Opposition Brief — Owens v. National Health Health Corp (No. 07-1380)

ao . @® FILED

No. 07-1380. JUN 5 - 2008

SEE

SUPREME COURT. U.S.

Iu The

Supreme Court of the United States

ty

v

DOROTHY OWENS, as Conservator of

Mary Francis King, an incapacitated person,

Petitioner,

v.

NATIONAL HEALTH CORPORATION d/b/a

NHC HEALTHCARE, MURFREESBORO;

NATIONAL HEALTHCORP, L.P.; NATIONAL

HEALTH REALTY, INC.; NHC, INC. a/k/a

NHC, INC. —- TENNESSEE; NHC/OP, L.P.,

Respondents.

,

bs

On Petition For Writ Of Certiorari

To The Tennessee Supreme Court

he

4

BRIEF IN OPPOSITION

”

JOHN B. CURTIS, JR.

(Counsel of Record)

BRUCE D. GILL

LEITNER, WILLIAMS, DOOLEY & NAPOLITAN, PLLC

801 Broad Street, Third Floor

Chattanooga, TN 37402

(423) 265-0214

(423) 266-5490 (facsimile)

ma ee

we

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402: 342-2831

i

QUESTION PRESENTED

Should this Court review a decision of the Tennessee

Supreme Court, which holds, consistent with every

other court having considered the issue, that a man-

datory arbitration agreement executed contempora-

neously with a contract for nursing home care does

not violate federal statutes and regulations prohibit-

ing the charging of other consideration for patients

entitled to medical assistance through Medicare and

Medicaid? ,

il

PARTIES TO THE PROCEEDINGS

The following persons or entities participated in the

proceedings an the Tennessee Supreme Court and the

trial court:

Plaintiff/Petitioner:

Dorothy Owens, as Conservator of Mary Francis

King, an incapacitated person

Defendants/Respondents:

National Health Corporation d/b/a NHC Health-

care, Murfreesboro

National Healthcorp, L.P.

National Health Realty, Inc.

NHC, Inc. a/k/a NHC, Inc. — Tennessee.

NHC/OP L.P.

Defendant:

National HealthCare Corporation

Defendant National HealthCare Corporation was

added as a party defendant during the sixty (60)

day interim period between the decision of the

Tennessee Court of Appeals and the Petitioner’s

application for permission to appeal to the Ten-

nessee Supreme Court. Because National Health-

Care Corporation was not part of Respondents’

original Motion to Compel Arbitration, it was not

a party to the appeal. Nevertheless, because of

the vested interest of National HealthCare Cor-

poration in the decision by the Tennessee Su-

preme Court, as well as any decision by this

Court, the parent/subsidiary status is stated for

the purpose of full disclosure.

ill

STATEMENT REGARDING PAR-

ENT/SUBSIDIARY STATUS

Respondent National Health Corporation d/b/a NHC

Healthcare, Murfreesboro does not have a parent

corporation, and there is no publicly held company

that owns 10% or more of its stock.

Respondent National Healthcorp, L.P. no longer

exists as a legal entity.

Respondent National Health Realty, Inc. no longer

exists as a legal entity.

Respondent NHC, Inc. a/k/a NHC, Inc. — Tennessee '

no longer exists as a legal entity.

Respondent NHC/OP, L.P. does not have a parent

corporation, and there is no publicly held company

that owns 10% or more of its stock.

Defendant National HealthCare Corporation does not

have a parent corporation, and there is no publicly

held company that owns 10% or more of its stock.

iv

TABLE OF CONTENTS

QUESTION PRESENTED

PARTIES TO THE PROCEEDINGS

STATEMENT REGARDING PARENT/SUBSIDIARY

STATUS

TABLE OF CONTENTS

TABLE OF AUTHORITIES

STATEMENT OF THE CASE

STATEMENT OF FACTS

SUMMARY OF ARGUMENT

ARGUMENT

1. The Arbitration Agreement Does Not

Constitute Other Consideration In Viola-

tion Of Federal Law

Petitioner’s Writ Would Require This

Court To Afford Unfettered Deference To

Tennessee’s Legal Definition Of Considera-

Federal Agencies Have Not Interpreted

The Subject Regulation Consistent With

Petitioner’s Argument

CONCLUSION

APPENDIX

Vv

TABLE OF AUTHORITIES

Page

CASES

Broughsville v. OHECC, LLC, No. 05CA008672

2005 WL 3483777 (Ohio Ct. App. Dec. 21,

SERIF SSSR isi ERR eer OMe mee RE he ne ore Og 9

Chevron, U.S.A, Inc. v.' Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984) ...... 13,15

Gainesville Health Care Center, Inc. v. Weston,

857 So. 2d 278 (Fla. Dist. Ct. App. 2003)................. 9

Hall Street Assoc., LLC v. Maittel, Inc., 128

Be te I I ooo io cca sca dos eecaundcecekseclocaske 10

Kuhnle Brothers, Inc. v. County of Geauga, 103

Ie I CE NS BOIS viv evconcdesesedescdscenioccvenccscansves 12

Owens v. Coosa Valley Health Care, Inc., 890

i ae I na ses cp ccinaniese 8,9

Owens v. National Health Corp., No. M2005-

01272-COA-R3-CV (Tenn. Ct. App. June 30,

BEES MER TSE Lito Reo RoR ON Ey ae nea 2,3

Owens v. National Health Corp., No. M2005-

01272-SC-R11-CV (Tenn. Nov. 8, 2007)........ 3, 7,8,9

Sanford v. Castleton Healthcare Center, 813

N.E.2d 411 (Ind. Ct. App. 2004)............0.0000.0..0000.. 8,9

Terminiello v. City of Chicago, 337 U.S. 1

ITI Gi chet nladamutibabingiethtessdnswntiianbiicecictunaiacsnaviblontoias

vi

TABLE OF AUTHORITIES — Continued

STATUTES AND REGULATIONS

42 U.S.C. § 1396r(c)(5)(A)(iii)

Omnibus Budget Reconciliation Act of 1987

42 C.F.R. § 483.12(d)(3)

OTHER AUTHORITIES

Notice, Department of Health and Human

Services, Office of Inspector General, Draft

OIG Supplemental Compliance Program

Guidance for Nursing Facilities (Apr. 16,

2008), 73 FR 20680-02

Memorandum from the Centers for Medicare &

Medicaid Services to the Survey and Certifi-

cation Group Regional Office Management

(G-5) State Survey Agency Directors (Jan. 9,

13, 15, 16

Rules and Regulations Department of Health

and Human Services, Health Care Financing

Administration, RIN 09388-AD12, Medicare

and Medicaid; Requirements for Long Term

Care Facilities (Sept. 26, 1991), 56 FR 48826-

1

STATEMENT OF THE CASE

Plaintiff filed suit in the Circuit Court for Ruth-

erford County, Tennessee alleging, inter alia, negli-

gence on the part of the Defendants in the care and

services provided to Mary Francis King (hereinafter,

“King”), an otherwise incapacitated person. At the

time of the alleged acts, King was a resident of a

nursing home facility owned by National Health

Corporation d/b/a NHC HealthCare, Murfreesboro in

Murfreesboro, Tennessee. The Plaintiff, in her repre-

sentative capacity as conservator of King, filed her

Complaint with a jury demand on February 10, 2005.

In lieu of filing an Answer or other responsive plead-

ing, Defendants filed a Motion to Compel Arbitration

and Stay Proceedings on March 17, 2005. To date,

Defendants have not filed a formal response to Plain-

tiff’s allegations, which are denied.

Defendants’ Motion to Compel Arbitration and

Stay Proceedings was premised upon an arbitration

provision in an admission and financial contract

. signed by Gwyn Daniel and John Smith on August

26, 2003 when admitting King to the Murfreesboro

facility. Ms. Daniel was the attorney-in-fact under a

durable power of attorney for health care executed by

King on August 5, 2003.

On April 8, 2005, a hearing was held in the

Circuit Court of Rutherford County on the Defen-

dant’s Motion to Compel Arbitration. Following oral

argument of the respective counsel, the court took the

matter under advisement but expressed reservations,

2

inter alia, as to whether the attorney-in-fact had

authority to waive King’s constitutional right to a

jury trial.

On April 18, 2005, the trial court corresponded

with counsel and advised of its decision to deny the

Defendants’ motion. The letter was incorporated by

reference into an Order denying the Defendants’

Motion to Compel Arbitration on May 3, 2005. The

trial court’s denial of the Motion to Compel Arbitra-

tion was premised upon two exclusive grounds,

namely that the attorney-in-fact lacked the legal

authority to execute an arbitration agreement in

securing long-term care, as well as a finding that the

arbitral entities listed in the agreement were no

longer available, thereby depriving the Plaintiff of a

remedy at law. An appeal followed.

On June 30, 2006, the Tennessee Court of Ap-

peals reversed and remanded the decision of the trial

court, finding that the attorney-in-fact under the

durable power of attorney for healthcare had author-

ity to execute an arbitration agreement on behalf of

the resident, and that the unavailability of the arbi-

tral entities listed in arbitration agreement did not

render the Plaintiff without a remedy at law. The

Court of Appeals further addressed a myriad of other

grounds asserted by Plaintiff in opposition to the

arbitration agreement, including its purported illegal-

ity in light of Medicare/Medicaid statutes and regula-

tions prohibiting “other consideration” as a condition

of admission. The Court of Appeals, relying upon

3

persuasive case law from other state courts, found the

arbitration agreement did not violate federal law.

The Plaintiff thereafter filed an application for

appeal to the Tennessee Supreme Court, which was

subsequently granted. The Tennessee Supreme Court

delivered its opinion on November 8, 2007, affirming

in.part and vacating in part the decision by the Court

of Appeals. Unrelated to the issue before this Court,

the Tennessee Supreme -Court later granted in part

and denied in part the Defendants’ Petition for Re-

hearing, witi a modified opinion following.

In short, the Tennessee Supreme Court affirmed

the decision by the Court of Appeals in finding that

the execution of a mandatory arbitration agreement

does not constitute “other consideration” as contem-

plated by pertinent federal statutes and regulations

governing Medicare and Medicaid. Contrary to Peti-

tioner’s argument, the Tennessee Supreme Court did

not simply agree with the Court of Appeals, but

rather examined all reperted cases of other jurisdic-

tions that had considered the same argument. While

acknowledging that the other cases were not binding,

the Tennessee Supreme Court nevertheless found

their rationale persuasive, and concluded that requir-

ing a Medicare/Medicaid recipient to agree to binding

arbitration when being admitted to a nursing home

does not constitute an additional fee or other consid-

eration prohibited by federal law.

°

4

STATEMENT OF FACTS

On August 5, 2003, Mary Francis King executed

a Durable Power of Attorney for Health Care wherein

she named William T. Daniel and Gwyn C. Daniel as

her attorneys-in-fact. As evidenced by language in the

Power of Attorney, the document was to be durable,

thereby surviving King’s incapacitation, and included

authority to engage medical providers. The Power of

Attorney further provides “I grant to my Attorney-in-

Fact the power and authority to execute on my behalf

anv waiver, release or other document which may be

necessary in order to implement the health care

decisions that this instrument authorizes my Attor-

ney-in-Fact to assist me to make, or to make on my

behalf.”

On August 26, 2603, Gwyn Daniel and: John

Smith executed an Admission and Financial Contract

(hereinafter, “Contract”) with National Health Corpo-

ration d/b/a NHC Healthcare, Murfreesboro for the

purpose of admitting King as a patient to the facility.

The Contract, among its other provisions, including a

separate section entitled “DISPUTE RESOLUTION

PROCEDURE (WHICH INCLUDES JURY TRIAL

WAIVER).” (emphasis in original) Pursuant to the

terms of that section, the parties to the Contract

agreed that all disputes would be submitted to either

mediation or arbitration. Specifically, the Contract

reads “BY AGREEING TO ARBITRATION OF

ALL DISPUTES, BOTH PARTIES ARE WAIVING

A JURY TRIAL FOR ALL CONTRACT, TORT,

5

STATUTORY, REGULATORY, AND OTHER

CLAIMS.” (emphasis in original)

In acknowledgement of the arbitration language,

both Gwyn Daniel and John Smith signed a separate

box wherein they agreed to be bound by the arbitra-

tion language and stated that the terms regarding

arbitration had been explained to them.

On February 10, 2005, Plaintiff Dorothy Owens

instituted the instant action by filing a Complaint in

the Circuit Court of Rutherford County, Tennessee

alleging, among other things, negligence on the part

of the named Defendants in causing personal injury

to King.

,

vv

SUMMARY OF ARGUMENT

Respondents submit that any review of the

decision by the Tennessee Supreme Court is unwar-

ranted. As conceded by the Petitioner, no court, whether

federal or state, has ever held that a mandatory arbi-

tration agreement violates Medicare/Medicaid law

and regulations regarding the prohibition of “other

consideration.” Accordingly, there is no conflict of

authority requiring intervention by this Court. More-

over, contrary to Petitioner’s argument, the issue does

not present an important question of federal law,

evidenced in part by the relatively few cases where

the issue has ever been raised.

FED RPE ae ee Pe

6

Respondents further submit that review by this

Court of the decision by the Tennessee Supreme

Court is improper because any reliance upon Tennes-

see interpretation of “other consideration” could |

result in inconsistent application of the same federal

law and regulations because of variances in differing

state laws. Where other states may employ an alto-

gether different definition of “consideration,” this

Court’s decision would arguably only apply to Tennes-

see’s definition on the question.

Lastly, Respondents submit that various inter-

pretations by federal agencies charged with enforcing

the statute and regulation in question have found

that “other consideration” must be monetary in

nature, and that an arbitration agreement in a nurs-

ing home contract does not violate federal law. These

interpretations are entitled to considerable weight in

interpreting the subject language, particularly where

Congress has not addressed the issue.

7

Vv

ARGUMENT

1. The Arbitration Agreement Does Not Con-

stitute Other Consideration In Violation Of

Federal Law.

The Petitioner argues that execution of the

arbitration agreement constitutes “other considera-

tion” as a precondition of admission to the nursing

home in violation of federal law governing Medicare

and Medicaid. Notably, the Petitioner’s Writ contains

7

a dearth of case law interpreting an arbitration

clause in a nursing home admission contract to be

inconsistent with those federal regulations. To the

_Contrary, as evidenced by the well-reasoned decision

of the Tennessee Supreme Court, persuasive case law

from other jurisdictions demonstrates the weight of

authority is contrary to the Petitioner’s argument.

In deciding this issue, the Tennessee Supreme

Court closely examined the language of the applicable

federal statute and regulation. The federal statute

provides, in pertinent part, that a participating

nursing home in the federal Medicaid program must:

in the case of an individual who is entitled to

medical assistance for nursing facility ser-

vices, not charge, solicit, accept, or receive, in

addition to any amount otherwise required to

be paid under the State plan under this sub-

chapter, any gift, money, donation, or other

consideration as a precondition of admit-

ting (or expediting the admission of) the in-

dividual to the facility or as a requirement

for the individual’s continued stay in the fa-

crlity.

42 U.S.C. § 1396r(c)(5)A)iii) (Supp. 2007) (emphasis

added). Language in the federal regulation closely

tracks that of the federal code:

In the case of a person eligible for Medicaid,

a nursing facility must not charge, solicit, ac-

cept, or receive, in addition to any amount

otherwise required to be paid under the

State plan, any gift, money, donation, or

8

other consideration as a precondition of ad-

mission, expedited admission or continued

stay in the facility.

42 C.F.R. § 483.12(d)(3) (2006) (emphasis added).

The Tennessee Supreme Court noted that other

jurisdictions have rejected Petitioner’s argument. The

court principally relied upon a decision by the Ala-

bama Supreme Court in Owens v. Coosa Valley Health

Care, Inc., 890 So. 2d 983 (Ala. 2004), wherein the

court stated:

[Requiring a nursing-home admittee to sign

an arbitration agreement is not charging an

additional fee or other consideration as a.re-

quirement to admittance. Rather, an arbitra-

tion agreements sets a forum for further

disputes; both parties are bound to it and

both receive whatever benefits and detri-

ments accompany the arbitral forum. If we

were to agree with [the plaintiff], virtually

any contract term [the plaintiff] decided she

did not like could be construed as requiring

“other consideration” in order to gain admit-

tance to the nursing home and thus be disal-

lowed by statute.

Id. at 898. The Tennessee Supreme Court further

relied upon the holding of the Indiana Court of Ap-

peals in Sanford v. Castleton Health Care Center,

LLC, 813 N.E.2d 411, 419 (Ind. Ct. App. 2004). In

construing the same statute in the context of the

same argument, the Sanford court undertook to apply

tools of statutory construction, namely the principle

9

of eyjusdem generis, which provides that a general

term in a statute that follows a series of specific items

must be limited in scope to the same type as those

listed. Jd. In this instance, the Sanford court noted

that preceding the prohibition against “other consid-

eration,” the statute specifically lists gifts, money and

donations. Jd. The court reasoned that an arbitration

agreement is not tantamount to a gift, money, or

donation, and therefore the prohibition was inappli-

cable. Id.

Finally, the Tennessee Supreme Court cited and

selectively quoted from other cases addressing the

same issue, including Gainesville Health Care Center

uv. Weston, 857 So. 2d 278, 288 (Fla. Ct. App. 2003);

and Broughsville v. OHECC, LLC, No. 05CA008672,

2005 WL 3483777, *8 (Ohio Ct. App. Dec. 21, 2005),

both of which found that agreements to arbitrate are

not additional consideration in violation of federal

regulations prohibiting the same.

The reasoning by the Alabama Supreme Court in

Owens is particularly persuasive insomuch that the

court extrapolated the Petitioner’s argument to

demonstrate its likely absurd result. If “other consid-

eration” as prohibited by federal law is extended to

any mutual promise or obligation on the part of the

nursing home admittee, then any term to the contract

aside from the charges to be incurr2d would poten-

tially be illegal. The consequences would be enormous

and would create chaos detrimental to nursing home

residents and facilities alike, while subverting the

clear intent of Congress. The interpretation advocated

10,

by Petitioner would likewise promote abuse of the

federal law, such as in this instance, where a party,

post hoc, would seek to render an entire agreement

illegal so as to avoid a mutual obligation due to a

change in circumstances.

The Sanford reasoning is likewise persuasive.

Only recently this Court employed the principle of

ejusdem generis ir. construing the Federal Arbitration

Act in Hall Street Associates, LLC v. Mattel, Inc., 128

S. Ct. 13896, 1404-1405 (2008). In deciding the exclu-

sive grounds upon which a party could seek relief

from an arbiter’s award, this Court noted that “the

old rule of ejusdem generis has an implicit lesson to

teach here. Under that rule, when a statute sets out a

series of specific items ending with a general term,

that general term is confined to covering subjects

comparable to the specifics it follows.” Id. at 1404.

In this instance, it is evident that the specifics

preceding “other consideration,” namely gift, money

and donation, in both the federal statute and regula-

tion are not comparable to an arbitration agreement,

which merely speaks to the forum in which the par-

ties agree to resolve disputes. Both the statute and

the regulation clearly contemplate that “other consid-

eration” will encompass something of monetary value

for the purpose of inducing admittance to a nursing

home or continued residence at the same.

Petitioner merely glosses over this point by

stating that if Congress had intended to mean “finan-

cial consideration,” then it could have employed that

11

language in lieu of “other consideration.” (Petition, p.

18) However, “financial consideration” alone may not

have included the broadest reach of prohibition that

. Congress was intending to address where, for exam-

ple, a facility might obligate an admittee to donate

personal property to gain admittance. Personal

property arguably would not be financial considera-

tion if it had not been reduced to negotiable instru-

ments.

Respondents submit that in this instance, the

arbitration agreement merely provided that the .

parties were mutually agreeing to shift all disputes to

an alternative forum, which in no way deprives the

resident of an ability to seek redress for any pur-

ported harms.

2. Petitioner’s Writ Would Require This Court

To Afford Unfettered Deference To Tennes-

see’s Legal Definition Of Consideration

In her Writ, Petitioner asserts “It is unquestion-

able that Tennessee law considers the waiver of a

right to be consideration.” (Petition, p. 4) Petitioner

then glosses that under any “common understanding

of the word, giving up a right in exchange for some

other product or service is ‘consideration.’” ([d.) How-

ever, Petitioner relies upon nothing other than Ten-

nessee’s interpretation of “consideration” as grounds

for her p- ition.

Under our federalist system of government,

federal courts are obliged to defer to state courts

12

regarding interpretation of a state’s own law. Ter-

miniello v. City of Chicago, 337 U.S. 1, 4 (1949).

However, federal courts owe no deference to a state

court’s interpretation of a federal statute. Kuhnle

Brothers, Inc. v. County of Geauga, 103 F.3d 516, 520

(6th Cir. 1997)

In this instance, provided this Court granted

Petitioner’s Writ and found that Tennessee’s interpre-

tation of consideration was in some manner binding

on the federal statute and regulation, then the unin-

tended consequence would mean that the language in

question would be subject to the interpretation of

each of the respective states. Tennessee’s interpreta-

tion of “consideration” may not be consistent with

that of Alabama or California, for example, thereby

creating inconsistency in the application of federal

law. That is counter to our federalist system, whereby

the states are obliged to defer to federal law where a

federal question is involved. That said, Petitioner’s

reliance upon Tennessee law should not give grounds

to this Court to decide an important question of

federal law.

3. Federal Agencies Have Not Interpreted The

Subject Regulation Consistent With Peti-

tioner’s Argument

Lastly, after an exhaustive review of the history

of the Omnibus Budget Reconciliation Act of 1987,

which encompasses the statute, and therefore the

regulation in question, Petitioner asserts that the

13

federal agency charged with enforcement has been

“evasive .and equivocating” regarding whether an

arbitration agreement may be required as a condition

of admission. This characterization is based upon

language in a Memorandum from the Centers for

Medicare and Medicaid Services, which is reproduced

only in part in Petitioner’s Writ. (Petition, p. 19-20)

Notably, the “evasive and equivocating” description of.

the Memorandum is derived exclusively from scholar-

ship addressing this issue, the title of which clearly

demonstrates the agenda of its author: Mandatory

Arbitration Agreements Do Not Belong in Nursing

Home Contracts with Residents. (Petition, p. 19-20)

Notwithstanding the foregoing, Respondents

submit that interpretations by federal agencies are

actually in accord with the reasoning of all courts

that have considered this issue. Since no federal court

has addressed this matter, then the interpretations of

the federal agencies should be given considerable

deference. In Chevron, U.S.A., Inc. v. Natural Re-

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

this Court noted:

When a court reviews an agency’s construc-

tion of the statute which it administers, it is

confronted with two questions. First, always,

is the question whether Congress has di-

rectly spoken to the precise questicn at issue.

If the intent of Congress is clear, that is the

end of the matter; for the court, as well as

the agency, must give effect to the unambi-

guously expressed intent of Congress. If,

however, the court determines that Congress

14

has not directly addressed the precise ques-

tion at issue, the court does not simply im-

pose its own construction of the statute, as

would be necessary in the absence of an ad-

ministrative interpretation. Rather, if 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.

“The power of an administrative agency to

administer a congressionally created . . . pro-

gram necessarily requires the formulation of

policy and the making of rules to fill any gap

left, implicitly or explicitly, by Congress.”

* * *

We have long recognized that considerable

weight should be accorded to an executive

department’s construction of a_ statutory

scheme it is entrusted to administer, and the

principle of deference to administrative in-

terpretations “has been consistently followed

by this Court whenever decision as to the

meaning or reach of a statute has involved

reconciling conflicting polices, and a full un-

derstanding of the force of the statutory pol-

icy in the given situation has depended upon

more than ordinary knowledge respecting

the matters subjected to agency regulations.”

“

... If this choice represents a reasonable

accommodation of conflicting policies that

were committed to the agency’s care by the

statute, we should not disturb it unless it

appears from the statute or its legislative

15

history that the accommodation is not one

that Congress would have sanctioned.”

Td. at 842-845. (internal citations omitted).

As mentioned above, Petitioner’s Writ selectively

reproduces from the Memorandum issued by the

Centers for Medicare and Medicaid Services. In the

memo, dated January 9, 2003, the director of the

Survey and Certification Group addressing “Binding |

Arbitration in Nursing Homes” noted:

The purpose of this memorandum is to ad-

dress the Centers for Medicare and Medicaid

Services’ (CMS) position regarding binding

arbitration between nursing homes and pro-

spective or current residents, in response to

recent marketplace practices. Specifically,

this memorandum addresses the use of an

agreement that requires disputes between a

prospective or current resident and the nurs-

ing home be resolved through binding arbi-

tration either as a condition of admission or

a condition of remaining in the nursing

home. Under these agreements, the resident

gives up his er her right to sue the nursing

home through the judicial process.

CMS believes that its primary focus should

be on the quality of care actually received by

nursing home residents that may be com-

promised by such agreements, for the rea-

sons set out below. Under Medicare,

whether to have a binding arbitration

agreement is an issue between the resi-

dent and the nursing home. Under

a hE ata Ya a a a Oe AS aN EN 0 kl Nae Sd i PR Sit uae Mn ah on ea ad tia gh RM BES Sy Oh eee

Pe en, ee

pak a

16

Medicaid, we will defer to State law as

to whether or not such binding arbitra-

tion agreements are permitted subject to

the concerns we have where Federal regula-

tions may be implicated... .

Memorandum from the Centers for Medicare &

Medicaid Services to the Survey and Certification

Group Regional Office Management (G-5) State

Survey Agency Directors (Jan. 9, 2003) (emphasis

added).

The memo, appended to this Brief, goes on to

further outline potential concerns regarding dis-

charge based on an existing resident’s failure “to sign

or comply with a binding arbitration agreement” and

notes that current residents are not obligated to sign

new admission documents containing a binding

arbitration agreement. Id.

The foregoing interpretation clearly evidences

that arbitration agreements with prospective patients

are not illegal per se due to participation in the Medi-

care/Medicaid program by a nursing home facility,

contrary to Petitioner’s argument.

With respect to the specific regulation at issue,

the Department of Health and Human Services has

also commented upon its intended purpose. The

Department found that

We believe that revised § 483.12(d)(3) only

prohibits the nursing facility from charging/

soliciting or accepting/receiving gifts from or

on behalf of a Medicaid recipient when these

17

gifts are intended to purchase preferential

treatment. for a Medicaid recipient, pre-

sumably over other Medicaid recipients.

Gifts given by or on behalf of Medicaid re-

cipients for purposes other than to gain ad-

mission, expedited admission or continued

stay are not prohibited.

Rules and Regulations Department of Health and

Human Services, Health Care Financing Administra-

tion, RIN 0938-AD12, Medicare and Medicaid; Re-

quirements for Long Term Care Facilities (Sept. 26,

1991), 56 FR 48826-01.

This interpretation by the Department demon-

strates the Congressional intent in prohibiting gifts,

money, donations or other consideration where the

same is solicited to gain more favorable treatment or

admission. In this instance, every resident, whether

on Medicare/Medicaid or not, is obliged to execute the

arbitration agreement to gain admittance.

Lastly, a recently published draft opinion from

the Office of the Inspector General regarding Sup-

plemental Compliance Program for Nursing Home

Facilities discusses the regulation at issue. The OIG

draft notes:

As a condition of its Medicare provider agree-

ment and under applicable Medicaid regula-

tions and a criminal provision precluding

supplementation of Medicaid payment rates, a

nursing facility must accept the applicable

Medicare or Medicaid payment (including any

[ 18

beneficiary coinsurance or copayments author-

ized under those programs), respectively, for

3 covered items and services as the complete

payment. For covered items and services, a

nursing facility may not charge a Medi-

care or Medicaid beneficiary, or another

person in lieu of the beneficiary, any

amount in addition to what is otherwise

required to be paid under Medicare or

Medicaid (i.e., a cost-sharing amount). For

example, an SNF may not condition accep-

tance of a beneficiary from a hospital upon re-

ceiving payment from the hospital or the

beneficiary’s family in an amount greater than

what the SNF would receive under the PPS.

For Medicare and Medicaid beneficiar-

ies, a nursing facility may not accept

supplemental payments, including, but

not limited to, cash and free or dis-

counted items and services, from a hospi-

tal or other source merely because the

nursing facility considers the Medicare

or Medicaid payment to be inadequate

(although a nursing facility may accept

donations unrelated to the care of spe-

cific patients). The supplemental pay-

ment would be a prohibited charge

) imposed by the nursing facility on an-

other party for services that are already

covered by Medicare or Medicaid.

¥ a ee

Notice, Department of Health and Human Services,

Office of Inspector General, Draft OIG Supplemental

Compliance Program Guidance for Nursing Facilities

(Apr. 16, 2008), 73 FR 20680-02 (emphasis added).

19

Based upon the foregoing interpretations of

federal law governing nursing home participating in

Medicare/Medicaid program, it is evident that the

executive departments charged with enforcing the

same do not find mandatory arbitration agreements

for prospective patients to be prohibited. Also, the

federal agencies’ interpretation of “other considera-

tion” makes it clear that the intent is to avoid prefer-

ential treatment in exchange for something of value

in the manner of a gift or donation having some

remunerative value.

CONCLUSION

In the absence of any authority to support her

Petition, Petitioner has not established any compel-

ling reason for this Court to consider the issue sub

jJudice. Therefore, Respondents respectfully request

that the Petition be denied.

Respectfully submitted,

June 5, 2008 JOHN B. CURTIS, JR.

(Counsel of Record)

BrucE D. GILL

LEITNER, WILLIAMS, DOOLEY

& NAPOLITAN, PLLC

801 Broad Street, Third Floor

Chattanooga, TN 37402

(423) 265-0214

(423) 266-5490 (facsimile)

Counsel for Respondents

App. 1

DEPARTMENT OF HEALTH & [LOGO]

HUMAN SERVICES

Centers for Medicare & Medicaid Services

7500 Security Boulevard, Mail Stop S2-26-12

Baltimore, Maryland 21244-1850

Center for Medicaid and State Operation

Ref: S&C-03-10

DATE: January 9, 2003

FROM: Director

Survey and Certification Group

SUBJECT: Binding Arbitration in Nursing Homes

TO: Survey and Certification Group Regional

Office Management (G-5) State Survey

Agency Directors

The purpose of this memorandum is to address the

Centers for Medicare & Medicaid Services’ (CMS)

position regarding binding arbitration between

nursing homes and prospective or current residents,

in response to recent marketplace practices. Specifi-

cally, this memorandum addresses the use of an

agreement that requires disputes between a prospec-

tive or current resident and the nursing home be

resolved through binding arbitration either as a

condition of admission or a condition of remaining in

the nursing home. Under these agreements, the

resident gives up his or her right to sue the nursing

home through the judicial process.

CMS believes that its primary focus should be on the

quality of care actually received by nursing home

App. 2

residents that may be compromised by such agree-

ments, for the reasons set out below. Under Medicare,

whether to have a binding arbitration agreement is

an issue between the resident and the nursing home.

Under Medicaid, we will defer to State law as to

whether or not such binding arbitration agreements

are permitted subject to the concerns we have where

Federal regulations may be implicated. Under both

programs, however, there may be consequences for

the facility where facilities attempt to enforce these

agreements in a way that violates Federal require-

ments. ;

Survey and Certification Guidance:

1. Ifanursing home discharges a resident or retali-

ates due to an existing resident’s failure to sign

or comply with a binding arbitration agreement,

the State and Region may initiate an enforce-

ment action based on a violation of the rules gov-

erning resident discharge and transfer. A current

resident is not obligated to sign a new admission

agreement that contains binding arbitration.

Federal regulations, at 42 C.F.R. §483.12(a)(2)

limit the circumstances under which a facility

may discharge or transfer a resident. None of the

conditions specified in the regulation permit a fa-

cility to discharge or transfer a resident based on

his or her failure to comply with the terms of a

binding arbitration agreement. Additionally, a fa-

cility that retaliates against a resident who fails

to sign or comply with the agreement is subject to

an enforcement response based on its failure to

comply with the obligation to furnish an abuse

free environment under 42 C.F.R. §483.13(b) or

App. 3

other requirements bearing on the facility’s obli-

gation to provide quality care to all residents.

The existence of a binding arbitration agreement

does not in any way affect the ability of the State

survey agency or CMS to assess citations for vio-

lations of certain regulatory requirements, in-

cluding those for Quality of Care.

2. The Medicaid appeal procedures at 42 C.F.R.

§431.200 et seq. apply to discharges or disputes

of eligibility between the resident and the State

Medicaid Agency and are not affected by a bind-

ing arbitration agreement.

Effective Date: This policy is in effect immediately.

Training: This policy should be shared with all

appropriate survey and certification staff, their manag-

ers, and the state/regional office training coordinator.

/s/

Steven A. Pelovitz