Judge Grants Injunction on CMS Arbitration Rule, Implementation Halted. What’s Next?

Earlier this month a federal judge issued an order temporarily halting the implementation of CMS’ new rule banning anti-arbitration clauses in nursing home contracts.

[Read the order here.]

The injunction was requested by the American Health Care Association, the industry group that is suing over the rule.

The rule, which was set to kick in on November 28, is now on hold until the court can hear AHCA’s case against it.

Details on the ruling, from Advisory Board:

District Court Judge Michael Mills in his decision wrote that the rule is “based on sound public policy,” but represents an “incremental ‘creep’ of federal agency authority … beyond that envisioned by the U.S. Constitution.”

Mills added that the court might be “sympathetic … to the public policy considerations which motivated the rule,” but only Congress, not CMS, can address it. “Congress’ failure to enact positive legislation should not serve as an excuse for the executive branch to assume powers which are properly reserved for the legislative branch,” he wrote.

Mills wrote that he “does not exclude the possibility” that CMS could make a case to change his decision. According to CQ HealthBeat, the Obama administration can appeal the decision.

What does this mean for providers? And what happens next?

The lawsuit will continue, but the rule won’t go into effect on November 28. CMS will likely appeal the ruling.

A blog post by Hinshaw & Culbertson LLP explains:

The ruling was a preliminary injunction. This is not necessarily a ruling on the merits. The parties could continue to litigate the mater in this Court. Additional evidence could be offered and the preliminary injunction could be vacated by the Court or affirmed as a permanent injunction.

The more likely next step would be an appeal by CMS. A preliminary injunction is immediately appealable to the Federal Appeals Court, in this case, the Fifth Circuit.


The rule banning arbitration agreements will not go into effect on November 28, 2016. Moreover, so long as the preliminary injunction remains in place, long-term care facilities will not be in violation of CMS’ Final Rule if they do not act by November 28, 2016 to amend their admission agreements to eliminate pre-dispute binding arbitration. The Rule will not become active without further action from the Court.

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