but the facility could not enter into a

general agreement to arbitrate any dispute with a

resident or resident’s family before the dispute arose.

Reform of Requirements, 81 Fed. Reg. at 68690.

A few weeks later, the American Health Care

Association and a number of nursing homes sought a

preliminary injunction against the rule in the United

States District Court for the Northern District of

Mississippi. On November 7, 2016, the court granted

a nationwide preliminary injunction, stopping the rule

from going into effect. See Am. Health Care Ass’n v.

Burwell, 217 F. Supp. 3d 921 (N.D. Miss. 2016).

Rather than appealing the preliminary injunction

or pursuing the litigation in the district court, CMS

went back to the drawing board. Inviting comments on

App-44

a revision of the 2016 final rule in June 2017, CMS

indicated that “further analysis is warranted before

any rule takes effect.” Revision of Requirements for

Long-Term Care Facilities: Arbitration Agreements,

82 Fed. Reg. 26649, 26650 (proposed June 8, 2017).

CMS proposed to withdraw its ban on pre-dispute

arbitration agreements and instead place various

conditions on their use, similar to the conditions CMS

had first proposed in 2015. For example, the agency

proposed requiring that any agreement be explained

to the resident in language he or she understands and

that the resident acknowledge such understanding;

that residents not be prohibited or discouraged from

communicating with any federal, state, or local

official; and that the facility save a copy of the

agreement and arbitrator’s final decision for five

years, subject to inspection by CMS. Id. at 26653. CMS

suggested that the new proposal “will achieve a better

balance between the advantages and disadvantages of

pre-dispute arbitration for residents and their

providers.” Id. at 26650.

After another comment period, on July 18, 2019,

CMS promulgated the Final Rule that the Plaintiffs

challenge here, which went into effect on September

16, 2019. In its final form, the Rule adds the following

language regarding binding arbitration agreements to

the regulations governing the administration of LTC

facilities:

(n) Binding arbitration agreements. If a

facility chooses to ask a resident or his or her

representative to enter into an agreement for

binding arbitration, the facility must comply

with all of the requirements in this section.

App-45

(1) The facility must not require any

resident or his or her representative to

sign

agreement

for

binding

arbitration as a condition of admission to,

or as a requirement to continue to receive

care at, the facility and must explicitly

inform the resident or his or her

representative of his or her right not to

sign the agreement as a condition of

admission to, or as a requirement to

continue to receive care at, the facility.

(2) The facility must ensure that:

(i) The agreement is explained to the

resident

and

his

her

representative in a form and manner

that he or she understands,

including in a language the resident

and his or her representative

understands;

(ii) The resident or his or her

representative acknowledges that he

or she understands the agreement;

(iii) The agreement provides for the

selection of a neutral arbitrator

agreed upon by both parties; and

(iv) The agreement provides for the

selection of a venue that is

convenient to both parties.

(3) The agreement must explicitly grant

the resident or his or her representative

the right to rescind the agreement within

30 calendar days of signing it.

App-46

(4) The agreement must explicitly state

that neither the resident nor his or her

representative is required to sign an

agreement for binding arbitration as a

condition of admission to, or as a

requirement to continue to receive care

at, the facility.

(5) The agreement may not contain any

language that prohibits or discourages

the resident or anyone else from

communicating with federal, state, or

local officials, including but not limited

to, federal and state surveyors, other

federal or state health department

employees, and representatives of the

Office of the State Long-Term Care

Ombudsman,

accordance

with

§ 483.10(k).

(6) When the facility and a resident

resolve a dispute through arbitration, a

copy of the signed agreement for binding

arbitration and the arbitrator’s final

decision must be retained by the facility

for 5 years after the resolution of that

dispute on and be available for inspection

upon request by CMS or its designee.

Revision of Requirements for Long-Term Care

Facilities: Arbitration Agreements, 84 Fed. Reg.

34718, 34735-36 (July 18, 2019) (codified at 42 C.F.R.

§ 483.70(n)).

On September 4, 2019, Plaintiffs filed a

Complaint and Motion for Preliminary Injunction in

this Court. (Docs. 2 & 4). Subsequently, the parties

App-47

filed a Joint Motion for Scheduling Order in which the

Government agreed that it would stay enforcement of

the Rule as to Plaintiffs and associated entities to

allow the Court to rule on cross-motions for summary

judgment the parties would file. (Doc. 16). That motion

was granted by the Court. (Doc. 23). Ultimately, the

Government agreed to extend the stay of enforcement

as to Plaintiffs until April 17, 2020. 3 (Doc. 43).

Plaintiffs claim to be harmed by four elements of

the Final Rule in particular: (1) the requirement that

an agreement to arbitrate not be made a condition for

admission to the facility (42 C.F.R. § 483.70(n)(1)); (2)

the requirement that the agreement be explained in

language the resident or her representative

understands (§ 483.70(n)(2)(i)); (3) the 30-day right of

rescission for residents who sign pre-dispute

arbitration agreements (§ 483.70(n)(3)); and (4) the 5year retention requirement (§ 483.70(n)(6)). Plaintiffs

challenge these elements of the Final Rule under the

Administrative Procedures Act (“APA”), which allows

a party harmed by an agency action to seek judicial

review of that action. 5 U.S.C. § 702. Upon review, the

court must set aside agency action that is “arbitrary,

capricious, an abuse of discretion, or otherwise not in

accordance with law; . . . in excess of statutory

jurisdiction, authority, or limitations; [or] without

observance of procedure required by law.” 5 U.S.C.

§ 706(2)(A), (C) & (D). The First Amended Complaint

raises five claims under the APA. (Doc. 25). First,

Plaintiffs assert that the Final Rule is “not in

3 While the Government agreed to extend the stay, it did not

concede that the public interest or any other factor favored

delaying the implementation of the Final Rule.

App-48

accordance with law” because it violates the Federal

Arbitration Act (“FAA”). In Claims Two and Three,

Plaintiffs argue that the Rule violates the APA

because it exceeds CMS’s authority under the

Medicare and Medicaid statutes. Claim Four asserts

that the Rule is arbitrary and capricious because there

is a lack of empirical evidence to support the position

taken by the agency and it is an unreasoned departure

from CMS’s past positions on the issue of binding

arbitration. Finally, Plaintiffs assert that CMS has

also violated the Regulatory Flexibility Act (“RFA”) by

failing to acknowledge and analyze fully the economic

impact of the Final Rule. Plaintiffs therefore ask the

Court to strike down the Rule.

For its part, the Government asserts that the

Final Rule is not in conflict with the FAA or that if it

is, CMS nevertheless has the authority to promulgate

the Rule as a condition on the receipt of federal

funding. The Government further argues that the

Rule is within the scope of its authority and is

adequately supported by the record. Finally, the

Government asserts that it complied with the

requirements of the RFA. Therefore, the Government

asks the Court to uphold CMS’s rulemaking on all

grounds.

II. DISCUSSION

A. The Rule Does Not Violate the Federal

Arbitration Act

Plaintiffs’ first argument is that the Rule violates

the FAA and therefore must be set aside under the

APA as “not in accordance with law.” 5 U.S.C.

§ 706(2)(A). The FAA provides, in relevant part, that

“[a] written provision . . . to settle by arbitration a

App-49

controversy thereafter arising out of such contract or

transaction . . . shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or

in equity for the revocation of any contract.” 9 U.S.C.

§ 2. Plaintiffs argue that because the Rule imposes

special requirements on the formation of enforceable

arbitration agreements that do not apply to any other

kind of contract, it violates the FAA, which requires

the equal treatment of arbitration agreements and

any other contract.

The Government also moves for summary

judgment on this point, arguing that the Final Rule

does not violate the FAA. The Government attempts

to distinguish between “legal rules,” which are

“wielded to preclude or invalidate an agreement to

arbitrate,” and “procedural rules” that “form no legal

barrier to the creation or enforcement of arbitration

contracts.” (Doc. 29, p. 24). The Government argues

that the FAA “has no bearing” on the Final Rule at

issue here because the Rule does not prevent nursing

homes from forming binding arbitration agreements

or undermine the enforceability of any arbitration

agreement that is already in place. (Doc. 29, p. 15).

Requirements about what a nursing home “must and

must not do when attempting to persuade patients to

arbitrate,” the Government argues, are “no legal

impediment to enforcement of any arbitration

agreement residents and nursing homes ultimately

sign.” Id.

In its Reply brief, the Government is even more

explicit: While “violating the Rule can carry

consequences for a nursing home’s ability to

participate in Medicare and Medicaid, a nursing home

App-50

can still enforce any agreement it enters into in

violation of the procedures that the Rule sets out.”

(Doc. 42, p. 10). Rather, “any violation of the Rule is

an issue between the nursing home and CMS, which

conditions its payments to the nursing home on that

home following applicable guidelines.” Id. at 11. In

other words, a participating nursing home may choose

to enter into a pre-dispute binding arbitration

agreement without complying with the procedural

requirements laid out in the Final Rule, and if a

resident were to sue the nursing home, the facility

could seek to compel arbitration pursuant to the

agreement and expect a court to enforce the

agreement. At the same time, however, the nursing

home would be exposing itself to the possibility of

corrective action by CMS for a violation of the facility’s

participation agreement. But, as the Government

points out, a nursing home “could rationally choose to

accept a fine as the price for negotiating an agreement

the way it wants.” Id.

CMS also made this argument regarding the

Final Rule’s validity in the administrative record. In

proposing and finalizing the Rule, CMS asserted that

the Rule “does not purport to regulate the

enforceability of any arbitration agreement, and does

not pose any conflict with the language of the FAA.”

Revision of Requirements, 82 Fed. Reg. at 26651. See

also Revision of Requirements, 84 Fed. Reg. at 34718.

In discussing the conditions on the use of pre-dispute

arbitration agreements the agency proposed back in

2015, which are substantially similar to those in the

Final Rule challenged here, the agency stated that the

“regulations are not meant to limit or provide

standards for courts to use in determining if an

App-51

arbitration agreement should be enforced in, for

example, a motion to compel arbitration.” Reform of

Requirements, 81 Fed. Reg. at 68799.

The Court recognizes that, generally, the

distinction that the Government tries to draw between

“legal” rules that declare arbitration agreements

invalid and “procedural” rules, which simply place

requirements on the formation of such agreements,

could not save the Final Rule from conflict with the

FAA. The cases on which the Plaintiffs rely,

particularly Doctor’s Associates, Inc. v. Casarotto, 517

U.S. 681 (1996), and Kindred Nursing Centers Limited

Partnership v. Clark, 137 S. Ct. 1421 (2017), make

clear that “[a] rule selectively finding arbitration

contracts invalid because improperly formed fares no

better under the Act than a rule selectively refusing to

enforce those agreements once properly made.”

Kindred Nursing, 137 S. Ct. at 1428.

In Casarotto, for example, the Supreme Court

considered the following Montana state law: “Notice

that a contract is subject to arbitration . . . shall be

typed in underlined capital letters on the first page of

the contract; and unless such notice is displayed

thereon, the contract may not be subject to

arbitration.” 517 U.S. at 684. The Montana Supreme

Court upheld the state law, holding that the first-page

requirement was a procedural issue that “did not

undermine the goals and policies of the FAA, for the

notice requirement did not preclude arbitration

agreements altogether; it simply prescribed ‘that

before arbitration agreements are enforceable, they be

entered knowingly.’” Id. at 685 (quoting the state

supreme court decision, Casarotto v. Lombardi, 886

App-52

P.2d 931, 939 (Mont. 1994)). The Supreme Court

reversed. It held that the FAA preempted the state

notice requirement because, in enforcing the

procedural rule, a court “would not enforce the

arbitration clause in the contract between [the

parties]; instead Montana’s first-page notice

requirement would invalidate the clause.” Id. at 688.

Similarly, in Kindred Nursing, the plaintiffs

argued that there is a “distinction between contract

formation and contract enforcement,” and the

Kentucky Supreme Court’s “clear-statement rule,”

requiring that a power-of-attorney expressly include

the power to waive the right to a jury trial, should be

upheld because it dealt only with formation. 137 S. Ct.

at 1428. The Supreme Court rejected this argument,

however, holding, as quoted above, that “[a] rule

selectively finding arbitration contracts invalid

because improperly formed fares no better under the

Act than a rule selectively refusing to enforce those

agreements once properly made.” Id.

Thus, if the failure to comply with the procedural

requirements in the Final Rule were a basis for

holding an agreement to arbitrate invalid and

unenforceable, the Rule would indeed conflict with the

FAA. Here, in contrast, the Final Rule places

requirements on the use of arbitration agreements

that do not undermine the validity or enforceability of

the agreement when it comes before a court. Instead,

the Rule only establishes conditions of the facility’s

receipt of federal subsidies. Imagine, for example, that

a nursing home participating in the Medicare and

Medicaid programs had a resident sign an agreement

to arbitrate without having “explained [it] in a form

App-53

and manner that he or she understands” and without

having received the resident’s “acknowledge[ment]

that he or she understands that agreement,” in

violation of 42 C.F.R. §§ 483.70(n)(2)(i) & (ii). If the

nursing home subsequently sought to enforce the

agreement in court, the nursing home’s violation of the

Final Rule would not prevent enforcement. Since

failure to comply with the Rule’s requirements does

not prevent the enforcement of arbitration agreements

between an LTC facility and a resident, the Court

finds no conflict with the FAA.

A district court in the District of Columbia

recently reached a similar conclusion in California

Association of Private Postsecondary Schools v. Devos,

2020 WL 516455 (D.D.C. Jan. 31, 2020) [hereinafter

CAPPS]. There, the plaintiffs challenged a final rule

promulgated by the Department of Education (“DOE”)

requiring that schools whose students receive funding

from the Federal Direct Loan program “not enter into

a predispute agreement to arbitrate a borrower

defense claim, or rely in any way on a predispute

arbitration agreement with respect to any aspect of a

borrower defense claim.” Id. at *5 (quoting 34 C.F.R.

§ 685.300(f)(1)(i)). In determining that the rule did not

conflict with the FAA, the court noted that

“[i]nstitutions of higher education remain free to seek

and to invoke predispute . . . arbitration agreements,

and, when confronted with any such agreement that is

otherwise enforceable, courts must—and will—

enforce the agreement.” Id. at *8. DOE’s rule, the

court noted, “does not provide a basis for a student to

resist a motion to compel arbitration” nor “to stay a

judicial proceeding pending arbitration.” Id. The court

concluded that since “the regulations do not purport to

App-54

invalidate or to render unenforceable any arbitration

agreement,” the plaintiff’s argument invoking

Kindred Nursing was unpersuasive. Id. “[T]o the

extent CAPPS suggests that Kindred Nursing holds—

or even implies—that agencies may not dissuade

program participants from entering into arbitration

agreements that relate to the federal programs they

administer, that contention bears no relation to what

the Supreme Court considered or held.” Id. at *9.

B. The Rule is a Valid Condition on Federal

Funds

Plaintiffs argue that the mere fact of disfavoring

arbitration by placing additional requirements on the

formation of arbitration agreements that do not apply

to other contracts is a violation of the FAA. Pursuant

to the Court’s ruling in Epic Systems Corp. v. Lewis,

138 S. Ct. 1612 (2018), Plaintiffs argue HHS cannot be

permitted to promulgate the Final Rule without

explicit authorization from Congress, which it lacks.

The Government argues that even if there is a

conflict between the FAA and the Final Rule, CMS has

the authority to promulgate this regulation as a

condition on the receipt of federal funds. The Rule

should be upheld because it “imposes conditions only

on entities that choose to accept federal funds—not on

a universe of unwilling private parties.” (Doc. 29,

p. 28). In Reply, Plaintiffs argue that this is a false

choice—without Medicare and Medicaid dollars,

Plaintiffs and other nursing homes like them would go

out of business because LTC facilities “typically serve

a patient base that is predominantly part of these

federal programs.” (Doc. 36, p. 17). For example,

Plaintiffs attach affidavits from administrators of two

App-55

Plaintiff LTC facilities attesting that Medicare and

Medicaid funding pay for more than 70 percent of the

residents at each facility. See Docs. 25-3 & 25-4 at ¶ 3.

The “choice” between complying with the Final Rule

or withdrawing from Medicare and Medicaid,

Plaintiffs argue, therefore exceeds the federal

government’s authority and constitutes impermissible

“‘economic dragooning’ that leaves participants in a

federal program with ‘no real option but to acquiesce’

to the government’s demands.” (Doc. 36, p. 17 (quoting

NFIB v. Sebelius, 567 U.S. 519, 582 (2012))).

Epic Systems Is Inapposite in the

Context of Federal Spending Power

First, the Court finds that the facts of this case,

which restrict only those parties who voluntarily

choose to avail themselves of federal funding through

the Medicaid and Medicare programs, are not

governed by Epic Systems, and CMS did not need

explicit authorization from Congress to implement the

Final Rule. In Epic Systems, the Supreme Court

considered an interpretation of the National Labor

Relations Act (“NLRA”) by the agency charged with

administering the NLRA, the National Labor

Relations Board (“NLRB”) that would have rendered

invalid and unenforceable a particular class of

arbitration agreements. The Supreme Court held that

the NLRB did not have the authority to interpret the

NLRA “in a way that limits the work of [the FAA]. And

on no account might we agree that Congress implicitly

delegated to an agency authority to address the

meaning of a second statute it does not administer.”

138 S. Ct. at 1629. An agency may not “seek to

diminish the second statute’s scope in favor of a more

App-56

expansive interpretation of its own,” id., without

Congress having made its intent to empower the

agency in this way “clear and manifest.” Id. at 1624.

Here, in contrast, the Final Rule does not purport

to bar the use of arbitration agreements in the heath

care industry generally but only to place conditions on

the use of such agreements by voluntary participants

in a federally funded program. CMS expressly

disavows any intent to limit the enforceability of any

arbitration agreement. See, e.g., Revision of

Requirements, 82 Fed. Reg. at 26651; Revision of

Requirements, 84 Fed. Reg. at 34718. The Secretary’s

exercise of his statutory responsibility does not “limit

the work” of the statutory language of the FAA. The

FAA allows private parties to agree to arbitrate

disputes that might arise between them in the future

and to have those agreements enforced according to

their terms, on equal footing with any other contract.

But there is nothing in the text of the FAA that limits

an agency’s prerogative to place conditions on the

receipt of federal funding in order to achieve the goals

of the federal program, nor have the parties cited the

Court to any precedent so holding. The Court declines

to expand Epic Systems in this way.

The court in CAPPS reached a similar conclusion.

The plaintiffs asserted that “Epic Systems stands for

the proposition that ‘federal Departments and

agencies . . . may not, in the absence of explicit

congressional authorization, invalidate or otherwise

discriminate against arbitration agreements.’” 2020

WL 516455, at *9 (quoting Plaintiff’s Motion for

Summary Judgment at 16 (No. 17-cv-999), ECF No.

83-1). The court did not disagree with this summary of

App-57

the holding but pointed out that the plaintiff could

identify “no support for its further contention that

federal agencies lack authority to disfavor arbitration

agreements in any respect. Epic Systems certainly

does not support that sweeping proposition.” 2020 WL

516455, at *9. Thus, the Court concludes that Epic

Systems is inapposite and neither finds, nor is directed

to, authority indicating that an agency must have

explicit authorization from Congress to regulate the

use of binding pre-dispute arbitration agreements by

voluntary participants in a federal program it

administers.

The Final Rule Does Not Disfavor

Arbitration and is Related to the

Purposes of Medicare and Medicaid

The federal government has broad authority to

place conditions on the use of funds it distributes, even

broader than its authority to impose direct

restrictions, so long as those conditions are related to

the goals of the program. See, e.g., South Dakota v.

Dole, 483 U.S. 203 (1987) (“[C]onditions on federal

grants might be illegitimate if they are unrelated to

the federal interest in particular national projects or

programs.” (internal quotation marks omitted)); Van

Wyhe v. Reisch, 581 F.3d 639, 650 (8th Cir. 2009)

(“[C]onditions on federal funds must be related to the

federal interest in particular national projects or

programs . . . .”). The Supreme Court has often

repeated its conclusion that the FAA is “a

congressional declaration of a liberal federal policy

favoring arbitration agreements,” Moses H. Cone

Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24

(1983), but the Court has also made clear that the

App-58

government’s refusal to provide funds for a particular

activity, even one involving the exercise of a

fundamental right, cannot be considered to infringe,

interfere with, or penalize that right. See Rust v.

Sullivan, 500 U.S. 173, 193 (1991). (“‘[A] legislature’s

decision not to subsidize the exercise of a fundamental

right does not infringe the right.’ . . . ‘A refusal to fund

protected activity, without more, cannot be equated

with the imposition of a ‘penalty’ on that activity.’”)

(quoting Regan v. Taxation With Representation of

Wash., 461 U.S. 540, 549 (1983) and Harris v. McRae,

448 U.S. 297, 317 n.19 (1980)). Thus, though the FAA

protects an individual’s right to have an arbitration

agreement enforced on the same terms as any other

contract, the government does not infringe upon that

right or “disfavor” arbitration when it limits the use of

such agreements to pursue the policy goals of a

federally funded program. As the court concluded in

CAPPS:

There is, in short, a vast difference between

an agency’s use of its regulatory authority to

impose stricter regulatory requirements on

parties that opt to use arbitration in

transactions not involving public funds and

an agency requiring participants in a federal

program to eschew predispute arbitration

clauses in transactions involving the

disbursement . . . of billions of dollars of

taxpayer funds as a precondition to

participation in that federal program.

CAPPS, 2020 WL 516455, at *12 (emphasis added).

The Court finds that the conditions in the Rule are

reasonably related to the federal interest in the

App-59

Medicare and Medicaid programs. The federal

government expends tens of billions of dollars

annually to subsidize healthcare for eligible

participants in order to ensure their access to

healthcare services. See Reform of Requirements, 81

Fed. Reg. at 68690. CMS describes its substantial

interest in the contractual relationship between the

LTC facility and the resident as follows:

Unlike traditional arms-length commercial

contracts that are, for the most part, business

arrangements

between

two

private

individuals, the Medicare and Medicaid

programs have a significant interest in both

the services being delivered as well as the

well-being of the beneficiary. In many cases,

Medicare and Medicaid are the sole payors for

the services. That’s why, for example,

Congress has required that the Secretary

create a wide assortment of rules and

regulations relating to quality of care and the

delivery of services in the LTC context.

Reform of Requirements, 81 Fed. Reg. at 68796. 4 The

administrative record provides sufficient support for

4 Similar logic was central to the court’s reasoning in upholding

the regulation prohibiting reliance on pre-dispute arbitration

agreements in CAPPS, observing that the DOE “is not acting as

a disinterested regulator but as the administrator of a multibillion-dollar program and as a participant in the transaction

between the student borrowers and the schools they attend.”

2020 WL 516455, at *10. The Court recognizes that, unlike the

DOE in CAPPS, CMS does not necessarily face increased

financial liability from the unrestricted use of arbitration

agreements. But an LTC facility is able to contract with the

resident because CMS has approved the facility’s participation as

App-60

the relationship between the Final Rule and the

provision of federally funded care in LTC facilities.

The conditions on the use of pre-dispute arbitration

agreements were put in place to “ensure that residents

will not be forced to sign arbitration agreements to

receive the care they need” and that a resident “is not

placed in the position of deciding between signing an

arbitration agreement or . . . not receiving the care at

the facility that he or she needs.” Revision of

Requirements, 84 Fed. Reg, at 34724. The Final Rule

was designed to accomplish the goal of “protecting

resident’s rights in matters concerning the arbitration

process” by decoupling the process of seeking care in a

facility that can meet the resident’s medical needs

from the agreement to arbitrate. Id. at 34725. CMS

has observed that “many residents or their families

usually do not have many LTC facilities to choose

from” and determined that “no one should have to

choose between receiving care and signing an

arbitration agreement.” Id. at 34728. The dispute

requirements in 42 C.F.R. § 483.70(n)(1)-(3) ensure

that a pre-dispute agreement to arbitrate is not a

barrier for a resident to access care. The provisions

allow prospective residents “to choose a LTC facility

based upon what is best for the resident’s health and

safety” without having to forgo access to a judicial

forum in exchange. Id. at 34735.

Similarly, the requirement that the facility retain

copies of agreements and decisions by arbitrators

where disputes were subject to arbitration helps hold

a provider and will pay for the care provided to the resident. CMS

therefore has an interest in ensuring the LTC facility does not

leverage the resident’s need for care to deprive her of other rights.

App-61

facilities accountable for the quality of care they

provide. Id. at 34726. CMS determined that “concerns

about a link between the use of arbitration

agreements and quality of care can be alleviated by

ensuring that surveyors have access to key documents

relating to the arbitration.” Id. at 34728. The

regulations are reasonably related to achieving these

goals, and CMS has the authority to impose them.

The Final Rule Does Not Constitute

Economic Dragooning

The Court is not persuaded by Plaintiffs’ attempt

to invoke NFIB v. Sebelius to invalidate the Final Rule

as a condition of federal funding. In NFIB, the

Supreme Court struck down as overly coercive a

section of the Affordable Care Act intended to

incentivize each state to expand its Medicaid program

by withdrawing all of its federal Medicaid funding if

the state did not comply. The plurality’s holding

regarding the impermissible coerciveness of the

condition, however, was based on the constitutional

balance of power between the state and federal

governments. A state’s acquiescence to the federal

government’s conditions must be voluntary to ensure

that “Spending Clause legislation does not undermine

the status of the States as independent sovereigns in

our federal system.” 567 U.S. at 577. Where a state’s

decision not to comply with conditions placed on

federal funding is so significant that it constitutes

“economic dragooning that leaves the States with no

real option but to acquiesce,” id. at 582, the conditions

must be struck down because the state’s participation

is no longer voluntary.

App-62

No part of the Court’s decision in NFIB touched

on the government’s power to place conditions on

private entities. In fact, Courts of Appeals have held

time and time again that the participation of private

entities in Medicare and Medicaid is always

voluntary, and providers can avoid regulations to

which they object by choosing not to participate in

Medicare or Medicaid. “Nursing homes, unlike public

utilities, have freedom to decide whether to remain in

business and thus subject themselves voluntarily to

the limits imposed” by the Medicaid program. Minn.

Ass’n of Health Care Facilities, Inc. v. Minn. Dep’t of

Pub. Health, 742 F.2d 442, 446 (8th Cir. 1984)

[hereinafter, MAHCF]. “It is, of course, only through

voluntary participation in the state’s Medicaid

program that a nursing home falls within the

purview” of a challenged regulation. Id. See also

Livingston Care Ctr., Inc. v. United States, 934 F.2d

719, 720 (6th Cir. 1991) (“[P]articipation in the

Medicare program is a voluntary undertaking.”); St.

Francis Hosp. Ctr. v. Heckler, 714 F.2d 872, 875 (7th

Cir. 1983) (same).

This is true even where providers argued that

choosing not to participate in the Medicare and

Medicaid programs would cause them to earn less

revenue and undermine their viability. “Despite the

strong financial inducement to participate in

Medicaid, a nursing home’s decision to do so is

nonetheless voluntary.” MAHCF, 742 F.2d at 446. See

also Se. Ark. Hospice, Inc. v. Burwell, 815 F.3d 448

(2016) (holding that hospice provider’s voluntary

participation in Medicare “forecloses the possibility

that the statute could result in an imposed taking of

private property which would give rise to the

App-63

constitutional right of just compensation” (quoting

MAHCF, 742 F.2d at 446)); St. Francis, 714 F.2d at

875 (“Providers who opt not to participate are free to

serve persons not covered by Medicare and those

potential Medicare recipients who are willing to forego

Medicare benefits for the services provided. As a

practical matter, perhaps few of those persons eligible

for Medicare would choose a non-participating

hospital, but the fact that practicalities may in some

cases dictate participation does not make

participation involuntary.”); Cf. Livingston Care Ctr.,

934 F.2d at 720-21 (affirming the dismissal of a

nursing home’s suit for wrongful termination after it

was terminated from Medicare and was forced to

declare bankruptcy, noting that “[j]ust as those who

choose to serve individuals not covered by Medicare

assume the risks of the private market, those who opt

to participate in Medicare are not assured of

revenues”). Having chosen to structure their private

businesses to be heavily dependent on Medicare and

Medicaid funding, Plaintiffs cannot now argue that

dependence somehow shields them from CMS’s efforts

to protect the beneficiaries of those programs. Thus,

Plaintiff’s argument regarding the coercive nature of

their “choice” does not undermine CMS’s authority to

implement the Final Rule.

In summary, the Court concludes that the Rule

codified at 42 C.F.R. § 483.70(n) does not conflict with

the FAA because it does not interfere with the validity

or enforceability of any arbitration agreement. To the

extent that the Final Rule places limitations on the

use of arbitration agreements by LTC facilities, it

cannot be said to disfavor such agreements. Rather,

CMS has reasonably imposed these restrictions as

App-64

conditions by which an LTC facility must abide to

receive federal dollars from the Medicare and

Medicaid programs. The regulations are reasonably

related to the policy goals of the Medicare and

Medicaid programs and are therefore a permissible

use of the Government’s authority to place conditions

on the use of federal funds.

C. The Rule is Within the Secretary’s

Statutory Authority

The Government cites two sections of the

Medicare and Medicaid statutes as the basis for its

statutory authority. See Revision of Requirements, 84

Fed. Reg. at 34718.

It is the duty and responsibility of the

Secretary to assure that requirements which

govern the provision of care in [participating

LTC facilities], and the enforcement of such

requirements, are adequate to protect the

health, safety, welfare, and rights of residents

and to promote the effective and efficient use

of public moneys.

42 U.S.C. §§ 1395i-3(f)(1) & 1396r(f)(1).

A [participating LTC facility] must meet such

other requirements relating to the health,

safety, and well-being of residents or relating

to the physical facilities thereof as the

Secretary may find necessary.

42 U.S.C. §§ 1395i-3(d)(4)(B) & 1396r(d)(4)(B). 5

5 The Court also notes that while the Government does not rely

on this statutory authority in promulgating the Final Rule or in

its briefs, the administrative record also refers to 42 U.S.C.

§§ 1395i-3(c)(1)(A)(xi) & 1396r(c)(1)(A)(xi), which require that an

App-65

The Government argues that the Rule falls within

the plain language of these authorizing provisions,

protecting the health, safety, welfare, and rights of

Medicare and Medicaid recipients. If it is ambiguous

whether the statute encompasses the new regulations,

the Government argues that CMS’s interpretation of

the extent of its authority is entitled to deference

pursuant to Chevron, U.S.A., Inc. v. Natural Resource

Defense Council, Inc., 467 U.S. 837 (1984).

The bulk of Plaintiffs’ opposition centers on the

argument that, pursuant to Epic Systems, the

Secretary must have explicit authorization from

Congress to regulate the use of arbitration. That

argument has already been addressed and rejected

above. In the alternative, Plaintiffs argue that the

statute grants the Secretary narrower authority than

the Government believes: “Congress actually confined

Defendants’ authority to regulate to ‘the provision of

care’ provided ‘in skilled nursing facilities,’ and did not

authorize any regulation that might arguably promote

the ‘health, safety, welfare, and rights of residents.’”

(Doc. 27, p. 30 (quoting 42 U.S.C. § 1395i-3(f)(1) with

emphasis added)). Plaintiffs argue that a permissible

restriction must be linked to “how long-term care

providers administer care to residents,” not a

“condition precedent to the provision of care.” Id. at pp.

30-31. Regulation of a facility’s admissions policies,

LTC facility “protect and promote the rights of each resident,”

including “[a]ny other right established by the Secretary.” The

Court agrees with CMS that with this statutory provision,

“Congress has expressed an [sic] clear interest in protecting the

rights of Medicare and Medicaid beneficiaries in LTC facilities.”

Reform of Requirements, 81 Fed. Reg. at 68796.

App-66

Plaintiffs argue, does not fall within the statutory

language authorizing regulation.

The Supreme Court established the legal

standard for judicial review of an agency’s

construction of the statute it administers in Chevron.

First a court must consider “whether Congress has

directly spoken to the precise question at issue,” in

which case Congress’s command is controlling. Id. at

842. But where “the statute is silent or ambiguous

with respect to the specific issue, the question for the

court is whether the agency’s answer is based on a

permissible construction of the statute.” Id. at 843.

When Congress, through its silence, implicitly

delegates authority to an agency, “a court may not

substitute its own construction of a statutory

provision for a reasonable interpretation made by the

administrator of an agency.” Id. at 844. Therefore, the

Court “must decide (1) whether the statute

unambiguously forbids the Agency’s interpretation,

and, if not, (2) whether the interpretation, for other

reasons, exceeds the bounds of the permissible.”

Barnhart v. Walton, 535 U.S. 212 (2002).

The Court does not find any statutory language

that would forbid CMS from enacting the Final Rule.

On the contrary, the statutory language is broad. It

does not just empower the Secretary to develop a

solution to a particular problem; it is gives the

Secretary the responsibility to identify areas where

there is inadequate protection for the “health, safety,

welfare, and rights” of Medicare and Medicaid

recipients and to promulgate regulations governing

the provision of care in LTC facilities to provide

needed protection. 42 U.S.C. §§ 1395i-3(f)(1) &

App-67

1396r(f)(1). Sections 1395i-3(d)(4)(B) & 1396r(d)(4)(B)

contain an even broader mandate to promulgate any

regulations necessary for the “health, safety, and wellbeing” of residents. The Court reads this statutory

language as granting discretion to the Secretary to

make the regulations he finds necessary based on

CMS’s experience administering the Medicare and

Medicaid programs, and the Court must defer to the

agency’s judgment so long as it is reasonable.

Plaintiffs do not cite the Court to any language

that would forbid CMS’s interpretation of the

regulation. At most, Plaintiffs point to the fact that

Congress has considered, but failed to enact,

legislation banning the use of pre-dispute arbitration

agreements as evidence that Congress would not wish

CMS to regulate such agreements in this way. The

Court notes that the regulations in the Final Rule do

not rise to the level of the complete prohibition

contemplated by proposed legislation. More to the

point, however, “[c]ongressional inaction lacks

persuasive significance because several equally

tenable inferences may be drawn from such

inaction. . . .” Pension Benefit Guar. Corp. v. LTV

Corp., 496 U.S. 633, 650 (1990) (analyzing agency

action under Chevron and declining to conclude that

Congress had expressed its position by considering,

but not enacting, a provision relevant to the agency’s

rulemaking) (internal quotation marks omitted).

Here, for example, the Court could just as easily

conclude from Congress’s inaction that it believed

CMS had the authority to regulate the use of predispute arbitration agreements and would do so if

such regulation were necessary, so that there was no

need for Congress to act. The ambiguity of

App-68

congressional inaction is further underscored in this

case by the fact that CMS received multiple pieces of

correspondence from members of Congress regarding

its rulemaking on arbitration agreements, each taking

a different position. See Reform of Requirements, 81

Fed. Reg. at 68790. Therefore, the Court concludes

that at the first stage of the Chevron inquiry, there is

no congressional command that forbids the agency’s

interpretation of its authority.

At the second step of the Chevron analysis, the

Court finds that it was reasonable for CMS to

determine that it had the authority to promulgate the

Final Rule. The restrictions on the use of pre-dispute

arbitration agreements are intended to protect the

resident by preventing the nursing home from

leveraging the resident’s need to access care to achieve

other goals not related to that resident’s medical care.

CMS observed that when arbitration agreements are

included as part of the admissions process, they “are

often made when the would-be resident is physically

and possibly mentally impaired, and is encountering

such a facility for the first time. In many cases,

geographic and financial restrictions severely limit

the choices available to an LTC resident.” Id. at 68792.

It was reasonable for the agency to conclude that

preventing a facility from refusing to serve a resident

in need of medical care who declined to enter into a

pre-dispute arbitration agreement was necessary to

protect the health, safety, welfare, and rights of

residents.

Furthermore, the protections CMS has put in

place are consistent with other existing statutory and

regulatory protections for residents. For example, the

App-69

administrative record provides several examples of

“rules mandating that suppliers of health care items

and services forgo contractual and other commercial

rights they might otherwise have with respect to

Medicare and Medicaid patients,” such as restrictions

on marketing to program participants, a requirement

to give written advance notice to residents of noncovered services, and a limitation on the right of the

facility to pursue payment from a patient who could

not have known the service would not be covered by

Medicare. Id. at 68791. The Court agrees with CMS

that these restrictions “evince a Congressional and

administrative

understanding

that

business

arrangements with Medicare and Medicaid patients

are not typical commercial contracts where both

parties engage in arms-length bargaining.” Id.

Additionally, section 483.15 of the Medicare and

Medicaid regulations establishes other requirements

for an LTC facility’s admissions policy, including

multiple regulations intended to ensure the facility is

not leveraging the resident’s need for care to

accomplish other goals. Plaintiffs’ argument that the

language of the statute limits the Secretary’s

authority to regulate how care is provided is

particularly unpersuasive in light of the regulations

discussed here. For example, the regulations establish

that a facility must not “request or require residents

or potential residents to waive potential facility

liability for losses of personal property” as a condition

of admission. 42 C.F.R. § 483.15(a)(2)(iii). Nursing

facilities participating in Medicaid also may not

“charge, solicit, accept, or receive . . . any gift, money,

donation, or other consideration as a precondition of

admission, expedited admission or continued stay in

App-70

the

facility.”

§ 438.15(a)(4).

LTC

facilities

participating in Medicaid also cannot “condition the

resident’s admission or continued stay” at the facility

on his or her willingness to purchase “additional

services” not covered by the state’s Medicaid plan.

§ 483.15(a)(4)(i). Nursing homes are also required to

“disclose and provide to a resident or potential

resident prior to time of admission, notice of special

characteristics or service limitations of the facility.”

§ 483.15(a)(6).

These regulations establish requirements for the

facilities’ admissions policies, which are conditions

precedent to the resident’s admission to the facility.

The Final Rule similarly limits a facility’s ability to

leverage the resident’s need for medical care to make

other demands on the resident. CMS, recognizing that

an agreement to arbitrate can be valuable to both

parties if entered into knowingly and voluntarily, has

reasonably chosen not to prohibit such agreements

altogether, but to use regulations to protect the

patient’s health, safety, welfare, and rights by

decoupling the resident’s ability to receive care in a

particular LTC facility from her decision whether or

not to sign a pre-dispute arbitration agreement.

Additionally, given CMS’s conclusion that “the secrecy

surrounding the arbitration process is a substantial

concern” and that because of this secrecy, arbitration

“could result in some facilities evading responsibility

for substandard care,” Reform of Requirements, 81

Fed. Reg. at 68797-98, the retention requirement

found at § 483.70(n)(6) is a reasonable exercise of the

Secretary’s responsibility to ensure that CMS is able

to enforce the program requirements.

App-71

For these reasons, the Court concludes that the

Final Rule is a reasonable exercise of the authority

delegated to the Secretary by the Medicare and

Medicaid statutes and is entitled to deference under

Chevron.

D. The Rulemaking Was Not Arbitrary and

Capricious

Plaintiffs challenge the Rule as arbitrary,

capricious, and an abuse of discretion on two separate

grounds. The Court will address each in turn.

Empirical Data Was Not Necessary

First, Plaintiffs argue that the Government does

not have the empirical data to support the Rule—in

fact, one rationale for the Rule’s retention

requirement is to allow CMS to collect such data. See

Revision of Requirements, 84 Fed. Reg. at 34728. The

Government acknowledges that there is “little solid

social science research” indicating the effect of binding

pre-dispute arbitration on the quality of care received

by residents. Id. at 34722. However, the Government

argues that it is not obliged to rely on empirical

evidence and has provided a sufficiently reasoned

basis for the Final Rule.

The standard of review to determine if a change

in regulation is arbitrary and capricious is the same

as promulgation of a new rule. Motor Vehicle Mfrs.

Ass’n of U.S. v. State Farm Mut. Auto. Ins. Co., 463

U.S. 29, 41 (1983). The Supreme Court has described

this standard as upholding a rule that is “rational,

based on consideration of the relevant factors and

within the scope of the authority delegated to the

agency by the statute.” Id. at 42. The scope of the

court’s review “is narrow and a court is not to

App-72

substitute its judgment for that of the agency.

Nevertheless, the agency must examine the relevant

data and articulate a satisfactory explanation for its

action including a ‘rational connection between the

facts found and the choice made.’” Id. at 43 (quoting

Burlington Truck Lines v. United States, 371 U.S. 156,

168 (1962)). The Court must rely only on the rationale

that the agency offers without “supply[ing] a reasoned

basis for the agency’s action that the agency itself has

not given.” Id. (quoting SEC v. Chenery Corp., 332 U.S.

194, 196 (1947)). However, the Court may “uphold a

decision of less than ideal clarity if the agency’s path

may reasonably be discerned.” Id. (quoting Bowman

Transp. Inc. v. Arkansas-Best Freight Sys., Inc., 419

U.S. 281, 286 (1974)).

To satisfy this standard, “it is highly desirable

that the agency: independently amass the raw data;

verify the accuracy of that data; apply that data to

consider several alternative courses of action; and

reach a result confirmed by the comments and

submissions of interested parties.” Nat’l Ass’n of

Regulatory Util. Comm’rs v. FCC, 737 F.2d 1095, 1124

(D.C. Cir. 1984). However, the Courts of Appeals have

recognized that it may not be possible for the agency

to undertake all of these steps. Instead, the

[n]otice and comment procedures are

partially designed to overcome this problem.

They permit parties to bring relevant

information quickly to the agency’s attention.

A degree of agency reliance on these

comments is not only permissible but often

unavoidable. Thus, although an agency must

consider and analyze the factual materials

App-73

gathered during the informal rulemaking

process, we have never held that an agency

must conduct this analysis without relying on

the comments submitted during the

rulemaking.

Id. See also Peck v. Thomas, 697 F.3d 767, 775-76 (9th

Cir. 2012) (holding that while analysis of statistical

evidence would be sufficient for APA compliance, it

was not necessary where the agency reasonably relied

on its own experience); Stilwell v. Office of Thrift

Supervision, 569 F.3d 514, 519 (D.C. Cir. 2009) (“The

APA imposes no general obligation on agencies to

produce empirical evidence.”).

The Court finds that the agency has provided a

sufficiently reasoned basis for the Final Rule. While

empirical data might have helped the agency form its

policy regarding the use of binding pre-dispute

arbitration agreements in LTC facilities, CMS was not

required to have such data. It was permitted to rely on

the numerous comments received from a variety of

parties and its review of court decisions and academic

literature to guide it in formulating the Final Rule. In

responding to the comments received when CMS first

proposed the possibility of regulating the use of

binding pre-dispute arbitration agreements, the

agency noted that it “conducted a literature review

and also reviewed court opinions involving arbitration

in LTC facilities.” Reform of Requirements, 81 Fed.

Reg. at 68793. These materials “provided evidence

that pre-dispute arbitration agreements were

detrimental to the health and safety of LTC facility

residents.” Id. This “published research”—in

conjunction with the public comments reviewed by the

App-74

agency—led CMS to conclude that it was important to

regulate the use of these agreements. Reform of

Requirements, 81 Fed. Reg. at 68793.

Furthermore, the fact that evidence was mostly

anecdotal rather than statistical influenced the

agency’s ultimate decision. In determining the

appropriate scope of the regulation, the Government

tempered its initial decision to bar the use of predispute arbitration entirely precisely because of the

“lack of statistical data” and the need to “strike a

balance between the stakeholders supporting

arbitration and residents having a complete

understanding of the consequences of entering into an

arbitration agreement.” Revision of Requirements, 84

Fed. Reg. at 34722. The agency also finalized a

requirement that facilities retain a copy of the

arbitration agreement and the arbitrator’s final

decision in any dispute resolved through arbitration to

“allow [CMS] to learn how arbitration is being used by

LTC facilities and how this is affecting the residents.”

Id. at 34723 (codified at 42 C.F.R. § 483.70(n)(6)).

While Plaintiffs assert that this “puts the cart before

the horse,” (Doc. 27, p. 33), the Court notes that

“agencies can, of course, adopt prophylactic rules to

prevent potential problems before they arise. An

agency need not suffer the flood before building the

levee.” Stilwell, 569 F.3d at 519. On the basis of the

materials it reviewed, including the academic

literature and public comments, CMS could

reasonably conclude that it was necessary to place

some limitations on the use of predispute binding

arbitration agreements without prohibiting them

completely and establish mechanisms to collect

additional information to inform future rulemaking.

App-75

The Change in Policy is Adequately

Justified

Second, Plaintiffs assert that the Final Rule is

arbitrary and capricious because the agency has left

unexplained its departure from prior policy, as laid out

in a memorandum from Steven Pelovitz, Director of

the Survey and Certification Group in January 2003

(the “Pelovitz Memo”) and a letter from Michael

Leavitt, Secretary of HHS at the time, to the House

Judiciary Committee in 2008 (the “Leavitt Letter”). In

response, the Government asserts that the Pelovitz

Memo and the Leavitt Letter are general statements

that are not in conflict with the Final Rule, which still

recognizes that there can be benefits of arbitration and

simply eliminates certain negotiating tactics by LTC

facilities.

“‘When an agency changes its existing position, it

‘need not always provide a more detailed justification

than what would suffice for a new policy created on a

blank slate.’ But the agency must at least ‘display

awareness that it is changing position’ and ‘show that

there are good reasons for the new policy.’” Encino

Motorcars, LLC v. Narvarro, 136 S. Ct. 2117, 2125-26

(2016) (quoting FCC v. Fox Television Stations, 556

U.S. 502, 515 (2009)) (internal citation omitted). A

more detailed justification of the change may be

necessary if the prior policy “has engendered serious

reliance interests.” Fox Television Studios, 556 U.S. at

515.

For the most part, the Court agrees that there is

not as much tension between the Final Rule and the

Pelovitz Memo and Leavitt Letter as Plaintiffs

suggest. The Final Rule does not “deprive patients and

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providers of the opportunity to agree voluntarily to

resolve their disputes through arbitration,” which was

then-Secretary Leavitt’s concern about the Fairness in

Nursing Home Arbitration Act. (Doc. 24-26, p. 705).

Nor does the Final Rule undercut his observation that

“[p]re-dispute arbitration agreements are an excellent

way for patients and providers to control costs, resolve

disputes, and speed resolution of conflicts.” Id. Where

both parties agree, subject to the requirements put in

place by the Rule, future disputes can still be

committed to the arbitrator for resolution. Nor does

the Court read the Pelovitz Memo to take a proarbitration stance at odds with the Final Rule; rather,

it states CMS’s decision to leave the choice whether to

enter into arbitration agreements to the facility and

the resident or to state law and emphasizes that a

resident’s refusal to enter into such an agreement is

not a valid ground for the facility to discharge the

resident. See Doc. 24-26, pp. 703-04.

However, to the extent that the Court finds that

there is more tension between these two policy

statements and the Final Rule than the Government

is willing to acknowledge, the Court finds that any

change in policy is adequately supported by the

administrative record. For example, both the Pelovitz

Memo and the Leavitt Letter assert that the use of

arbitration agreements does not interfere with CMS’s

ability to enforce its regulations and sanction facilities

for inadequate quality of care. See Doc. 24-26, pp. 704

& 705. But in promulgating the Final Rule, CMS

stated that the retention requirement was being put

in place “to ensure that CMS can fully evaluate quality

of care complaints that are addressed in arbitration.”

Revision of Requirements, 84 Fed. Reg. at 34730. To

App-77

the extent that this suggests CMS now believes that

arbitration agreements may in fact impede its

enforcement efforts, that change in position is justified

by “anecdotal evidence of so-called ‘gag-clauses’ being

common in arbitration agreements and that residents

and family members were uncertain if they could talk

to surveyors about a quality concern that was

arbitrated.” Id.

Similarly, to the extent that CMS’s policy no

longer leaves the decision whether to arbitrate entirely

to the facility and the resident but establishes some

additional protections for the resident, the perceived

need for those additional protections has been

discussed at length above and is sufficient to “show

that there are good reasons for the new policy.” Fox

Television Stations, 556 U.S. at 515. Additionally,

CMS noted that the use of arbitration by LTC facilities

had increased in recent years, citing articles that were

published after the Pelovitz Memo and Leavitt Letter

were put forward. See Reform of Requirements, 81

Fed. Reg. at 68794. Finally, to the Plaintiffs’ assertion

that CMS has not met the threshold requirement of

recognizing that the Final Rule departs from prior

policy, (Doc. 36, p. 28), the Court notes CMS’s

acknowledgment that it “reversed the existing policy

through the adoption of the 2016 final rule.” Revision

of Requirements, 82 Fed. Reg. at 26650. Therefore, the

Court can conclude that the agency has sufficiently

justified the Final Rule, including providing an

adequate basis for changing its policy.

Finally, the Court is unpersuaded by Plaintiffs’

claims to have a serious reliance interest in the prior

policy that CMS failed to acknowledge. See Doc. 27,

App-78

p. 33. First, the Final Rule has no effect on arbitration

agreements that were formed before it went into

effect. See Revision of Requirements, 84 Fed. Reg. at

34729. Second, Plaintiffs’ claim to have “built their

economic and pricing models” in reliance on the prior

policy, (Doc. 27, p.33), rings hollow in light of their

admission that most of their residents are covered by

Medicare and Medicaid, see Docs. 25-3 & 25-4 at ¶ 3,

for whom the rates are set by the agency, not the

facility. Ultimately, as discussed at length in Section

B.2, supra, Plaintiffs are only subject to conditions on

their use of pre-dispute arbitration by virtue of their

voluntary participation in Medicare and Medicaid. If

the regulatory changes made by the Final Rule truly

shift Plaintiffs’ economic calculus, they are free to

serve fewer residents covered by Medicaid and

Medicare, or none at all.

E. Regulatory Flexibility Act

Finally, Plaintiffs argue that the Rule violates the

APA by failing to comply with the Regulatory

Flexibility Act (“RFA”). The RFA requires that “[w]hen

an agency promulgates a final rule, . . . the agency

shall prepare a final regulatory flexibility analysis”

containing a variety of descriptions and assessments

described in the statute. 5 U.S.C. § 604(a). However,

such an analysis is not required where “the head of the

agency certifies that the rule will not, if promulgated,

have a significant economic impact on a substantial

number of small entities.” 5 U.S.C. § 605(b). If the

agency head, in this case the Secretary of HHS, makes

such a certification, it must be published in the

Federal Register when the final rule is promulgated,

App-79

“along with a statement providing the factual basis for

such certification.” Id.

Judicial review of agency compliance with

§ 605(b) is governed by the APA. “Thus, if data in the

regulatory flexibility analysis—or data anywhere else

in the rulemaking record—demonstrates that the rule

constitutes such an unreasonable assessment of social

costs and benefits as to be arbitrary and capricious,

the rule cannot stand.” Nat’l Telephone Co-op Ass’n v.

F.C.C., 563 F.3d 536, 540-41 (D.C. Cir. 2009) (quoting

Thompson v. Clark, 741 F.2d 401, 405 (D.C. Cir.

1984)). Under arbitrary-and-capricious review, the

court’s “review is narrow,” and that is “particularly

true with regard to an agency’s predictive judgments

about the likely economic effects of a rule.” Id. at 541

(internal quotation marks omitted).

It is appropriate for the court to consider the

entire administrative record in making this

assessment, even if the rulemaking took place over

multiple phases. See Michigan v. Thomas, 805 F.2d

176, 188 (6th Cir. 1986) (rejecting an RFA challenge

where the agency approved a rule, saw the rule

challenged in court, and sought voluntary remand to

reconsider the rule, because the agency “performed its

regulatory flexibility analysis in the context of its

overall rulemaking analysis”); Cal. Farm B. Fed’n v.

EPA, 72 F. App’x 540, 541 (9th Cir. 2003) (rejecting an

RFA challenge in part because the Secretary’s

certification was supported by an “earlier impact

analysis”); Carpenter, Chartered v. Sec’y of Veterans

Affairs, 343 F.3d 1347, 1357 (Fed. Cir. 2003)

(upholding the Secretary’s certification as complying

with the RFA “in view of the record as a whole”). Cf.

App-80

Nat’l Mining Ass’n v. Mine Safety & Health Admin.,

512 F.3d 696, 701 (D.C. Cir. 2008) (holding that since

the agency had found that a more widely-applicable

requirement did not create a significant economic

burden on small business, it was unnecessary for the

agency to perform an analysis of a second rule that

was simply an alternative to the first).

It is undisputed that the notice of the Final Rule

in the Federal Register did contain the Secretary’s

certification that the Rule would not have a significant

economic impact on a substantial number of small

entities, see Revision of Requirements, 84 Fed. Reg. at

34734, but Plaintiffs assert that the CMS provided no

factual basis for the Secretary’s certification, that

there was no assessment or explanation to support the

Secretary’s conclusion, and that the Final Rule does in

fact have a significant economic impact on a

substantial number of small entities. The Government

responds that the RFA certification requirement is a

purely procedural mandate that requires a

reasonable, good faith effort by the agency to comply

but does not permit Plaintiffs or the Court to challenge

the outcome of the Secretary’s determination. The

Government argues that CMS provided an extensive

factual basis for the Secretary’s certification in

promulgating the 2016 version of the rule. Since the

Final Rule at issue here imposed fewer requirements

on regulated parties, the Secretary could conclude

that the analysis under the RFA would be unchanged,

and therefore the procedural requirements were met.

The Court agrees with the Government. As

discussed above, the Court finds it appropriate to take

into account the entire administrative record in

App-81

evaluating whether the Secretary complied with the

requirements of the RFA. In promulgating the first

version of the rule in 2016, the Government analyzed

the economic impact of the entire rule and determined

that “[t]he annual impact on a nursing facility would

be around $63,000 in year 1 and $55,000 in year 2 and

thereafter . . . so the average impact on the facility is

less than 1 percent of revenue” and less than the

threshold of 3 to 5 percent that would constitute a

significant economic impact. Reform of Requirements,

81 Fed. Reg. at 68846. This was the basis for the

Secretary’s certification in 2016. The 2016 rule

entailed extensive changes to the regulations

governing LTC facilities. In addition to the regulation

barring the use of pre-dispute binding arbitration, the

rule implemented changes to requirements for

infection control and nutrition, notification and

grievance procedures, and many others. See id. at

68847-72.

In promulgating the Final Rule in 2019, the

Secretary again certified that the Rule would not have

a significant economic impact on a substantial number

of small entities. See Revision of Requirements, 84

Fed. Reg. at 34734. Though the Secretary did not state

the factual basis for this certification in the paragraph

where it was made, the Court can conclude from

review of the record that the 2019 Final Rule had a

much narrower economic impact on LTC facilities

than the 2016 rule, which the Secretary had

previously certified. Furthermore, comparing only the

portion of the rule related to pre-dispute binding

arbitration agreements, CMS made clear that its

intention with the Final Rule was to reduce the costs

to the LTC facilities while still protecting the rights of

App-82

residents. See, e.g., Revision of Requirements, 82 Fed.

Reg. at 26651 (“We believe this revised approach is

consistent with the elimination of unnecessary and

excessive costs to providers while enabling residents

to make informed choices . . . .); Revision of

Requirements, 84 Fed. Reg. at 34722 (“[C]ommenters

from the LTC industry have argued for the continued

use of arbitration agreements for reasons of cost and

efficiency. This regulation is designed to strike a

balance between those concerns and protecting the

needs of LTC residents.”); id. at 34733 (“LTC facilities

assert that . . . arbitration reduces their costs . . . .

[W]e are removing the prohibition on pre-dispute

binding arbitration agreements . . . .).

Plaintiffs challenge CMS’s reliance on the 2016

rulemaking, arguing that the agency should not be

able to use its reasoning from 2016 as a factual basis

for the RFA certification in 2019. The Court is not

persuaded by Plaintiffs’ reliance on North Carolina

Fisheries Ass’n v. Daley, 16 F. Supp. 2d 647 (E.D. Va.

1997). There, the plaintiffs challenged the RFA

certification of the Secretary of Commerce in setting

the quota for the number of summer flounder that

could be caught by the fishing industry in North

Carolina in that year. The Secretary certified that

there would not be significant economic impact on a

substantial number of small entities because the

quota was the same as the previous year. The court

held that the Secretary did not satisfy § 605(b) and

was required to “make some showing that it has at

least considered the potential effects of this quota, this

year.” Id. at 652 (emphasis in original). However, the

fisheries management plan being implemented by the

Commerce Department requires the National Marine

App-83

Fisheries Services to set a quota every year based on

a variety of factors. Each year is a new undertaking

specific to that year. See id. at 649-50. Here in

contrast, the Final Rule is the culmination of a multiyear process that began when a version of the current

Rule was initially proposed in 2015. Therefore, the

Court concludes that the Secretary complied with the

requirements of the RFA.

Further, the Court finds that, as described above,

the record provides adequate support for the agency’s

position. Given the deferential standard of review, the

Court is not permitted to “substitute its judgment for

that of the agency.” even if it disagrees with the

agency’s conclusion. Motor Vehicle Mfrs. Ass’n, 463

U.S. at 43. Plaintiffs have not alleged that the agency

has relied on improper factors or “entirely failed to

consider an important aspect of the problem.” Id. The

Court cannot conclude that the Secretary’s

certification is “so implausible that it could not be

ascribed to a difference in view,” id. at 43, and

therefore cannot find the agency’s RFA certification

arbitrary and capricious.

III. Conclusion

For the reasons given above, Plaintiffs’ Motion for

Summary Judgment (Doc. 26) is DENIED and the

Defendants’ Cross-Motion for Summary Judgment

(Doc. 28) is GRANTED. Accordingly, Plaintiffs’ First

Amended Complaint is DISMISSED WITH

PREJUDICE and this case is terminated.

App-84

IT IS SO ORDERED on this [handwritten: 7th]

day of April, 2020.

[handwritten: signature]

TIMOTHY L. BROOKS

UNITED STATES

DISTRICT JUDGE

App-85

Appendix D

RELEVANT STATUTES AND REGULATIONS

42 C.F.R. §483.70(n)

(n) Binding arbitration agreements. If a facility

chooses to ask a resident or his or her representative

to enter into an agreement for binding arbitration, the

facility must comply with all of the requirements in

this section.

(1) The facility must not require any resident or

his or her representative to sign an agreement for

binding arbitration as a condition of admission to,

or as a requirement to continue to receive care at,

the facility and must explicitly inform the

resident or his or her representative of his or her

right not to sign the agreement as a condition of

admission to, or as a requirement to continue to

receive care at, the facility.

(2) The facility must ensure that:

(i) The agreement is explained to the

resident and his or her representative in a

form and manner that he or she understands,

including in a language the resident and his

or her representative understands;

(ii) The resident or his or her representative

acknowledges that he or she understands the

agreement;

(iii) The agreement provides for the selection

of a neutral arbitrator agreed upon by both

parties; and

(iv) The agreement provides for the selection

of a venue that is convenient to both parties.

App-86

(3) The agreement must explicitly grant the

resident or his or her representative the right to

rescind the agreement within 30 calendar days of

signing it.

(4) The agreement must explicitly state that

neither the resident nor his or her representative

is required to sign an agreement for binding

arbitration as a condition of admission to, or as a

requirement to continue to receive care at, the

facility.

(5) The agreement may not contain any language

that prohibits or discourages the resident or

anyone else from communicating with federal,

state, or local officials, including but not limited

to, federal and state surveyors, other federal or

state

health department employees,

and

representatives of the Office of the State LongTerm Care Ombudsman, in accordance

with § 483.10(k).

(6) When the facility and a resident resolve a

dispute through arbitration, a copy of the signed

agreement for binding arbitration and the

arbitrator’s final decision must be retained by the

facility for 5 years after the resolution of that

dispute on and be available for inspection upon

request by CMS or its designee.

9 U.S.C. §2

A written provision in any maritime transaction

or a contract evidencing a transaction involving

commerce to settle by arbitration a controversy

thereafter arising out of such contract or transaction,

or the refusal to perform the whole or any part thereof,

or an agreement in writing to submit to arbitration an

App-87

existing controversy arising out of such a contract,

transaction, or refusal, shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or

in equity for the revocation of any contract or as

otherwise provided in chapter 4.

42 U.S.C. §1395i-3(f)(1)

(f) Responsibilities of Secretary relating to

skilled nursing facility requirements

(1) General responsibility

It is the duty and responsibility of the Secretary

to assure that requirements which govern the

provision of care in skilled nursing facilities under

this subchapter, and the enforcement of such

requirements, are adequate to protect the health,

safety, welfare, and rights of residents and to

promote the effective and efficient use of public

moneys.

42 U.S.C. §1396r(f)(1)

(f) Responsibilities of Secretary relating to

nursing facility requirements

(1) General responsibility

It is the duty and responsibility of the Secretary

to assure that requirements which govern the

provision of care in nursing facilities under State

plans approved under this subchapter, and the

enforcement of such requirements, are adequate

to protect the health, safety, welfare, and rights of

residents and to promote the effective and

efficient use of public moneys.

App-88

42 U.S.C. §1395i-3(d)(4)(B)

(d) Requirements relating to administration

and other matters

(4) Miscellaneous

(B) Other

A skilled nursing facility must meet such

other requirements relating to the health,

safety, and well-being of residents or relating

to the physical facilities thereof as the

Secretary may find necessary.

42 U.S.C. §1396r(d)(4)(B)

(d) Requirements relating to administration

and other matters

(4) Miscellaneous

(B) Other

A nursing facility must meet such other

requirements relating to the health and

safety of residents or relating to the physical

facilities thereof as the Secretary may find

necessary.

App-89

42 U.S.C. §1395i-3(c)(1)(A)(xi)

(1) General rights

(A) Specified rights

A skilled nursing facility must protect and

promote the rights of each resident, including

each of the following rights:

(xi) Other rights

Any other right established by the

Secretary.

42 U.S.C. §1396r(c)(1)(A)(xi)

(1) General rights

(A) Specified rights

A nursing facility must protect and promote

the rights of each resident, including each of

the following rights:

(xi) Other rights

Any other right established by the

Secretary.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.