First of all, the question about the school's obligation to ensure that practitioners are fully trained is a question of law and policy and beyond the scope of what can be answered in this forum.
My first impression from the facts presented is that the writer of this case is seeing an actual or perceived power imbalance in favour of the school. I gather the students are afraid of a disciplinary hearing because they fear they may get a worse deal than they might through negotiation -- or as has been suggest in the case presentation, mediation.
The perception of power imbalance may be worth testing a bit. I'm guessing that the school's lawyer might be open to mediation if the school became concerned it might not do well in a disciplinary hearing, or if the school were concerned about reviews of the disciplinary hearing afterward, or if it were concerned about unfavourable publicity for the school.
What are the risks to both parties of not settling now, e.g. possibilities of appeal, publicity, etc. Is the school subject to the jurisdiction of a state ombudsman or human rights commission who might take jurisdiction to review a discipline process? What if the case ended up in the courts? Is the state a mandatory-mediation state that could compel mediation if the case were filed in court?
Is this dispute in the public eye? How publicly sympathetic is the case of the school and the students respectively? The students may have less to fear than the school if there were publicity (unless there are some adverse facts about the students, or if there are safety concerns that are not presented in this scenario.)
What are the views of various administrators in the school at various levels? Has the situation become controversial within the school? Would it be controversial if it became more widely known? What do other students think about it? Have they ever mobilized, or are they likely to mobilize? Are there interest groups outside the school who might be advocates on one side or the other? Possibly so, if there is a significant public discussion about alternative medicine (I thought chiropractic was an alternative approach?! It used to be...)
If there is a risk to the school from increased pressure or publicity, and if there is controversy about the situation within the school's academic and administrative ranks, mediation may be seen as attractive to prevent internal conflict within the school.
Has the idea of mediation been put forward to the parties? By whom? And how? Is there a possibility that a powerful administrator or other person within the system could propose mediation in a way that it might be considered?
Is there anyone in the situation who might help the parties do as thorough analysis with each of the parties, including risk assessment? The very fact that the school's lawyer is negotiating is a possible sign that the school's lawyer isn't sure what might happen if the students ratcheted up the dispute a few notches.
