By Kevin Stawicki

Law360 (August 3, 2020, 4:45 PM EDT) -- Two nursing homes have urged the Eighth Circuit to extend a block on the Centers for Medicare & Medicaid Services' rule that bans arbitration agreements for newly admitted residents, saying health care providers shouldn't have to juggle complying with the unlawful rule and serving patients during the coronavirus pandemic.

The appeals court should extend a stay on the far-reaching and improper prohibition on nursing home arbitration agreements while it continues to review whether a lower court properly granted summary judgment to U.S. Department of Health and Human Services over the validity of the rule, the nursing homes said in a brief Friday.

"Diverting resources toward compliance with a rule that is unlikely to survive appellate review would constitute sufficient irreparable injury for a stay even in the ordinary course," the nursing homes said, adding that COVID-19's outsized impact on nursing homes only heightens the need for immediate relief.

After HHS denied the nursing homes' request to halt enforcement of the rule, the appeals court in June paused its implementation until Sept. 1. Friday's briefing wants the rule to be paused until the appeal is completely resolved.

"Requiring plaintiffs to come into compliance with the rule in the midst of an unprecedented and worsening global pandemic would irreparably injure plaintiffs, their staff, and their residents, undermining the very public-health interests HHS is charged with protecting," the nursing homes said.

The appeals court is mulling U.S. District Judge Timothy L. Brooks' April ruling that HHS didn't violate the Federal Arbitration Act by limiting the use of arbitration agreements by long-term health care facilities, and that those limits don't necessarily "disfavor such agreements."

Reasonable restrictions on the facilities in obtaining federal funds are "reasonably related to the policy goals of the Medicare and Medicaid programs and are therefore a permissible use of the government's authority," Judge Brooks wrote in April.

But the nursing homes said in their Eighth Circuit appeal in June that Judge Brooks' ruling created a conflict among the courts by finding that HHS can restrict arbitration agreements.

Northport Health Services of Arkansas LLC, which does business as Springdale Health and Rehabilitation Center, and NWA Nursing Center LLC, which does business as The Maples at Har-Ber Meadows, sued in 2019. Both nursing homes are located in Springdale, a city in northwest Arkansas.

According to the suit, the prohibition is "just as unlawful" as an earlier arbitration ban pursued by the Obama administration, which a Mississippi federal judge blocked in 2016.

After the judge's 2016 decision, CMS rejiggered an arbitration rule so that it doesn't forbid all arbitration agreements. But the revamped rule still prevents nursing homes from forcing potential residents to sign binding arbitration agreements in order to be admitted, the suit said.

"The differences between the rules are more cosmetic than material," according to the lawsuit.

CMS issued its final rule in July. The American Health Care Association, a trade group representing many of the nation's 16,000 nursing homes, said at the time that it was "concerned about CMS adding any conditions or administrative requirements when Congress has spoken on this topic."

The nursing homes said their challenge to the revised rule is even stronger than it was in 2016 in light of the U.S. Supreme Court's 2018 ruling in Epic Systems v. Lewis , which blessed employers' use of mandatory arbitration agreements, and its 2017 ruling in Kindred Nursing Centers v. Clark, which established the FAA's supremacy over any conflicting state laws.

The 2016 ruling scrapping the initial ban said that while CMS could conceivably justify its actions by citing the agency's authority to protect the health and safety of nursing home residents, it ultimately didn't compile enough evidence to justify the ban. Northport said Wednesday the agency presented just as little evidence this time around and admits that "empirical support for the new regulations does not exist."

Counsel and representatives for the parties did not immediately respond to requests for comment Monday.

The nursing homes are represented by Kirkman T. Dougherty of Hardin Jesson & Terry PLC, and Paul D. Clement and Erin E. Murphy of Kirkland & Ellis LLP.

The government is represented by Robert P. Charrow, Brenna E. Jenny, Janice L. Hoffman, Susan M. Lyons, W. Charles Bailey Jr., David C. Fowlkes, Mark B. Stern and Dennis Fan of the U.S. Department of Justice's Civil Division.

The case is Northport Health Services of Arkansas LLC et al. v. U.S. Department of Health and Human Services et al., case number 20-1799, in the U.S. Court of Appeals for the Eighth Circuit.

--Additional reporting by Jeff Overley. Editing by Adam LoBelia.

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