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

     I previously introduced the concept of the hospital-medical staff standing neutral, and how satisfaction of Joint Commission conflict resolution requirements and other advantages argue for its use. This Part 3 of the series will turn to the potential roles a standing neutral can fulfill. There is no blueprint to follow on this, nor should there be. The parties are free to define both the functions to be performed by the standing neutral, and the kinds of disputes that will fall within the standing neutral's purview. The hospital and the medical staff will need to agree on these things up front.

     In all cases, the essence of the concept is that the standing neutral is selected in advance of any dispute, is given information sufficient to be familiar with the parties as problems arise, and remains readily available to deal with disputes quickly and efficiently.

     The functions to be performed by the standing neutral can span the range of dispute resolution processes. Some parties may simply want a standby facilitator, who can jump in to assist the parties when their direct negotiations have stalled. A step up from this would be a formal mediation process. Other parties may want the neutral to hear from both sides and offer a non-binding recommendation for the resolution of their disputes. The parties may want the neutral to make a binding decision, effectively acting as an arbitrator. The standing neutral also may serve as a hearing officer pursuant to the fair hearing procedures under the medical staff bylaws. All of these may be used in different circumstances, individually or in combination, as suited to the parties' situation.

     As for the kinds of disputes that will fall within the standing neutral's purview, the parties may consider disputes arising from some or all of the following:

- proposed changes to medical staff bylaws, policies and rules

- "turf battles" between members of the medical staff and the executive committee and/or the board of trustees

- credentialing and discipline of individual practitioners

- implementation or restructuring of hospital physician payment initiatives, including managed care networks, Accountable Care Organizations and "gainsharing"

- "economic credentialing"

- hospital-physician joint ventures

     Next up, selecting a hospital-medical staff standing neutral.

[Image: a child amateur boxing exhibition match in Union City, New Jersey, July 1, 2010, by Luigi Novi]

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       On February 21, the U.S. Supreme Court vacated a 2011 ruling by West Virginia's highest court that found all predispute arbitration clauses in nursing home admission agreements were void as a matter of public policy. In Marmet Health Care Center v. Brown, the Supreme Court held that the Federal Arbitration Act ("FAA") preempts the West Virginia court's stated "public policy" because that policy prohibits the arbitration of a particular type of claim, a result clearly inconsistent with prior Supreme Court decisions interpreting the FAA.

       The Supreme Court did leave open the possibility that on remand, the West Virginia court could find the particular arbitration provisions in question to be unenforceable because they are unconscionable under generally applicable state law principles (i.e., not just because they are contained in an arbitration agreement). 

       Marmet is consistent with the law in New Jersey interpreting the FAA as previously articulated in Estate of Ruszala v. Brookdale Living Communities and Moore v. Woman to Woman Obstetrics & Gynecology, which were discussed here previously. The question remains: will hospitals, physicians and other healthcare providers utilize admission agreements to require their patients to arbitrate later arising negligence claims? Although Marmet confirms that this door is wide open, providers will need to proceed with caution. Among other things:

- Is the provider's malpractice insurer on board?

- How far does the provider want to go to assure the arbitration clause will be sufficiently "fair" to be enforceable under state law? Should it contain a patient "opt out" feature?

- Is the clause consistent with the provider's existing philosophy towards patient lawsuits?

- Is the provider prepared for the public relations consequences?

- Who will arbitrate claims that are made, under which rules, and how will the arbitrators be selected? (Keep in mind that the American Arbitration Association and the American Health Lawyers ADR Service, as a matter of policy, do not accept patient malpractice claims arising from predispute arbitration agreements.)

       These issues will play out for providers all over the country as they struggle to contain malpractice coverage expenses while competing for the ever-shrinking healthcare dollar. 

[Image: Justice Icon with crossed gavels, March 6, 2010, by Svgalbertian]

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       "State courts across the United States are bracing for another year of austerity as a new budget cycle threatens once again to limit funding for the courts." So writes Sheri Qualters in the National Law Journal, as reprinted this week in the New Jersey Law Journal online edition (subscription required). Her story goes on to detail the problems faced by state courts nationwide, which depend on anemic state tax revenues for their funding. She further details the steps being taken by state courts to trim budgets and curtail services in an effort to balance the books.

       New Jersey is no exception to this trend. In response to ever-increasing caseloads and budgetary constraints, the state's Administrative Office of the Courts recently issued a report in support of proposed legislation to increase filing fees and permanently dedicate the new revenue to improving the courts; specifically, the creation of an e-filing system and the funding of Legal Services of New Jersey.

       Nowhere in the article cited above or the NJ AOC report is there mention of the role alternative dispute resolution can play in reducing the burdens on a state court system. In fact, the New Jersey judiciary is currently reevaluating the state's mandatory mediation program based on concerns that it diverts too many resources away from the administration of a growing civil case load. Many in the New Jersey ADR community fear that the current court mandated mediation program will be scrapped for "budgetary reasons." Both sides on this issue are missing the forest for the trees.

       The railroad barons of the 19th century lost their preeminence because they thought they were in the railroad business when they were really in the transportation business. Apparently, those running state court systems today believe they are in the litigation business, when they should be in the dispute resolution business. There is a well established and competent (albeit private) community of ADR providers now operating in parallel with the state courts. That community stands ready willing and able to work in tandem with the court system to resolve disputes at virtually no additional cost to the taxpayers.

       Previous efforts to integrate private ADR providers with the state courts (including the current New Jersey program) have encountered two major obstacles. First, the courts are reluctant (and some would say Constitutionally unable) to mandate any substitute for a trial in state court, particularly anything the litigants must pay for in addition to statutory filing fees. Second, the courts have been unable to assure the competence and quality of ADR providers in court annexed programs. However, neither of these obstacles is insurmountable.

       This is where the ADR community needs to focus its attention. There is no question that ADR processes can dispose of most disputes more efficiently than litigation in state court. The legal community has had a generation of exposure to ADR, and is prepared to accept its use under the right circumstances. Creative minds can find a way to overcome the obstacles to a state court - private ADR system, thereby solving the current budgetary problem, yielding better outcomes and protecting the taxpayers.

       Much more discussion and debate on how to overcome these obstacles must follow. For today, I can only suggest that we not write or accept further analyses of the "state court budget problem" that do not include a major role for ADR. Private ADR providers are to the state court systems what the interstate highways are to the railroads. Door to door delivery of all shipping containers by railroad is prohibitively inefficient and expensive. Let's stop making that mistake.

[Image: Unloading a shipping container with household contents, June 19, 2010, by Geo Swan]

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       "Decision-Making By Judges And Arbitrators - How Decisions Are Made And Influences On The Process" will be the subject of a program by the Dispute Resolution Section of the New Jersey State Bar Association at 6:30 p.m. on Tuesday, February 28, at the Law Center. This is the second program in a series, and follows one covered here previously. The panel for this program includes retired Judge John W. Bissell, John E. Sands and John R. Holsinger, all noted arbitrators. They will discuss how they go about deciding cases, how judges and arbitrators differ, and what advocates should and should not do to influence a decision in their client's favor.

       I will be asking the panelists to address the role of "intuition" in the decision-making process. Four years ago I wrote here about a study that indicated state court judges are predominantly intuitive decision-makers, and intuitive judgments are often flawed. I see that as another reason to opt for arbitration, where a more deliberative approach and subject matter expertise can overcome intuition errors. 

       Registration is through the NJSBA. The program includes dinner and CLE credits. If you attend, please stop by and say hello.

[Image: Figurines representing three of the ten judges of Diyu, December 29, 2006, by Wafulz]

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     I previously introduced the concept of the hospital-medical staff standing neutral. In this Part 2 of a series, I will cover relevant Joint Commission requirements, and the advantages and drawbacks of using a hospital-medical staff standing neutral to resolve conflicts between hospitals and their medical staffs.

Joint Commission Requirements

     Joint Commission Leadership Standard LD.02.04.01 requires that "the hospital manages conflict between leadership groups to protect the quality and safety of care." The Elements of Performance supporting this standard require that "senior managers and leaders of the organized medical staff work with the governing body to develop an ongoing process for managing conflict among leadership groups."

     Similarly, Joint Commission Medical Staff Standard MS.01.01.01 requires that "Medical Staff bylaws address self governance and accountability to the governing body, including by way of Element of Performance 10, which says in part:

"The organized medical staff has a process which is implemented to manage conflict between the medical staff and the medical executive committee on issues including, but not limited to, proposals to adopt a rule, regulation, or policy or an amendment thereto."

     It is clear that the Joint Commission expects each hospital and its medical staff to have a dispute resolution mechanism in place. However, other than for the basic elements of the process (set forth in the Elements of Performance under LD.02.04.01), the Joint Commission leaves it up to each hospital and medical staff to fashion their own means of compliance. Most have simply adopted policies that mimic the Joint Commission's directives, but are short on detail, essentially leaving conflict resolution to a case-by-case process. Unfortunately, this typically results in the parties falling into their familiar routine: "lawyering up" and setting the litigation machine into motion. Establishment of a hospital-medical staff standing neutral fundamentally alters this habit - and its advantages far outweigh its drawbacks.

     Advantages

     1. Enables self-determination. The hospital and the medical staff remain in control of their relationship and the resolution of their differences, rather than abdicating to the legal system.

     2. Saves time. The standing neutral can be activated at a moment's notice. Once involved, the neutral's use of alternative dispute resolution processes can bring about a resolution more quickly than traditional legal proceedings.

     3. Less costly. The parties will spend less on lawyers and incur lower internal costs by resolving their disputes more quickly and efficiently.

     4. Creates trust and confidence. Because the parties have jointly selected the standing neutral, and jointly defined the neutral's role, they can be confident that the process used to resolve their dispute will be fair.

     5. Preserves relationships. Rather than "slugging it out" through legal proceedings, parties using a standing neutral are encouraged to cooperate in a process that will yield a fair result.

     6. Reduces the occurrence of disputes. Experience in the use of standing neutrals in the construction industry suggests that parties using this mechanism come to have fewer dispute as time goes on. This occurs because that each party realizes its position on any given issue will be quickly and candidly reviewed by a neutral who will hold both parties to the same standard of good faith and reasonableness. This forum does not favor hyperbole, stonewalling, bluffing and other tactics common to the traditional legal process. Accordingly, parties over time tend to self-regulate their demands and positions to more naturally coalesce around their common objectives.

     Drawbacks

     The establishment of a hospital-medical staff standing neutral is not without some perceived drawbacks.

     1. Cost. The cost of the standing neutral must be considered. However, when compared to the internal costs and legal fees associated with resolving disputes through conventional means, this cost is minimal.

     2. Loss of control. Some parties and their legal counsel may feel that the presence of a third party neutral will interfere with the party's ability to "control" the handling of disputes that arise. But the neutral only has whatever authority the parties agree upon in advance. In reality, parties have far less "control" over the process and outcome of conventional litigation than they might think. 

     3. Fear of bias. If a party believes the standing neutral is biased towards the interests of the other party, the process is bound to fail. This is why both parties must participate actively in the selection of the standing neutral. It also means the neutral must work diligently to remain unbiased and appear to be unbiased throughout the engagement.

     4. Confidentiality. Introduction of a standing neutral to the parties' discussions opens up the possibility that confidences will be disclosed. The parties must believe that the selected neutral will honor the obligations of confidentiality imposed under the parties' agreements and by law.

     Next up, defining the role of the hospital-medical staff standing neutral.

[Image: Unbalanced scales, January 8, 2007, via Wikimedia Commons]

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     The idea of a "standing neutral" is well known within the construction industry, and has been used there in various forms for many years. The construction standing neutral is a trusted expert selected by the owner and the contractor at the outset of a project who remains available until the project's conclusion to assist the parties in resolving disputes as they arise. A standing neutral for construction projects works well because the parties have an ongoing relationship, and a mutual need to resolve disputes quickly and efficiently.

     Hospitals and their organized medical staffs stand in a similar posture, but with even greater interdependence. Their relationship is ongoing, indeed, it's perpetual. Rather than a contractual arrangement in which the parties exchange money for goods and services, the relationships between hospitals and their medical staffs are symbiotic. The hospital needs the members of its medical staff to admit and care for patients, and needs the organized staff to oversee and regulate the practice of medicine within the hospital's facilities. The members of the medical staff need the facilities, equipment, nurses and other personnel that the hospital provides, and the physicians cannot afford.

     The smooth functioning of the hospital-medical staff relationship is crucial to their common economic well-being. As forces beyond their control strain that relationship, conflicts will arise. Just as in the case of an ongoing construction project, the parties can choose to address these conflicts on an ad hoc basis, or proactively provide for a mechanism that stands ready to resolve conflicts as they arise: the hospital-medical staff standing neutral.

     This is the first in a series of posts on this subject. It is drawn from an article I wrote in the September-October issue of the Physician Executive Journal ("PEJ") (subscription required). Future posts will address the advantages of a hospital-medical staff standing neutral, including Joint Commission standards on conflict resolution that favor its use; defining the role of the hospital-medical staff standing neutral; and the process for selection of a hospital-medical staff standing neutral.

[Image: Chair umpire referee on court 18 at Wimbledon 2006, via Wikimedia Commons]

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     I've been on a mission to convince fellow lawyers that encouraging clients to use mediation, arbitration and other alternative dispute resolution methods is good for clients and their lawyers. According to Dan Hull:

          "Think like a client. The trick now is to win cheap.

For an experienced client, the cost of the lawsuit is part of the "victory" analysis. So is closure--or just getting it over with."

     I can't say it any better, so I won't. Read on at What About Paris?

[Image: $620 in 31 twenty dollar bills, August 14, 2007, by Merzperson]

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