Healthcare Neutral ADR Blog : New Jersey Healthcare ADR Lawyer & Attorney : Healthcare Neutral : Richard Webb : New York Metropolitan Area

          Advocates of mediation often point to several advantages of that process over conventional courtroom litigation: the uncertainty (risk) of a litigated outcome; imperfect decision-making by the judge or jury; lack of the parties' control over the process;  and increased costs.  Now we can add to this list a more practical rationale:  if you are a plaintiff and you go to trial, the odds are you will do worse than if you settle. 

          At least that is the conclusion of a comprehensive study of civil lawsuits as reported by Jonathan D. Glater in The New York Times online Business Section.  The study, to be published in the September issue of the Journal of Empirical Legal Studies, is said to be "the biggest of its kind to date."  It contrasts the results actually achieved by the parties at trial with the results that were offered to them in settlement but declined.  The decisions of both plaintiffs and defendants were separately analyzed.

          According to Randall L. Kiser, a co-author of the study and a principal analyst at DecisionSet, plaintiffs made the wrong decision by going to trial in 61 percent of the cases.  Defendants made the wrong decision far less often, in 24 percent of the cases.  Before defendants and their counsel draw too much comfort from having been "right" more often than "wrong" by choosing to go to trial (i.e., 76% v. 24%),  they should also consider that the study found getting it wrong cost plaintiffs $43,000 on average, while the cost of getting it wrong for defendants averaged $1.1 million.
     

          To me, the most interesting and compelling finding of the study reported by the NYTimes was this:

          "In just 15 percent of the cases, both sides were right to go to trial - meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered."

          What this means is that in 85 percent of the cases that went to trial, the outcome was outside the last zone of settlement determined by the parties prior to trial.  If the plaintiff offered to settle for $100 and the defendant offered to pay $50, they both might intuitively expect  the trial to yield an outcome somewhere between $50 and $100.  And they would be wrong 85 percent of the time!

           The NYTimes article discusses some of the potential explanations for the consistent pattern of litigants going to trial when it is clearly the wrong choice - another interesting topic in itself.  But without knowing why, parties and counsel can appreciate the consequences of these choices.  

          The smart money goes to mediation.

          [Image: A roulette wheel, by Toni Lozano via flickr]

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 [Image: U.S. Hygiene Laboratory photo of Schick test, a measure of immunity from diphtheria, 1915]


          It may be the weather, the economy, or the mounting pressure on hospitals and physicians to "compete" with each other like never before, but lately I have noticed a sharp increase in matters presented to me involving "professional review activities" by hospitals against physicians on their medical staffs.  These disputes come in all shapes and sizes, but always require reference to the hospital's medical staff bylaws and applicable law. 

          In particular, the federal Health Care Quality Improvement Act of 1986 ("HCQIA") provides for "safe harbor" procedures to be followed in the course of any professional review activity, compliance with which is a precondition to the legal immunities offered by the Act.  The HCQIA's requirements have become the industry standard, and often shape (or at least must be read together with) the provisions of a hospital's medical staff bylaws concerning the due process rights of affected practitioners.

          In 2004, a jury in the Northern District of Texas awarded a physician $366 million in damages against a hospital and members of its medical staff for action taken by them to suspend the plaintiff physician's medical staff privileges.  The award in that case, Poliner v. Texas Health Systems, et al, sent shivers through hospitals throughout the country because the trial court  permitted the damages award to stand (albeit substantially reduced in amount on remittitur), notwithstanding the defendants' claim of immunity under the HCQIA.  This week, the Fifth Circuit Court of Appeals issued a decision in the defendants' appeal on this issue, and reversed the judgment of the District Court.

          The Court's opinion focused on whether the defendants in Poliner had adhered to the four requirements for immunity under the HCQIA:

1 - Were their actions taken in the reasonable belief that they furthered quality health care?

2-  Was there a reasonable effort to obtain the facts?

3-  Were adequate notice and hearing procedures afforded to the affected physician?

4-  Did they reasonably believe that their adverse action was warranted by the facts known?

          There was no dispute that these were the requirements for immunity under the HCQIA.   The  question faced by the  Fifth Circuit was whether the District Court had interpreted these requirements correctly in applying them to the defendants in Poliner.  In several important respects, the Fifth Circuit found that the District Court had erred.

          Of most importance  to hospitals and counsel for physicians on both sides of these situations, the Fifth Circuit held:

 - The HCQIA's reasonableness requirements were intended to create an objective standard of performance rather than a subjective good faith standard.

- The Court's review of the reasonableness of the defendants' decisions must be based on the information known to them at the time, and not what might be later shown to be true by experts or otherwise.

- Immunity does not require the defendants to have been correct or "right" in their findings, only that their findings were objectively reasonable under the facts available at the time.

- Plaintiff's allegations of anti-competitive motives and evil intent are of no consequence to the immunity offered by the HCQIA if the defendants' actions are objectively reasonable.

- Immunity from money damages under the HCQIA does not require compliance with the hospital's medical staff bylaws, as long the four requirements of the HCQIA set forth above have been met.

          This decision will greatly affect the resolution of conflicts involving professional review action, whether during the hospital-medical staff proceedings or in subsequent litigation.  The trial court's decision created a perception of risk in many professional review scenarios that expanded the range of potential outcomes "on the table" during any effort to resolve these matters.  Under the Fifth Circuit's decision, that range has been shrunk.

          Aside from its  value as direct precedent, the decision is very clear, well reasoned and practical in its approach, and I wager it will be widely followed.  Affected physicians will now get far less impact from suggestions that "the review panel was out to get me," "my expert knows more about this than you do," or  "the hospital didn't follow its bylaws."

           Poliner appears to have put the balance of negotiating power back to where it was intended by the HCQIA.  It clearly elevates considerations of patient safety over the right of an affected physician to seek money damages.  It leaves unchanged the affected physician's right to seek remedies other than money damages (e.g., to enforce rights under the medical staff bylaws), and holds hospitals and medical staffs to a reasonable standard of conduct that they can realistically implement.  It warrants their collective sigh of relief.

(Hat tip to the Horty Springer Health Law Express (join here) for being the first to bring this decision to my attention.)

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