AHLA Offers Enhanced ADR Training Opportunities

     For many years, the American Health Lawyers Association ("AHLA") Alternative Dispute Resolution Service has offered basic (one day) training courses in arbitration and mediation. I just heard from Geoff Drucker, Manager of the ADR Service, that the Service is taking a big step towards expanding its educational and service capabilities.

     From October 19-21, the ADR Service will provide some enhanced arbitration and mediation training opportunities. Offered in partnership with Hamline University School of Law (one of the nation's preeminent ADR and health law programs), the training sessions will be held in Minneapolis, MN. Details are available on the AHLA website.

     As Geoff explained it, these training sessions will break from the past in that (1) they will be longer and thereby permit more in-depth coverage of the material through role playing; (2) they will take place at a university conference center rather than a hotel meeting room; and (3) they will embody the quality associated with programs at Hamline.

     The courses' instructors appear to be top notch. The two and one-half day mediation training will be given by Debra Gerardi, President of Emerging Healthcare Communities ("EHCCO")  and Professor Sharon Press of Hamline School of Law's Dispute Resolution Institute. The one and one-half day arbitration training will be given by a panel of experienced health law arbitrators from around the country, including Marcia Augsburger, Elise Dunitz Brennan, Anthony DiLeo, and Michael Jordan. Debra Gerardi will speak at a joint plenary luncheon.

     According to Geoff, the ADR Service's foray into more in-depth training is hopefully the first of other steps to improve its offerings. On the horizon may be higher training requirements for neutrals who are new to the Service (with these new courses meeting that higher standard). He also sees the potential for an entire AHLA conference devoted to ADR (similar to the AHLA's regular subject matter offerings, e.g., Medicare/Medicaid, Tax Exempt Organizations, Antitrust, Fraud & Abuse). Both of these would be welcome developments.

     Registration for these training sessions is limited. You can register here.

[Image: University Hall - Old Main, Hamline University, Saint Paul, MN, March 19, 2008, by William Wesen]

Should Mandatory Arbitration Be Regulated?

     "Mandatory arbitration" provisions have come under harsh criticism in recent years. (Since all pre-dispute agreements to arbitrate are "mandatory," it would be more precise to state that pre-dispute arbitration agreements between parties with unequal bargaining power have raised concerns about their "fairness," but I will use the shorthand "mandatory arbitration" here.) Such provisions are common in consumer, financial and employment agreements, and increasingly seen in healthcare. Opponents of mandatory arbitration assert that agreements to arbitrate in certain circumstances can be fair only if freely entered into after a dispute arises. The proposed Arbitration Fairness Act of 2009 (now 2011) adopts this stance, and would render unenforceable all pre-dispute arbitration agreements in employment, consumer, franchise and civil rights matters.

      A welcome alternative to the drumbeat of the "Arbitration Fairness" movement is presented by Miles B. Farmer's Note in the Yale Law Journal entitled "Mandatory and Fair? A Better System of Mandatory Arbitration."  If you have any interest in the debate over "mandatory arbitration" and the Arbitration Fairness Act, I recommend that you read this Note in its entirety.

     Mr. Farmer identifies arbitrator bias resulting from the "repeat player" phenomenon as the primary source of unfairness in mandatory arbitration. But he concludes that outlawing all predispute arbitration agreements between parties of unequal bargaining power would be like throwing the baby out with the bathwater. As he explains, the benefits to society and the parties from the widespread use of arbitration in these cases should be maintained.

     The Note proposes the creation of a state or federal regulatory regime under which providers of arbitration services (e.g, the American Arbitration Association) would be required to report data on the selection and use of particular arbitrators for repeat players, and the arbitrators' awards in those repeat cases. Arbitration providers would be required to demonstrate that the arbitrator selection process resulted in decisions which, in the aggregate, appeared fair to both sides when compared with (i) a range of outcomes deemed "fair," and (ii) outcomes reported by other arbitration providers. A failure to report required data, to abide by the required arbitrator selection process, or to achieve a "fair" balance of outcomes (in the aggregate), would subject the arbitration provider and the drafter of the arbitration provision to an enforcement action by a designated law enforcement agency (including financial remedies).

     Mr. Farmer would not provide for a challenge to the outcome of any particular arbitration award (thereby retaining each arbitration's finality, and avoiding preemption by the Federal Arbitration Act). Further, he would not provide for a private right of action to enforce the regulatory regime.

     The Note focuses the attention of the "mandatory arbitration" debate where it belongs: on the abuses that can taint the outcomes in repeat player cases. It correctly rejects the Arbitration Fairness Act as overkill and protects individual arbitration awards from challenge by unhappy parties. Requiring arbitration providers to demonstrate fairness in the arbitrator selection process for repeat players would be feasible and effective, although I would prefer to see this occur as a result of market forces than by way of government regulation.

     Where Mr. Farmer loses me is in the suggestion that the outcomes of all cases administered by an arbitration provider for a repeat player should be assessed, in the aggregate, for their "fairness."  Although an arbitrator who ruled in favor of a repeat player in 100% of a large number of cases probably has some explaining to do, a "50-50" split of outcomes is not necessarily fair and just. A fair and just split is the one that results from the decisions of unbiased arbitrators appointed in accordance with the selection rules Mr. Farmer advocates, whatever that split may be. Setting a "50-50," "60-40," or any other split as the "fair" standard for arbitration providers to achieve would have the perverse result of requiring those providers to recruit, select and instruct their arbitrators on outcomes -  exactly the kind of interference that created the original problem.

     Rules for the selection of qualified, unbiased arbitrators should be strictly applied, as should ethical constraints relating to cases involving repeat players. A sufficient rotation of arbitrators should be appointed for any repeat player to assure that undue familiarity will not occur. Arbitration providers should embrace these efforts, and make them an important and transparent part of what they offer both parties to a "mandatory arbitration." But arbitration providers and the government should stay away from selecting particular arbitrators in an effort to assure some preconceived, "fair" mix of outcomes.

     Bias for and bias against a repeat player are equally bad. You either trust the arbitrators you've picked or you don't. If you don't, you should look elsewhere.

NJ Bar Health Law Section Announces Programs For 2012-2013

     I am honored to serve as Chair of the New Jersey State Bar Association's Health Law Section for the upcoming year. The Section includes 446 members of the Bar who represent healthcare providers and other clients relating to the health care field. The Section's Board recently approved a schedule of meetings and programs that I'd like to share with you.

  • September 11, 2012 : The aftermath of the SCOTUS decision on the Affordable Care Act (Law Center)
  • October 19, 2012: Annual Health Law Symposium (Seton Hall Law School)
  • November 13, 2012: The View From Trenton After Election Day - NJ Commissioner of Health (invited) (Law Center)
  • December 11, 2012: Holiday reception and roundtable on in-house/outside counsel relationships and alternative fee arrangements (Law Center)
  • January 8, 2013: Brown bag lunch program on Ethics For Health Lawyers (law firms throughout NJ, t/b/d)
  • February 5, 2013: Medical Staff Due Process v. Hospital's Duty As Employer And A Hostile Work Environment (Law Center)
  • March 12, 2013: Joint program with NJ Hospital Association In-House Counsel on Current Tax Exemption Issues (NJHA, Princeton)
  • April 16, 2013: Alternative Dispute Resolution in Healthcare (Law Center)

     These programs are open to all members of the NJSBA. If you are not a member, please consider joining, or request to attend as a guest. In most cases, CLE credits and dinner are provided, and you will not be disappointed. Contact me directly if you have any questions.

Why Not More Corporate ADR?

     A fundamental premise of the alternative dispute resolution ("ADR") movement is that when properly applied, ADR can resolve most disputes faster, cheaper and better than conventional litigation. I'm convinced this is true, as are most ADR practitioners. When asked, most lawyers will say something positive about ADR, but fall short of endorsing its universal application (e.g., "I think ADR is great for the right case").

     This week I noticed two articles that brought home just how far ADR has to go in penetrating the world of corporate and commercial disputes. Writing in Corporate Counsel at LAW.COM, Craig Bleifer listed 10 Questions CEOs Should Ask GCs About the Legal Business Plan. It's a thorough list that attempts to remind GCs that in-house legal operations should make sense from a business standpoint, just like every other major department of the corporation. Notably absent from the article are the words "alternative dispute resolution" or anything else to suggest a rethinking of how the company handles disputes.

     I also noticed an article by Jennifer Smith on the Wall Street Journal's Law Blog entitled Getting More for Less. It covers an announcement by the Association of Corporate Counsel recognizing its 2012 Value Champions, "a handful of business and law firms who came up with innovative ways to boost efficiency and cut legal spending." The focus of the article is on alternative fee arrangements, and does not mention the use of ADR. It also ends by noting that smaller companies (under $5 billion in revenue) can't seem to benefit from alternative fee arrangements, which require "lawyers to predict outcomes and set the appropriate fees." (To be fair, in reviewing the actual ACC list, two of the firm's honored, Whirlpool and Wheeler Trigg, did emphasize an effort to seek "early resolution" of lawsuits, although not necessarily via ADR.)

     Why the devotion to "efficiency" in using law firms but no mention of ADR? The forces that are pushing towards "efficiency" should be having the same effect on increasing the use of ADR in the corporate setting. I think this is not occurring because in-house counsel are still lawyers. They have been trained to think like their outside counsel, are often former outside counsel themselves, and spend much of their time talking with their outside counsel about their corporations' disputes. As for the outside counsel, litigators do what they know best: litigate. In addition, there are more of them now than ever before, all looking for the same work.

     There are ways to bring the forces for efficiency and the value of ADR together. Success fee billing and ADR are made for each other. But more fundamentally, those who run corporations and manage their legal disputes need to be better "sold" on the value of ADR  -  a notion that does not fit neatly within the customs, habits and organizational structures of the law firms these same corporate leaders have come to trust and depend upon.

[Image: Large herd of red deer on Borrobol Estate, Scotland, November 1991, by Evelyn Simak]

AHLA ADR Service Adopts Code Of Ethics For Arbitrators In Commercial Disputes

     Today, the American Health Lawyers Association ("AHLA") Alternative Dispute Resolution Service ("ADR Service") advised its roster of Dispute Resolvers that the Executive Committee of the AHLA has adopted The Code of Ethics for Arbitrators in Commercial Disputes (the "Code"). This replaces the ADR Service's Code of Ethics for Arbitrators.

     The Code was originally adopted by the American Arbitration Association ("AAA") in conjunction with the ABA, and is the standard used by the AAA and other ADR organizations nationwide. This change eliminates the need for arbitrators appointed by the ADR Service to apply a different set of standards from those they use in other settings.

[Image: Mirror Image, by Keith Ellwood, August 13, 2009]

Fifth Circuit Overturns Class Action Arbitration Decision

     In Reed v. Florida Metropolitan University, Inc., No. 11-50509 (5th Cir. May 18, 2012), the United States Court of Appeals for the Fifth Circuit ruled that an arbitrator exceeded his powers in finding the parties' agreement authorized class arbitration (hat tip to Victoria VanBuren at Disputing). The case is remarkably similar to Sutter v. Oxford Health Plans, in which the Third Circuit reached the opposite conclusion, as discussed here previously.

     In Reed, the court found no express agreement to engage in class action arbitration, and refused to accept the arbitrator's interpretation of the parties' contract, which inferred class action intent from language referring to "any dispute."  The court further rejected any argument that the absence of language prohibiting class action arbitration can be used to infer class action intent. In both regards, the Fifth Circuit based its opinion squarely on the Supreme Court's decision in Stolt-Nielsen.

     You can't explain the different outcomes in Reed and Sutter by distinguishing them on the facts. The two courts clearly wanted to adopt very different views of Stolt-Nielsen. Other Circuits have addressed the issue as well. See, e.g., Jock v. Sterling Jewelers, 646 F.3d. 113 (2nd Cir. 2011). Drafters of arbitration clauses and those choosing their arbitration venue should act accordingly.

[Image: A fork in the road, by Nicholas Mutton, September 16, 2007]

Litigating A Medical Practice Break-Up Is Rarely A Good Idea

     I observe the insides of medical practice business disputes on a regular basis, and I am always amazed at (1) how many similarities there are, and (2) how often the parties turn to litigation to resolve their differences. Similarities appear in the form of legal agreements that are less than perfect, or which, although technically sound, fail to expressly address a particular situation that comes to pass in the parties' relationship. Unfortunately, once physicians find themselves on opposite sides of one of these "gray areas" in their documents, they reflexively call in the cavalry, and the litigation battle begins.

     Writing in the New York Business Divorce blog, Peter A. Mahler describes just such a situation in Anesthesiology Practice Undergoes "Legal Equivalent of a Proctology Exam" in Shareholder Dispute, dissecting the recent post-trial decision by Suffolk County Commercial Division Justice Emily Pines in Suffolk Anesthesiology Associates, P.C. v. Verdone, 2012 NY Slip Op 50728(U)(Sup.Ct. Suffolk County April 25, 2012). He fairly describes the case as "a bare-knuckles contest pitting an expelled physician-shareholder of a large Long Island anesthesiology practice against the 11 other physician shareholders."

     I will not repeat Mr. Mahler's stellar synopsis of the case, including the court's pre-trial and post-trial rulings, which is worth the read. Familiar elements include an apparent power struggle, major business decisions favored by fewer than all of the shareholders, alleged "whistleblower" claims and some "tit for tat" good faith and fair dealing issues. The end result was a finding of some "breach" or "fault" by both sides, and an order that put them close to what a disinterested observer would have recommended from the very beginning. 

     Mr. Mahler observes that the absence of a particular provision in the parties' documents (involuntary termination without cause) probably inspired both sides to adopt the litigation posture they pursued. Similar omissions or the occurrence of unanticipated circumstances are often present in these cases. To me, the real question is why, time and time again, "divorcing" physicians in these circumstances and their lawyers escalate the litigation to what he calls "a DEFCON 1 situation in which each side has little choice but to launch their biggest missiles against the other, necessitating public disclosure of embarrassing and potentially troublesome information about the Practices."

     To be fair, I know only what I read in the blog post and the court's post-trial decision, and it is possible there were facts that compelled this course of action. More likely, the familiar pattern of emotional clients making irrational decisions, and lawyers doing their best to litigate their way to victory, led to this result. The litigation started in October 2008 and went to trial in 2012. There were numerous interim proceedings and pre-trial motions. The trial lasted 11 days and included the testimony of 15 witnesses and over 100 exhibits. One can only imagine the total cost to both sides in legal fees, expenses and time lost from practicing medicine.

     Mr. Mahler suggests that mandatory arbitration provisions in the parties' agreements would have saved them from public disclosure of their "dirty linen" and greatly shortened the time (and money) required to reach a resolution. I agree. But I find even more compelling the argument for mediation prior to any form of adjudicative proceedings. This appears to have been a textbook case of the parties having more than sufficient common interests and available resources to fairly defuse their dispute through mediation. The cost-benefit analysis of mediation in these cases is off the charts. Hopefully, "divorcing" physicians and their counsel will take heed.

Solving The Balance Billing Problem In New York And Elsewhere

     Over three years ago, I wrote here about the "balance billing" problem; in short, the practice of non-participating healthcare providers billing patients for the difference between the provider's charge and the out of network payment made by the patient's insurer/PPO ("payer"). As described by E.J. McMahon in Newsday, the problem in New York has taken an interesting turn, but come no closer to a satisfactory resolution.

     When Governor Andrew Cuomo was New York's Attorney General, he investigated charges that the Ingenix database then used to set fees for out of network providers was skewed in favor of the payers who controlled it. A settlement resulted in the creation of an independent nonprofit company, "Fair Health," that generates a "usual and customary" fee database. In the meantime, some payers began the practice of paying non-participating providers on the basis of the (lower) Medicare fee schedule, and some providers began increasing their standard "charges" substantially in an effort to drive up the Fair Health rates. Non-participating providers unsatisfied with the Fair Health fees continue to bill their patients for the "balance owed" on the standard charge.

     While some progress has been made, the fundamental problem remains. When a balance bill is created, one of three parties must be left "holding the bag:" the patient, the non-participating doctor or the payer. E.J. McMahon suggests that New York "should set up an arbitration process to resolve reimbursement disputes between insurers and physician, while shielding consumers from bills for disputed balances." I'll be the last one to object to the use of an ADR process to resolve these disputes, but some greater clarity is required.

  1. Although politics and economics may favor an absolute "hold harmless" for patients in these cases, that result wouldn't always be fair, or sound policy. If a patient knowingly chooses to go to an out of network provider with full awareness that the charge will well exceed the payer's obligation to pay, why shouldn't the provider be able to collect the full charge from the patient? On the other hand, if the patient is unaware of the balance bill potential, or the magnitude of the difference, the patient should be off the hook. Rules can be adopted to define what the patient must be told, when and by whom.
  2. Patients who are made aware of the potential differential and are unhappy with their predicament will likely complain to their payer, as they should. However, rather than focus on the provider's charges, the payer should make the patient aware of the other alternative providers, both in and out of network, who are available to provide the necessary service within the confines of the payer's allowable charge. If the alternative providers offered by the payer are too few, too inconvenient or otherwise unacceptable, that's a problem with the payer's network, not a "balance billing" problem, at least in the eyes of this patient.
  3. For cases in which the patient is held harmless because he or she is unaware of the balance bill potential or its magnitude, the payer and the provider must find a way to agree on what the provider should be paid. This is where an ADR process would come into play. In order to avoid every case being contested, a presumption should be adopted with respect to the Fair Health fee schedule. That presumption could be the 100th percentile, the 80th or some other point on the schedule thought to fairly represent the usual and customary charge. Absent a protest by either party, this is what the provider would be paid. If either the provider or the payer objects to the presumption created under the Fair Health fee schedule, binding arbitration could be requested.
  4. The role of the arbitrator would be to, de novo, determine fair and reasonable compensation for the provider under the particular circumstances. Using this standard, a world renowned surgeon with 30 years of experience and outstanding results might expect a higher fee than the presumptive schedule, whereas a new surgeon who simply charged well above the presumptive schedule might not fare as well.
  5. To encourage good faith and fair play, both parties would submit their best and final offer to the arbitrator. Using so called "baseball arbitration" rules, the arbitrator would then hear the evidence in an expedited procedure and choose the one that best meets the standard of "fair and reasonable under the circumstances." The loser would pay the costs of the arbitration.

     The process just described, or something like it, wouldn't make "balance billing" disappear, but it would be far superior to the confusion, expense and unfairness arising from the current, ad hoc litigation approach to the problem. Let's see if New York and other states agree.

[Image: A balanced (roseate spoon)bill.]

Who Pays The Hospital - Medical Staff Standing Neutral?

     See my guest post today at Disputing: Who Pays the Hospital - Medical Staff Standing Neutral? This is a follow up to the four part series on the Hospital - Medical Staff Standing Neutral that appeared here (See Part I, Part II, Part III and Part IV). If you haven't seen it before, Disputing is a terrific ADR blog, and I'm grateful for the opportunity to appear there.

[Image: Pennybacker Bridge, Austin, Texas, 1997, by Eric Hunt]

Healthcare Subject Matter Expertise - An Arbitrator's Blessing or Curse?

     Today I listened to a roundtable discussion on "Handling Healthcare Arbitration Effectively" presented by the American Health Lawyers Association. The Panel offered valuable practical tips on drafting an arbitration clause and effectively representing a client in arbitration. From my perspective, the most interesting portion of the discussion concerned the role of healthcare industry expertise in the process of arbitrator selection.

     One of the Panelists expressed the belief that experience with healthcare business and legal issues is rarely necessary for an arbitrator to effectively decide a case, so  long as he or she is "experienced in handling complex commercial cases." In his view, an experienced arbitrator can learn all he needs to know about the healthcare law affecting a case in legal counsel's briefs and oral arguments.

     I beg to differ. I do not believe that I can become an expert at anything by tomorrow. More importantly, even assuming an arbitrator can absorb the basic, "black letter law" on a given issue during the presentation of a case, it is impossible for that arbitrator to have any grasp of the nuances or "feel" of the law as it is applied in the real world. Often, it is in that nuanced, "gray" area of healthcare law and practice that the outcome of an arbitration must be decided.

     Another Panelist addressed the process of selecting an arbitrator where industry expertise is desired, but there is a need to evaluate the potential arbitrators' "orientation." I think this was a polite way of saying that some clients may fear an arbitrator will be biased against them if the arbitrator's legal career was mostly spent "on the other side of the fence." Thus, for example, parties in a payor-provider dispute might look differently at potential arbitrators who had mainly represented health insurers versus those who had primarily represented hospitals. Although I certainly can understand this as a visceral reaction, it doesn't really hold up to scrutiny.

     If parties want an arbitrator with subject matter expertise, they will be hard pressed to find one who has not had a successful legal practice primarily on one side or the other of the transactions and disputes typical in that field (think labor v. management, plaintiff v. defendant, insurer v. insured). So unless only one of the parties to an arbitration is concerned about the arbitrator's "orientation," there will be no agreement on an arbitrator with industry expertise.

     More importantly, the focus on a potential arbitrator's "orientation" ignores the fact that the arbitrator is holding himself out as a neutral - with full awareness of the fact that setting personal feelings (if any) aside is essential to performing that service ethically and professionally. This is no different from the duty of a sitting judge in maintaining his neutrality. Unless an actual conflict of interest exists, judges and arbitrators should be assumed to be neutral - it is the essence of what they do. Would a person seeking to pursue this line of work expect to have much success if his or her decisions were skewed toward one category of litigants versus another?

     Far better than attempting to predict the effects of a potential arbitrator's "orientation" is seeking the opinion of the marketplace on whether he or she is  honest, open-minded and fair. Arbitrators who fail this market test will not be around for long.

[Image: Flower vendors in the Main Arcade, Pike Place Market, Seattle, Washington. To be allowed to sell here, vendors must grow the flowers themselves; by Joe Mabel, October 10, 2008]

Third Circuit Clarifies Class Arbitration Rule - Sort Of

     On April 3, 2012, the Third Circuit Court of Appeals released its opinion in Sutter v. Oxford Health Plans (No. 11-1773). The case is one of long-standing in New Jersey, involving allegations by Dr. Sutter that Oxford failed to make prompt and accurate payments for services rendered by Sutter under the parties' Primary Care Physician Agreement. That Agreement contained a provision that required arbitration of all claims arising under the Agreement, but did not specifically allow or prohibit class arbitration. The Court's current opinion addresses a challenge by Oxford to the arbitrator's ruling that the Agreement permitted class arbitration, notwithstanding the U.S. Supreme Court's decision in Stolt-Nielsen v. Animal Feeds International, 130 S.Ct. 1758 (2010).

      In Stolt-Nielsen, the Supreme Court held that an arbitral panel exceeded its authority by permitting class arbitration when the parties had reached no agreement on that issue. Significantly, the parties in Stolt-Nielsen stipulated they never reached agreement on the permissibility of class arbitration when forming their agreement to arbitrate. On that record, the Court determined there was no basis on which the arbitrators could construe the parties' agreement to permit class arbitration. The Court held that the imposition of class arbitration requires a contractual basis for concluding that both parties agreed to permit it - but no requirement that class arbitration be expressly mentioned.

     Against this backdrop, the Third Circuit in Sutter allowed the arbitrator wide latitude in interpreting the parties' intent under their Agreement. Since, unlike Stolt-Nielsen, the parties in Sutter did not stipulate the absence of an agreement on class arbitration, the arbitrator was free to broadly interpret the intent of their Agreement on the issue. He did so and found class arbitration to be permitted.

     The arbitrator's rationale for finding an intent to permit class arbitration would seem to apply to most provisions that do not expressly prohibit class arbitration. Oxford made this argument to the Third Circuit, saying that affirming the arbitrator here would effectively require parties to expressly disclaim the use of class arbitration. The Court did not agree, stating that there still needs to be "some contractual basis" for the arbitrator's interpretation that class arbitration is permitted.

     So where does that leave us? 

1. An express statement of intent to permit class arbitration is not required for an arbitrator to allow it.

2. An express prohibition against class arbitration is not required for an arbitrator to deny it.

3. The arbitrator may not infer the parties' intent to permit class arbitration solely from the fact of their agreement to arbitrate.

4. The arbitrator may find an intent to permit class arbitration in the construction of an agreement that neither expressly permits nor expressly prohibits class arbitration.

At least in the Third Circuit, and probably elsewhere, a party that feels strongly about class arbitration (one way or the other) would do well to include a statement of intent on this issue in the arbitration provision.

     For parties that do not want to submit to class arbitration, the Third Circuit's analysis of the absence of a clause precluding class action arbitration is noteworthy:

"Stolt-Nielsen does prohibit an arbitrator from inferring parties' consent to class arbitration solely from their failure to preclude that procedure, but the arbitrator did not draw the proscribed inference in this case. Rather, the arbitrator construed the text of the arbitration agreement to authorize and require class arbitration. Then he observed that an express carve-out for class arbitration would have made it unavailable even under the clause's otherwise broad language. As the arbitrator later articulated when he revisited his construction of the clause in light of Stolt Nielsen, the lack of an express exclusion was merely corroborative of his primary holding that the parties' clause authorized class arbitration; it was not the basis of that holding. Thus, the arbitrator did not impermissibly infer the parties intent to authorize class arbitration from their failure to preclude it."

It is unclear how the Sutter Court knew when in the arbitrator's thought process the absence of a class action carve out became determinative (i.e., it can't be dispositive, but it can be corraborative?), although this conclusion appears essential to upholding the arbitrator's decision while squaring it with Stolt-Nielsen. But whether or not you can split this hair, counsel drafting arbitration provisions must acknowledge Sutter's practical effect, and act accordingly.

[Image: Photo of a split end, May 2,2011, by Milful]

Arbitrators Can't Rewrite Contracts

     An unpublished opinion from New Jersey's Appellate Division on March 28, 2012 serves to remind arbitrators of their proper role in resolving contractual disputes. It also debunks a common complaint by detractors of arbitration that it offers no meaningful right of appeal.

     Knecht v. 225 River Street (A-4793-10T3) involved a contract by which Knecht agreed to purchase a luxury condo from 225 River Street. The contract required Knecht to pay a deposit of $299,250 towards a purchase price of $1,995,000, and included a mortgage contingency period of 90 days. Knecht did not obtain a mortgage commitment within 90 days, but did not then terminate the contract. Upon completing the project, 225 River Street called for a closing, and Knecht did not appear. 225 River Street kept the deposit money, and Knecht initiated arbitration as required by the parties' contract.

     The arbitrator ruled in favor of Knecht and ordered the return of her deposit on the basis of the following:

(1) "both parties knew or should have known that financing could not be finalized in the ninety (90) day time limit";

(2) [Knecht] "used her reasonable best efforts, but failed to obtain a mortgage commitment" when the time came for closing;

(3) market conditions had changed; and

(4) both parties acted in good faith.

     225 River Street filed a motion to vacate the arbitrator's award. The trial judge concluded that the arbitrator had exceeded the scope of his powers by disregarding the clear terms of the parties' contract, and accordingly, vacated the arbitrator's award.

     On appeal, Knecht contended that a court's power to overturn an arbitrator's award is very limited. The Appellate Division generally agreed, but after a recitation of the limited grounds to do so, found that vacatur of the arbitrator's award in this case was proper. Specifically, the Court said:

"An arbitrator exceeds the scope of his powers when he disregards the terms of the parties' contract or rewrites the contract for the parties."

     It is noteworthy that the Appellate Division did not question any of the four underpinnings of the arbitrator's award set forth above, all of which were essentially findings of fact. Further, the Appellate Court did not challenge whether the outcome under the arbitrator's award was fair.

     The message is clear. Parties should expect arbitrators to enforce their contract as written, and judicial review can assure that result.

[Image: D.W. Griffith, Mary Pickford, Charlie Chaplin (seated) and Douglas Fairbanks at the signing of the contract establishing United Artists motion picture studio in 1919. Lawyers Albert Banzhaf (left) and Dennis O'Brien (right) stand in the background. From the New York World-Telegram & Sun collection.]

American Arbitration Association Calls For Muscular Arbitration

       Last week I attended the American Arbitration Association's Neutrals Conference, held this year in Scottsdale, Arizona. Over 300 AAA neutrals (arbitrators and mediators) from across the country and overseas attended the event. The AAA uses the Neutrals Conference as an opportunity to present a topical educational program and to impart some "common wisdom" thought to be vital to the entire AAA community.

       A dominant theme throughout the Neutrals Conference was the perceived belief among users of arbitration services that arbitration has lost its way - that a process designed to be faster, less expensive and more effective than conventional litigation is often too slow, too costly and no better than going to court. While pointing out statistics to demonstrate that this perception is not well founded, the AAA acknowledges that for providers of arbitration services, user perceptions are reality.

       Continuing a theme introduced through a number of AAA educational programs in 2011, the 2012 Neutrals Conference promoted the concept of "muscular arbitration." In essence, muscular arbitration refers to an arbitration process that is designed and administered by AAA and its arbitrators to minimize or eliminate unnecessary litigation-like efforts by arbitration parties and their counsel. "Trimming the fat" requires a comprehensive and well-run preliminary hearing, minimal and time limited discovery and a creative approach to the presentation of evidence at the hearing. This approach closely follows the guidance provided by the College of Commercial Arbitrators' 2010 Protocols for Expeditious, Cost-Effective Commercial Arbitration.


       For the most part, the speakers at the Neutrals Conference were preaching to the converted, although learning more techniques on how to run a muscular arbitration was worth the trip. The real challenge for the AAA and all proponents of arbitration will be getting the other stakeholders in the game (i.e., parties/in-house counsel and their outside counsel) to "buy in." The same folks who may have the perception that arbitration has become no better than litigation must acknowledge they have some share of the responsibility for that result.

       Lawyers who want arbitration to be quick, inexpensive and fair cannot insist upon taking 5 depositions per side and conducting 10 days of hearings in every case. The AAA and its arbitrators can recommend the most efficient process possible, and attempt to persuade the parties and their counsel to accept it, but they can't force them to agree. Thus, every arbitration is both an opportunity for the arbitrator to deploy muscular techniques and an educational moment that shouldn't be missed.

[Image: SRD Posing Bodybuilder, July 24, 2004]

Selecting A Hospital-Medical Staff Standing Neutral

       This fourth and final installment on the Hospital-Medical Staff Standing Neutral will address the neutral selection process. Previous posts introduced the concept, its advantages and relation to Joint Commission requirements, and how to define the neutral's role.

       The essence of the standing neutral concept is: (1) an expert, neutral person is selected in advance by both parties to an ongoing transaction or relationship; (2) the neutral is given sufficient information to be familiar with the parties as problems arise; and (3) the neutral remains readily available to assist the parties in resolving disputes quickly and efficiently. The neutral selection process should reflect these expectations.

       The process of selecting a hospital-medical staff standing neutral is best undertaken by a committee representative of the interests likely to be involved in the conflicts to be managed. On the hospital side, this might include a member of the board of trustees, the hospital CEO, the CMO and in-house counsel. On the medical staff side, the group might include the current president of the medical staff, the immediate past president or president elect, and the Chiefs of Medicine and Surgery. If hospital in-house counsel will participate, and the medical staff has regular independent counsel, medical staff counsel should also be included.

       The selection committee should attempt to identify a person who can carry out the standing neutral's responsibilities. That person would be:

1. Neutral (i.e. have no no current or recent relationship with any of the parties);

2. Expert in the subject matter of the likely disputes (probably a lawyer specializing in hospital-physician matters);

3. Trained and experienced in dispute resolution processes;

4. Readily available as conflicts arise; and,

5. Cost effective.

Above all, the neutral selected should have the confidence of both the hospital and the medical staff.

       With the selection of a qualified standing neutral and a commitment to the process of conflict management, hospitals and medical staffs can better face the challenges that threaten the relationships so vital to their existence.

[Image: Football referees at a Razorback game, October 6, 2007, by Belinda Hankins Miller]

Part 3- Defining The Role Of The Hospital-Medical Staff Standing Neutral

     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]

Supreme Court Rejects State Bar Of Nursing Home Arbitration Clauses

       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]

State Courts, Lean Budgets And ADR

       "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]

NJSBA Offers Program On Decision-Making By Judges And Arbitrators

       "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]

Part 2 - Joint Commission Conflict Resolution Requirements And The Advantages Of A Hospital-Medical Staff Standing Neutral

     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.



     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.


     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]

The Hospital-Medical Staff Standing Neutral - Part 1

     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]

ADR Can Help Lawyers "Win Cheap"

     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]

Request For Mediation Can Be A "First-Filed Action"

       The "first filed action" rule says that when lawsuits over the same dispute are filed in different states, the courts in both states will give the "first filed" action the exclusive right to go forward. Often described as a matter of "comity," the rule furthers the practical goals of certainty and efficiency within our federal system. However, as a matter of policy, the rule can be seen as unfavorable towards alternative dispute resolution. Counsel faced with the possibility of litigation in an unfriendly jurisdiction will often race to be the "first to file" a lawsuit rather than pursuing mediation. Not so in New Jersey anymore.

       Last week, the Appellate Division of the Superior Court of New Jersey ruled that the "first filed action" rule applies when a party demands mediation or arbitration, as contractually obligated, and the other party later files a lawsuit in a different jurisdiction. In CTC Demolition Company, Inc. v. GMH AETC Management/Development LLC, et al (Docket No. A-3703-10T4), Judge Clarkson S. Fisher, Jr., wrote for a unanimous panel:

"Although the creation of the first-filed rule may have presupposed that the interplay of its principles would relate solely to which of two lawsuits should proceed to disposition, the proliferation of mediation and arbitration as an alternate but highly-favored method for resolving disputes since the first-filed rule's development, suggests the legitimacy of CTC's argument that its demand for mediation should be treated like the filing of a complaint.

...once mediation was demanded to occur in New Jersey, the later institution of the Pennsylvania action represented an untoward attempt to move the situs of this dispute, giving rise to special equity that warrants a disregarding of the Pennsylvania action."

       This is great news for ADR in New Jersey, and hopefully elsewhere. Although this case was remanded to the trial judge for findings of fact on which of the parties' contracts applied to this dispute (raising the possibility that the contract providing for mediation would be held not to apply at all), the Court's holding on the first-filed action rule is clear. At least where the parties' agreement requires mediation before arbitration (or, presumably, litigation), a demand for mediation in New Jersey will trump a later filed lawsuit in another jurisdiction.

[Image:Brown filing cabinet, March 9, 2007, via Wikipedia Commons]

Randall Kiser To Address NJ Dispute Resolution Section On Effective Decision Making

       The New Jersey State Bar Association's Dispute Resolution Section is offering a three part series of programs on decision making entitled "Judgments: How We Reach Them And How We Can Improve Them." The series will open with a presentation on January 24, 2012 by Randall Kiser, the principal analyst at DecisionSet and an expert on attorney-client decision making. He is the author of two books, Beyond Right and Wrong: The Power of Effective Decision Making for Attorneys and Clients, and How Leading Lawyers Think: Expert Insights Into Judgment and Advocacy.

       Randall Kiser's work first got my attention in 2008 when the study underlying his first book was released and covered by The New York Times. Most notably, his study revealed that in 85 percent of the cases that went to trial, the final outcome after trial was outside the last zone of settlement determined by the parties prior to trial. (In my view, this means that mediation offers much better odds than going to trial.)

       Participants in this program will explore whether our customary means of evaluating disputes is impeding or facilitating their resolution. The program will be offered at the NJSBA's Law Center in New Brunswick at 6:00 p.m., and will include dinner and 1.5 CLE credits. It is a great opportunity to hear a nationally recognized authority address a topic that is central to our professional lives, but not well understood. Pre-registration is available on the NJSBA website.

       Subsequent programs in this series will focus on decision making in the contexts of arbitration (February 28) and mediation (March 27). Details on these programs will follow in upcoming posts.

[Image: Deep In Thought, by Ben Pollard, March 16, 2008]

AAA Announces New Healthcare Payor-Provider Arbitration Rules

     Arbitration has been getting a bum rap lately. Many complain that arbitration has become litigation by another name, with its only advantage being the opportunity of the parties to select the arbitrator. The advantages of speed and lower cost have largely gone by the wayside, or so it would seem. Thomas Stipanowich, writing a guest post at the Disputing blog, recently analyzed this development quite well. Essentially, he argues that all stakeholders in the arbitration game, i.e., parties and in-house counsel, outside counsel, arbitrators and arbitration service providers, bear some responsibility for the shortcomings of arbitration today.

     Professor Stipanowich suggests that all stakeholders will achieve the advantages of arbitration when they cease to treat it like litigation. In the case of arbitration service providers, he urges them to reject a "one size fits all" approach, and to focus on assisting parties and their counsel in crafting an arbitration process that best suits their dispute.

     The American Arbitration Association ("AAA") clearly took this theme to heart in issuing its new Healthcare Payor Provider Arbitration Rules, effective January 31, 2011. These new rules will be available in AAA arbitrations between healthcare payors (e.g., insurers, HMOs) and healthcare providers (e.g., hospitals, doctors) if the parties agree to their use, or in the future, if parties specifically include reference to these rules in their contracts. Among the highlights of these new rules are features that should serve to restore the traditional advantages of arbitration over litigation.

1. The rules permit all claims and counterclaims between a payor and a provider to be combined in a single arbitration, even if they involve different contracts and different patients.

2. The rules provide for three different types of proceedings or "tracks" which may be used by agreement of the parties, regardless of the amount in controversy: desk/telephonic track; regular track; or complex track. Absent the parties' agreement, the regular track will be the default selection. Each of these tracks mandates procedural characteristics that are detailed in the rules.

3. The rules require the AAA to establish and maintain a national healthcare roster of arbitrators, and from that roster, the AAA has designated a subset of arbitrators with expertise in payor-provider disputes.

4. Regardless of the amount in controversy, the rules provide for the arbitration to be conducted by one arbitrator, unless both parties agree upon a panel of three.

5. The rules mandate that a preliminary conference be held regardless of the track selected. The arbitrator is given authority to resolve preliminary issues at that conference, including many that are common to payor-provider disputes.

6. The rules limit the number of depositions permitted by each party according to the track selected: desk/telephonic - 0; regular - 1; and complex - 2.

7. The rules prohibit dissemination or publication of the arbitration award (except as necessary for its enforcement) unless both parties agree in writing.

8. The rules provide that the arbitration award will have no precedential, res judicata or collateral estoppel effect, unless both parties agree in writing.

     Without question, arbitrations conducted under these rules should be faster, less expensive and more efficient than litigation of the same claims. Of course, as Professor Stipanowich points out, the other players in the game will have to do their part as well. The arbitrators on the AAA national healthcare roster for payor-provider cases (myself included) understand what these rules are intended to accomplish. As parties and outside counsel become familiar with these new rules, their use should go a long way towards reestablishing arbitration as the preferred means of resolving payor-provider disputes.


     [Image: A game of women's Aussie Rules Football]

NJSBA Dispute Resolution Section to Host Program On Med-Mal Arbitration

     The next meeting of the New Jersey State Bar Association's Dispute Resolution Section will feature a program addressing the implications of two recent decisions of the Superior Court, Appellate Division: Estate of Ruszala v. Brookdale Living Communities and Moore v. Woman to Woman Obstetrics & Gynecology. I previously offered my view that these decisions appear to endorse the possibility that pre-dispute arbitration agreements between healthcare providers and their patients can be enforceable in New Jersey.

     I  will moderate the program at the Law Center in New Brunswick at 6:00 p.m. on Tuesday, October 12th. The speakers scheduled to appear all had a direct role in the cases to be discussed.

Joel I. Fishbein, Esq. served as counsel for appellants (defendant) in Ruszala.

Robert Paarz, Esq. served as counsel for appellants (plaintiff) in Moore.

Michael Carcaise represents the insurer in Moore that advocates the use of pre-dispute arbitration agreements.

The program includes dinner and qualifies for CLE credits! Contact the New Jersey State Bar Association for registration information.


            [Image: The Doctor and His Patient, by Jan Steen, c. 1665]

New Jersey Court Green Lights Provider-Patient Arbitration Agreements

       In two rulings handed down over the last two weeks, the Appellate Division of the Superior Court of New Jersey removed any doubt that New Jersey healthcare providers can enter into enforceable, pre-dispute agreements to arbitrate medical malpractice claims.


        Estate of Ruszala v. Brookdale Living Communities involved an arbitration clause in a nursing home admissions agreement, which on its face violated a 2003 New Jersey statute barring such agreements. The Court found that the New Jersey statute was preempted by the Federal Arbitration Act (a result consistent with recent, similar rulings by the Supreme Courts of Illinois and Missouri), and went on to state that there is nothing about such agreements to render them unenforceable, per se. The Ruszala Court did strike down aspects of the arbitration agreement found to be unconscionable and against public policy in New Jersey, i.e., a cap on compensatory damages, limited discovery and a ban on punitive damages.

       Moore v. Woman to Woman Obstetrics & Gynecology concerned the ability of a physician to enforce an agreement to arbitrate signed by a patient as part of the physician's patient intake process. The Moore Court ruled that such an agreement was not, per se, unenforceable. Once again, the Court made clear that such agreements must be judged on a case by case basis to determine whether the patient's rights to due process have been preserved. Issues such as the patient's receipt of a copy of the agreement and the circumstances of her signing the agreement were remanded to the trial court for findings of fact.

       I wrote here previously about the growing practice among physicians to require patients to sign pre-dispute arbitration agreements. Ruszala and Moore make it clear that there is nothing to prevent New Jersey hospitals, nursing homes, physicians and other healthcare providers from requiring that patients agree to arbitrate future disputes, including malpractice claims. To be sure, providers choosing this path would do well to tailor their agreements to accomplish their primary objective: shifting the forum for the resolution of malpractice disputes from a jury to an arbitrator (or panel of arbitrators). Piling on other impediments to the patient's claim, such as limitations on non-economic damages, discovery and punitive damages remain suspect, and are ill-advised. Care should also be taken in assuring that the patient fully understands what he or she is signing, and has a realistic right to "opt out."

       Absent an appeal and reversal by the New Jersey Supreme Court, or federal legislation along the lines of the proposed Arbitration Fairness Act of 2009, pre-dispute agreements to arbitrate malpractice claims in New Jersey are here to stay. Two major providers of ADR services, the American Arbitration Association and the American Health Lawyers Association have policies against accepting medical malpractice claims arising under pre-dispute agreements to arbitrate. Accordingly, providers and counsel considering the use of such agreements must carefully address the language governing the arbitrator selection process.

[Image: Green Traffic Light, by TheGo Team]

Contracting For The Unknown Using ADR


[Image: "Cap'n Archie" fortune telling machine, Archie McPhee store, Seattle, Washington, March 20, 2007, by Joe Mabel]


     Healthcare providers and insurers sign contracts every day that extend well beyond the horizon of the world in which they operate. The unknown dimensions of the future healthcare marketplace became even more uncertain with the recent passage of federal healthcare reform legislation. Many of the concepts contained in that law are subject to interpretation and political implementation, not to mention the possibility of repeal or modification by a future Congress.

     Healthcare lawyers routinely seek some protection from future uncertainty affecting their clients' contracts by drafting "out" clauses that spring into effect upon the happening of certain significant events. Among these are governmental findings of illegality or adverse tax effects, changes in the law and substantial failure of economic expectations. Typically, these contractual provisions (1) define the potential adverse event; (2) require that the parties attempt to negotiate a contractual amendment to resolve the problem; and (3) in the absence of agreement, permit either party to terminate on short notice. Robin Fisk recently discussed this topic in the context of provider - payor contracting in her Managed Care Contracting & Provider Payment blog. I think the concept has even wider application. Hospital-physician service contracts, joint venture agreements and institutional affiliations of all stripes can also expect to be affected by presently unknown legal and economic developments.

     Allowing either party to terminate a contract upon an adverse event is a simple and effective solution to the problem created by that event.  But it leaves the parties without a contract. Rarely is such an event so intractable that it could not have been dealt with had the parties known of it at the inception of the contract. Rather than terminating the contract, the parties can provide in advance for how they want its negative consequences to be resolved, and then employ an alternative dispute resolution process to reach a solution.

     The key elements of such a provision include (1) a clear definition of what constitutes the adverse event; (2) the principles that will guide how the adverse event is to be alleviated (e.g., "the parties agree to implement the minimum change required to eliminate illegality while preserving the structure and economic result of the relationship to the greatest extent possible"); and (3) a process to resolve any dispute in the implementation of this provision.

     With respect to process, a multi-step dispute resolution clause is particularly well suited to this situation. As recently defined by John DeGroote in his Settlement Perspectives blog

A multi-step dispute resolution clause is a contractual provision that requires the parties to an agreement to escalate a dispute through varying levels of management or other processes, such as mediation, using agreed-upon procedures before litigation or arbitration may proceed.

     Along with a multi-step resolution clause, parties seeking to address unknown, adverse events through ADR would do well to define their selection of an ADR neutral to suit the events in question. This requires more than the designation of a neutral to be provided by an ADR service (e.g. AAA, AHLA). It should also include a requirement of experience in representing parties with respect to the issues raised by the adverse event.

     Some unknown adverse events may so dramatically frustrate the parties' original expectations that it makes no sense to continue their contract. Most do not. Rather than abandon or renegotiate an entire contract, a multi-step ADR clause can often preserve the benefit of the original bargain for both parties.

Changes In Legal Practice And The Use Of ADR

       In case you haven't noticed, the law business - the way law is practiced - has been changing at a rate uncharacteristic of the profession. Financial pressure from the economic downturn is a major contributor to this development. But change was afoot long before the subprime meltdown and stock market nosedive. The viability of the "big law" pyramid model for most purchasers of legal services has been questioned since the starting salaries of newly minted associates crossed into six figures, but only with the disappearance of easy money has awareness of the issue entered the mainstream.

       I am writing about this here because of a fundamental premise of my decision to pursue a career in ADR: that the resolution of most business disputes through litigation waged by opposing traditional model law firms is not an economically viable option for the healthcare industry.  By "traditional model law firms" I mean firms organized under a pyramid structure, deploying all resources available to every aspect of litigating a dispute, and billing on the basis of hourly rates. Instead, I see a growing role for solos, practice groups and firms with no "leverage" imperative, an acceptance of alternatives to hourly rate billing, and a focus on the value of specific tactics rather than an automatic adherence to the traditional litigation roadmap.

       For some time, I have been following the ideas on these and related topics advanced by the bloggers linked on the left side bar of this post under the heading "Recommended Legal Practice Blogs." They each have a unique focus and style, but all are worth a look. Patrick Lamb at In Search Of Perfect Client Service and Dan Hull at What About Paris? (f/k/a What About Clients?) are consistent voices for a new, client centered approach to legal practice emphasizing service and value. I find myself agreeing with almost everything they say. Which brings me to the point of this post.

       Even among the most forward thinking voices in the legal blogosphere, the potentially expanded role of ADR in carrying out the lawyer's goals of improving client service and maximizing value is not given the attention it deserves. Almost all litigated cases are settled. The business of law is much more about settling disputes than it is about litigating cases. Yet most lawyers see it the other way around. Early case evaluations, pre-claim mediation, ad hoc arbitration and success fees tied to settlement (and litigation cost savings) need to be pursued along with the more commonly deployed pre-trial mediation. Indeed, I would expect this initiative to be at the very core of a value based approach to legal practice.

       Since entering the ADR field, I have wondered about the inherent conflict between the interests of the lawyer engaged on an hourly fee basis and the interests of the client in achieving the most economically efficient result. Conventional wisdom says that a good (and smart) lawyer will always forsake the opportunity to earn a larger fee in favor of achieving the best economic result for the client - because a well served client will be back for the next case and sing your praises to others. Unfortunately, I'm not sure this maxim is followed as often as we might think. It is not that most lawyers are consciously calculating their own benefit to the detriment of their clients. Instead, most lawyers are simply thinking in the way they were trained, and in the way they are encouraged to think by the traditional legal model they work within.

       Most lawyers operating in the traditional legal model are like most doctors practicing in a traditional, healthcare setting with fully insured patients. When a patient presents with a complaint, the doctor deploys whatever resources are at his or her disposal to diagnose and cure the problem. Whether it is consultations with specialists, diagnostic tests and procedures, medications, surgeries or other therapies, the limits of modern medicine are the only constraint. For lawyers, depositions are like CAT Scans. It seems you can never be faulted for doing one too many.

       But just as doctors have come to see the economic erosion of their traditional model of practice, so must lawyers embrace what Patrick Lamb, Dan Hull and others have been saying for years now. I'm just suggesting that the proactive use of ADR should be a bigger part of that story.

       [Image: Change, by Felix Burton, May 17, 2005]

Changes In Scope Of Healthcare Practice = Conflict, Too

     Earlier this week I wrote about the inevitability of conflict arising out of the leading ideas behind healthcare reform.  Restructuring healthcare payment systems to reward efficiency and quality rather than volume will only be effective if they result in a decrease in overall spending. With that "smaller pie" will come disputes over how to slice the pie. But efforts to contain healthcare costs will not be limited to elegant reform measures based on lofty principles. Especially when government payers are involved, healthcare cost containment may take a more direct approach.

     Witness the "turf war" between anesthesiologists and Certified Registered Nurse Anesthetists ("CRNAs") going on in California. As reported by James A. White in The Wall Street Journal Health Blog, Governor Arnold Schwarzenegger last year exercised an option under the Medicare program to permit CRNAs in California to administer anesthesia without a supervising anesthesiologist. The California Medical Association and the California Society of Anesthesiologists filed a lawsuit to block Schwarzenneger's decision. Prior to California's decision, 14 other states had opted out of the physician supervision requirement.

     Healthcare cost containment by government payers can occur through licensing and enforcement proceedings that directly or indirectly change the scope of practice permitted in a given healthcare sector.  A health care adviser to California's Governor told Anesthesiology News that "the purpose of the opt-out decision was to reduce pressures on and increase access to services at small and rural hospitals." Hmm. The WSJ Health Blog notes that California has the largest number of anesthesiologists in the U. S. at 5,400. Leaving aside the debate on patient safety, it is not hard to understand that paying unsupervised CRNAs costs less than paying for physician supervision.

     Once states take action to change a permissible scope of practice, the action shifts to how that change will be applied by hospitals, physicians and third party payers. The California rule change did not mandate the use of unsupervised CRNAs. But when payers demand lower prices and hospitals compete for patients, possible cost reductions have a way of becoming necessary cost reductions. That's when the fun begins.

[Image: Turf War Graffiti at Glanmoelyn, Llanrug, United Kingdom, by Eric Jones, August 12, 2006]

Healthcare Reform and Inevitable Conflict: Smaller Pie Means Smaller Slices

     With all the media coverage of healthcare reform and its political ramifications, its easy to get caught up in the debate. Notwithstanding the recent setbacks, there will be some kind of reform in the not too distant future, if only because the sources of healthcare payment cannot keep up with the costs of providing care. Most healthcare economists agree that real reform will only come when the financial incentives of the current system are altered to reward quality and efficiency rather than volume

     A concept frequently put forth to address this objective is the "accountable care organization" or "ACO" (any reputable idea in healthcare must be reducible to a three letter acronym). Essentially, ACOs are associations of healthcare providers (typically, doctors and hospitals) that share responsibility for the coordinated care provided to a pool of common patients. ACOs can share clinical information and operate with some degree of financial integration. The providers in the ACO are then jointly "accountable" to the third party payers who fund the care provided to their beneficiaries by the ACO. (See the recent post in the Healthcare Economist explaining ACOs and some of the key characteristics of various ACO models.)

     Another concept aimed at the same objective is "value based purchasing" or "VBP."  Under VBP, the current system of Medicare payments to physicians (based on a per task menu of fees) would be converted to one based on efficiency and quality.  In order to assess a physician's efficiency and quality, the services provided to any patient would have to be grouped with all services within the same "episode of care." As noted in another post at the Healthcare Economist, this process of grouping carries with it a number of unanswered questions.

     Sooner or later, the use of ACOs and VBP in some form will become a reality.  There is no other politically viable approach on the horizon to reducing healthcare costs. But that will be only the beginning of a wave of conflict within the world of healthcare providers and third party payers.  ACOs, VBP and any other three letter acronym to come will only reduce healthcare costs by yielding a result by which the total dollars paid to doctors and hospitals for providing care to a group of patients is reduced. Otherwise, why bother? When the pie gets smaller, everyone's piece will get smaller, too. Those who provide the highest quality, most efficient services may get a larger piece, but that will only make everyone else's piece even smaller.


     Most doctors and hospitals do not believe they are overpaid under the current regime. Many have  experienced decreased net income over recent years. All will enter the new arena of ACOs and VBP firmly holding the "bottom line" position that they must at least maintain their financial status quo. The convergence of so many irreconcilable bottom lines will create conflicts that play out in a variety of scenarios. Who will lead the ACO? Who will be allowed in or kept out? Who will decide the internal compensation model, and what will it be? What effect will the ACO have on existing hospital-physician relationships? On existing medical practice agreements? How far will ACOs go to create, preserve and assert their control over patients in dealing with third party payers? How much of the benefit of their "efficiency" will providers share with third party payers?

 [Image: Thanksgiving pie aboard U.S. naval ship in the Persian Gulf, by Photographers' Mate Airman Rome J. Toledo, November 25, 2004]

Cardozo To Host Conflict At Work Symposium

[Image: Anselm Feuerbach's painting of a scene from Plato's Symposium, 1869.]

     The Cardozo School of Law Journal of Conflict Resolution will hold its 11th annual symposium in New York City on Thursday, November 5, 2009, entitled "Conflict Resolution at Work, ADR in the Private and Public Sectors."  The full day program will include panels on the use of ADR in real estate, federal government and healthcare.  I will be part of the panel on healthcare along with moderator Ellen Waldman, Jerry P. Roscoe, Chris Stern Hyman and Joan Ilivicky,  The symposium is free, and includes breakfast, a reception and CLE credits! If you attend, please stop by and say hello.

What It Means To Be Neutral

[An astronaut training in the Neutral Buoyancy Laboratory at the NASA Johnson Space Center]


       I recently read an excellent commentary in the New Jersey Law Journal (195 N.J.L.J. 95, January 12, 2009, page 19) by retired New Jersey Superior Court Judge Harvey Weissbard entitled "The Myth of Judicial Neutrality."  Available online by subscription only, it's worth digging out your old hard copy if you missed this when it first appeared.  In Judge Weissbard's view:

"The notion that a judge is neutral is one of many legal fictions.  The concept presumes that the judge is a tabula rasa, a clean slate."  Instead, Judge Weissbard suggests, "every judge is a product of life experiences, which result in an indelible imprint we may call the judge's personal philosophy...We all know that a lifetime of practice in a particular area cannot be shrugged off when the robe is put on.  And personal world views, derived from family experience or religious indoctrination, are no less likely to influence the judge."

       Judge Weissbard's central point is that judicial neutrality exists only as the result of a conscious struggle by judges to recognize and subordinate their personal values and beliefs to the objectivity that all litigants are promised.

       So, too, is the neutrality of the non-judicial "neutral" in arbitration, mediation and other forms of alternative dispute resolution.  There is no denying the "personal philosophy" one acquires through a lifetime of professional practice, business and personal relationships.  In the course of a friendly conversation or barroom debate, that "personal philosophy" would likely show itself rather clearly.  But like a judge, the ADR neutral must face what Judge Weissbad calls "the proverbial elephant in the room" and handle each case fairly and objectively.

       Unlike a sitting judge, the ADR professional's "neutrality" as perceived by the parties is subject to a higher test in the form of the opinion of the marketplace.  Although judicial forum shopping can and does occur to a limited extent, ADR neutrals are subject to immediate and lasting negative consequences if any party believes the neutral is "biased."  Parties and their counsel will simply vote with their feet. 

       This is the reason why "subject matter expertise" can coexist with "neutrality" on the ADR professional's resume.  Very few neutrals have had a legal practice that was evenly divided among the representation of parties on all sides of the disputes in which they now claim to have subject matter expertise.  In selecting an ADR professional, parties can attempt to figure out whether a candidate's legal experience potentially predisposes him or her to that party's point of view (i.e., a neutral with a shortsighted business plan), or they can select someone who has a reputation for being fair, open-minded and neutral

AHLA Offers Practical Toolkit For Managing Healthcare Conflicts

     Before you head off for the long Thanksgiving weekend, consider signing up for a teleconference to be held next Tuesday that you might otherwise miss in the post holiday crush.  The American Health Lawyers Association ("AHLA"), through its ADR Task Force, is offering "A Practical Toolkit for Managing Healthcare Conflict" from 3:00 to 4:00 p.m. Eastern Time on December 2, 2008.  You can read the full description of the program and sign up on the AHLA's website.  It is open to AHLA members and non-members.

      Presumably, the teleconference will be based on the "Practical Toolkit for Managing Healthcare Conflict" just published by the AHLA, which is available as a PDF on the AHLA website.  This document is a good summary of the need for conflict management in the healthcare (particularly hospital) setting, and provides a framework for hospital management to approach conflict management comprehensively.  It also addresses the specific requirements for internal hospital conflict resolution processes mandated by the Joint Commission.


     No doubt the current economic crisis affecting hospitals in New Jersey and throughout the country  will only make conflict more prevalent and important to manage.  It will be interesting to see whether some of the suggestions made in the AHLA's toolkit, which will carry a new and significant price tag, will gain traction.  I believe what they say about "an ounce of prevention" applies here, but those with the checkbooks may need more convincing. 

     Joining in to hear this program would be a step in the right direction.


[Image: A toolbox, by Per Erik Standberg, May 13, 2006] 

Living With Hall Street v. Mattell Under The New Jersey Arbitration Act

       I wrote here previously about the options faced by healthcare lawyers considering the use of an arbitration agreement following the U.S. Supreme Court's decision in Hall Street Associates, L.L.C. v. Mattell, Inc.  As I saw it then, the decision in Hall Street requires counsel to decide what it is about the arbitration process that would cause them to choose arbitration in the first place.  It seemed to me that those who wanted the best of all worlds (i.e., the scope of authority, speed and finality of traditional arbitration and the legal safety net of enhanced judicial review), probably could not have it all.  I just read an article that addresses this point in far greater detail in the context of  cases arising under the New Jersey Arbitration Act.

       In "Law And More: Enforced Arbitration With Enhanced Judicial Review" (New Jersey Lawyer News online, November 1, 2008), attorney Christopher Walsh of the Gibbons firm presents a thoughtful analysis of the issues faced by New Jersey counsel in enforcing an arbitration provision calling for expanded judicial review, even though the New Jersey Arbitration Act allows the parties to select this option.  He focuses on the ambiguity of the Hall Street decision itself, the potential preemption of the New Jersey Arbitration Act, the effects of a removal of a state court vacatur proceeding to federal court, and the use of a choice of law provision to insulate the a desired application of the New Jersey Arbitration Act.

       Although I remain struck by the incongruity of using arbitration subject to "enhanced judicial review," this is clearly a path some parties and their counsel will want to follow.  In New Jersey, Christopher Walsh's article is a good place to begin. 

    [Image: Lesser Ury: Leser mit Lupe, c. 1895]

Program On Healthcare - Consumer ADR In Philadelphia

     I heard from Jean Hemphill, Chair of the Health Care Group at Ballard Spahr, that she will be among the speakers at a free seminar on Thursday, October 16, 2008, entitled: "Arbitration of Health Care Claims Seminar: Reducing Malpractice Exposure and Maximizing Your Collections."  The program will be held from 2:00 to 4:30 p.m. at the Philadelphia Marriott West in West Conshohocken, Pennsylvania.

     Other speakers scheduled to appear include Ballard Spahr partners Alan S. Kaplinsky and Jeremy T. Rosenblum, former Duke University General Counsel David Adcock, Keith Maurer and Aaron Rose of National Arbitration Forum spin-off Forthright, and Deborah Lorber, Director of Risk Management, Drexel University College of Medicine.  The agenda promises to "explain how arbitration of malpractice and billing claims can radically reduce malpractice exposure, increase success in collecting on delinquent accounts, and improve patient relations."

     This seminar appears poised to argue the other side of the debate raised by current legislative efforts to ban pre-dispute arbitration agreements between healthcare providers and patients, particularly in the nursing home context.  That debate should go on, but it will be important for both sides to consider alternatives other than an "all or nothing" result.  Among the issues in play:

- Should agreements to arbitrate consumer/patient bills for services rendered be given the same status as agreements to arbitrate claims of medical malpractice?  Should different rules apply?

- Can steps be taken to assure that patients and their families truly understand the meaning of arbitration agreements upon the initiation of a healthcare service, with enforcement of the arbitration agreement being dependent upon adherence to some "industry standard" measures?

- Can healthcare providers and ADR professionals do more to assure the neutrality of mandated ADR processes, and in particular, nullify the perceived advantage of "repeat users" of ADR services?

     If you will be anywhere near Philadelphia this Thursday, consider preregistering via the Ballard Spahr website, and see if the presenters at this program address these questions.  You can share your impressions by leaving a comment on this post below.

[Image: Geno's Steaks at dusk, Philadelphia, PA, by Bobak Ha'Eri, April 19, 2007]

Special Issue Of New Jersey Lawyer Covers Healthcare Law

          The current issue of in Re: Magazine, the special supplement to the weekly newspaper, New Jersey Lawyer, is dedicated to healthcare law and is online now.


          In addition to an article by yours truly entitled Alternative Dispute Resolution In The Healthcare Industry, topics covered include:

- Nuances Of Purchasing  A Medical Practice, by Peter A. Greenbaum;

- The Next Wave Of Healthcare Fraud Enforcement In New Jersey, by Mark S. Olinsky and Gary W. Herschman;

- Answering Malpractice Insurance Questionnaires, by Christopher R. Barbrack;

- Medicaid Beneficiaries' Rights Not To be Evicted From Nursing Homes, by William P. Isele; and,

- New IRS Form 990 And Transparency For Nonprofit Boards, by Todd C. Brower and Isai Senthil.

[Image: Newspaper Rock, by Jon Sullivan, February 15, 2004]

AHLA To Offer Arbitration Training

          The American Health Lawyers Association's ADR Service will hold a one day Arbitration Training Session on June 29, 2008 at the San Francisco Marriott Hotel in San Francisco, California.  The session will be held on the day prior to commencement of  the AHLA's Annual Meeting & In-House Counsel Program, although registration for that meeting is not required to attend the Arbitration Training Session.
          This training session will be taught by Jerry P. Roscoe, who always does a fine job in covering a lot of ground in an engaging way.  I started my ADR training with AHLA sessions, and found them to be well worth the cost.  For those interested in joining the AHLA's Roster of Dispute Resolvers, this is a great place to begin.

          For a detailed schedule of the training session and to register online, access the AHLA's website.

[Image: San Francisco Cable Car by Thomas Bachmann, July 15, 2004]

Report From Seattle: Some Perspectives On ADR

         [Image: View of downtown Seattle from Kerry Park, with Mt. Rainier in the background, by U.S. Geological Survey, October 16, 2005]

         Two weeks ago, I attended the 10th Annual ABA Section of Dispute Resolution Spring Conference in Seattle.  Having dug out from the tasks accumulated during my time away, and with the benefit of some time for reflection, I now turn to writing about a few of the topics covered in some of the break-out sessions I attended at the conference.  On the whole, the conference was excellent, and I have already touched upon some topics (Hall Street, med-arb) that were addressed there in great detail.  In posts to follow, I will share what I learned about:

- mediating cases in which the only issue is money;

- the use of apologies in helping to resolve disputes arising from adverse healthcare outcomes; and,

- what frequent consumers of ADR want and consider to be quality when selecting their neutrals.

          Aside from the sessions discussing these topics and others, the conference offered an opportunity to meet and talk with interesting people from around the country (and beyond) who share a belief in the value of alternative dispute resolution, and who seek to improve the way in which they advance the cause.  For anyone who is serious about ADR, I highly recommend it.

MED-ARB: The Best Of Both Worlds?

          [Image: Top view of the two-headed Boa Island Janus figure, County Fermanagh, Northern Ireland, by Kenneth Allen, May 22, 2006]

          Last night I attended a joint meeting of the New Jersey State Bar Association's Dispute Resolution Section and the New Jersey Association of Professional Mediators, at which a presentation and discussion took place concerning the dispute resolution process in which the neutral serves as both a mediator and an arbitrator in the same case - commonly referred to as "med-arb" or "arb-med," depending on the primary process for which the neutral is engaged.  The speakers, Patrick Westerkamp and Sally Steinberg-Brent, entitled their presentation "Mediation and Arbitration, Like Oil and Water?"  They approached the topic in the context of labor arbitrations, including an interesting historical review, and offered examples of how an experienced and trusted labor arbitrator could utilize mediation techniques to settle certain cases with the parties' consent.

          Against this backdrop, the diverse audience of ADR providers in attendance jumped in with spirited discussion of how and why med-arb could (or could never) work in their practices.  Among the strongest objections to the concept were voiced by the family law mediators in attendance, who saw the judgmental role of arbitrator as antithetical to their mediation practices.  Others focused on some practical problems with med-arb: How does the arbitrator maintain objectivity and neutrality after hearing confidential information from the parties in mediation?  What happens if mediation settles some but not all of the issues, and the remaining issues cannot be fairly arbitrated without reopening the settlement?  Are med-arb and arb-med permitted by applicable statutes, codes of ethics and rules of practice?  Time ran out before these issues could be fully explored, but a consensus seemed to emerge that med-arb can be a very helpful tool if used carefully and in appropriate circumstances. 

          In my view, for purposes of resolving common business disputes arising in the healthcare industry, the greatest utility exists in a process that might more accurately be described by the oxymoronic term "binding mediation."  Specifically, after making considerable progress but reaching an impasse, a mediator can, at the request of the parties, offer a "mediator's proposal."  The object of such a proposal is to state the mediator's sense of a fair allocation of the remaining ground between the parties, and not an opinion of how the entire conflict would be resolved in court.  The parties are then presented with this proposal in separate sessions and asked to accept or reject it.  Only if both parties accept it does the mediator reveal their decisions and settle the case.  Otherwise, the mediation is concluded without settlement.

          "Binding mediation" takes this process one step further.  At the point where the parties request a "mediator's proposal,"  they also may agree that they will accept the mediator's proposal as a binding decision.  Again, the mediator does not then offer an arbitral award in the traditional sense, but a solution that equitably resolves the remaining issues in the case, taking into account the prior course of negotiation and scope of available solutions at the time of impasse.  This is, I think, the kind of "med-arb" that  parties at impasse may want from a mediator in whom they have confidence when they cannot bear to leave the mediation without settlement.

          Among other things I learned from many of the courses and discussions I participated in at last week's annual meeting of the ABA Dispute Resolution Section in Seattle, the future of ADR lies in tailoring the process to suit the needs of the parties.  Call it "med-arb," "binding mediation" or something else, it is here to stay.

Supreme Court's Decision In Hall Street Offers Something For Everyone

 [Image:  A supreme pizza with pepperoni, peppers, olives and mushrooms, by Scott Bauer, USDA]

          Last week, the U. S. Supreme Court decided the much anticipated arbitration case, Hall Street Associates, L.L.C. v. Mattel, Inc., which I first wrote about when it was argued last November.  The question faced by the Court in Hall Street was whether the parties to a dispute governed by the Federal Arbitration Act ("FAA") could, by agreement, provide for more expansive judicial review of the arbitrator's award than the narrow grounds stated in the FAA.  In particular, the case involved an agreement that the federal district court could vacate, modify or correct the arbitrator's award to correct legal or factual error.  The FAA permits an award to be vacated or modified only when it is in excess of the arbitrator's authority, or when it results from fraud or arbitrator misconduct.

          By a 6-3 vote, the Court held that the statutory grounds for vacating or modifying an arbitration award under the FAA are exclusive, and not subject to expansion by agreement of the parties.  The Court thereby resolved a conflict among the circuit courts, and upheld the more "traditional" view of arbitration argued by many, including the American Arbitration Association ("AAA").  This was a good result.  It preserved the essence of the arbitration process under the FAA that makes it an attractive alternative to courtroom litigation.

          But the Court did not slam the lid on all future use of  "enhanced arbitration."  Arbitrations not governed by the FAA may or may not permit the parties to agree upon heightened judicial review, depending on the arbitration statute or rule involved.  Even under the FAA, as noted by the National Arbitration Forum ("NAF"), the possibility remains that parties could expressly agree to require the arbitrator to apply the substantive law governing their underlying dispute.  Thus, the losing party could attempt to challenge the arbitrator's award in court on the grounds that the arbitrator failed to "follow the law," and thereby acted "in excess of the arbitrator's authority."  The distinction between the parties' agreement that (a) the arbitrator's award will be subject to "enhanced judicial review" (a result not allowed under Hall Street) and (b) the arbitrator's award can be vacated for "exceeding the arbitrator's authority" if the arbitrator did not follow the law, is a subtle one, to say the least.  For  a fuller explanation of this theory, see Judge Posner's opinion in a case cited by the NAF, Edstrom Industries, Inc. v. Companion Life Insurance Co., 516 F.3d 546, 550 (7th Cir. 2008).

          What does this mean for the healthcare lawyer and client considering the use of an arbitration agreement?  If you like the idea of "traditional" arbitration, with the scope of discretion, speed and finality that it offers, make your case subject to the FAA and select an arbitrator using rules that are consistent with your expectations.

          If you are not comfortable with that scope of arbitral authority, you could attempt to get your case outside the FAA, expressly require the arbitrator to strictly adhere to the applicable substantive law, and require the arbitrator to issue a reasoned award (including findings of fact and conclusions of law).  Procedural rule 20 D of the NAF provides that an arbitrator "shall follow the applicable substantive law."  This approach may or may not get you the judicial review you want, but it maintains that possibility, and holds the arbitrator to a tighter standard.  It also may slow the process and undercut the finality that traditional arbitration offers.

          Finally, if you can't live without absolute certainty that your case will be reviewed on the merits by a sitting judge, just skip arbitration and go directly to court.  You really didn't want to arbitrate anyway.
          The beauty of the Hall Street decision is that it leaves parties with this choice.  You just can't have them all.

Super Lawyers, Like Superstars, Can Come And Go

          [Image: World Wrestling Entertainment (WWE) superstar Rikishi performs for the troops at Camp Victory, Baghdad, Iraq, December 20, 2003, by TSGT Lias M. Zunzanyika, USAF]

          Until very recently, I viewed the annual announcement of New Jersey's Super Lawyers with considerable skepticism.  Having practiced law for nearly 30 years with my fair share of success and professional achievement, it seemed to me that any such list that didn't include my name had to be faulty.  All of that changed this week when I was named a New Jersey Super Lawyer in the Health Care category (also published in the April print edition of New Jersey Monthly magazine).  Clearly, the folks over at Super Lawyers have finally gotten the kinks out of the selection process. 

          I don't know what made me a Super Lawyer this year, or why some terrific healthcare lawyers I know have yet to make the list.  But I confess that I'd rather be on the list than not.  I wish I could say that I didn't care, but I do, if only a little.  I also admit that I will buy the plaque commemorating this event.  After all, the selection process may never again be as well-conceived, fairly applied and thorough as it was this year - I will let you know.

Do You Know How Judges Decide Cases? Do You Have A Hunch?

          [Image: The center third of "Education" (1890), a stained glass window by Charles Louis Tiffany and Tiffany Studios, located in Linsley-Chittenden Hall at Yale University.  It depicts Science (personified by Devotion, Labor, Truth, Research and Intuition).]

          Writing in the online ABA Journal, Debra Cassens Weiss picks up on a fascinating story from the Legal Blog Watch by Robert J. Ambrogi on an upcoming Cornell Law Review article called "Blinking on the Bench: How Judges Decide Cases."  The article, written by Chris Guthrie of Vanderbilt Law School, Jeffrey J. Rachlinski of Cornell Law School and U.S. Magistrate Judge Andrew J. Wistrich of the Central District of California, analyzes how trial judges make decisions.
          Their thesis rests on the dichotomy between  "deliberative" and "intuitive"  decision-making  processes.  Their conclusion? As quoted by Robert Ambrogi, trial judges "are predominantly intuitive decision makers, and intuitive judgments are often flawed," with the result that "millions of litigants each year might be adversely affected by judicial overreliance on intuition."

          The complete article thoroughly describes the characteristics, advantages and disadvantages of deliberative decision making and intuitive decision making, and then explains the testing done by the authors on 295 Florida trial court judges that forms the basis for their conclusions.  Among those tests were the following questions (try all three before checking the answers at the end of this post, below):

          1- A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost?

          2- If it takes five machines five minutes to make five widgets, how long would it take 100 machines to make 100 widgets?

          3- In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake?

          According to the authors, nearly one-third of the judges failed to answer a single question correctly; nearly one-third of them answered only one question correctly; about one-quarter of them answered  two questions correctly; and roughly one in seven answered all three questions correctly.  How did you do?

          Although the judges' scores were comparable to those of other well educated adults, they illustrate the authors' point: while intuition is quicker and often "feels right," it cannot substitute for a careful deliberative process in reaching just and accurate decisions.

          So what does all this have to do with alternative dispute resolution?  A few things occur to me:

        - The parties to a dispute heading towards litigation need to be realistic about what they an expect from the courts at the end of their case.  They typically cannot select their judge, and their judge probably has far more cases to handle than there are hours in the day - the primary reason the article's authors found for most judges' reliance on an intuitive approach.

        - Alternative dispute resolution processes, whether adjudicative (arbitration, evaluation) or facilitative (mediation, negotiation), inherently permit and encourage a more deliberative approach than a trial court's decision.  Time, attention (and sometimes expertise) are brought to bear on the dispute as needed. 

        - The process of "reality testing" that is a major part of most mediations results in the parties and counsel having to confront the intuitive but unsound aspects of their case, and then reshape it accordingly, while there is still time for a fair settlement.

          Of course, some parties may want an "intuitive" decision-maker, and may be convinced that the prospect of a favorable result in that forum far outweighs the risk of a less than perfect decision.  They may even be correct.  But that is just another factor in the mix of issues and interests to be sorted out.

Answers to the questions above:
1- The correct answer is 5 cents, not 10 cents.
2- The correct answer is five minutes, not 100 minutes.
3- The correct answer is 47 days, not 24 days.

Should Doctors Insist That Their Patients Arbitrate? Should Patients Agree?


            [Image: The Turnstiles of Taipei in Xindien Station, by Shack,  June 28, 2007]

          An article posted in Sunday's philly.com by Inquirer Staff Writer Stacey Burling described arbitration as "a growing trend in health care."  In particular, the article focused on the practice of some physicians and other health care providers to condition their willingness to provide services on the patient's signature of an agreement to arbitrate all disputes (including malpractice claims) arising out of the physician-patient relationship.  Sometimes the agreement will place limits on the nature and amount of damages that can be recovered in a malpractice action.
          One patient interviewed for the article said she could never use a physician who required such an agreement because that physician had "already set the tone" of their relationship to be one of "adversaries before we even know each other."  I suspect this feeling may be widespread, although that says more about most people's assumptions concerning litigation and alternatives to litigation than anything else. 
          How would patients feel about entering a doctor's office for the first time and having to ask that doctor to sign a form that said something like this: "I [physician] agree that you [patient] reserve the right to hire a lawyer on a contingent fee basis to sue me in court for unlimited damages in the event you are in any way unhappy with my services, and that your claim will be decided by a small group of strangers who have no training in the law or medicine and will be final and binding upon me."  Sets a nice tone, doesn't it?
          As one doctor interviewed for the article said, he started requiring an arbitration agreement as a precondition to taking on new patients to "somehow create malpractice reform for myself since it wasn't coming from the courts and it wasn't coming from the legislature."
          If you assume that the creation of the doctor-patient relationship is a free choice for both parties, why shouldn't those parties be free to decide how disputes that arise in the course of their relationship will be resolved?  To be sure, there is potential for overreaching and abuse here, but nothing that can't be overcome.  Such agreements can't be forced upon patients who are in the middle of an emergent or life threatening condition; they can't require unreasonable venue, costs or other procedural rules; they can't be unclear, ambiguous or unduly complicated; they must be reciprocal;  and they must not so diminish the patient's substantive rights to relief as to be "unconscionable". 
          The idea that such agreements are so inherently unfair and inconsistent with our society's values that they must be judicially stricken, or legislatively outlawed, rests on a  fundamental mistrust  of appropriate alternatives to courtroom litigation that has long been debunked.
          I don't know how I would react to my doctor requiring me to sign an arbitration agreement.  I'd like to think I would listen to his explanation of why he wants it, I would read it, and I would make my decision as to what it says about him and our relationship.  But that would be between us.

Garibaldi Inn of Court Revisits Hall Street v. Mattel

             [Image: A view of Inner Temple Gardens, London, The Lud, 10-03-2006]

            Two months ago, I posted on the then pending oral argument in Hall Street Associates, L.L.C. v. Mattel, Inc.,  calling it "the most important ADR case of the year."  The case raises the question of whether parties can, by agreement, expand the scope of judicial review of an arbitration award beyond the grounds stated in the Federal Arbitration Act. Last week, I was able to attend the monthly meeting of the Justice Marie Garibaldi Inn of Court for Alternative Dispute Resolution, at which there was a wonderful presentation on the case and the oral argument before the Supreme Court.  The Garibaldi Inn of Court, named in honor of retired New Jersey Supreme Court Justice Marie Garibaldi, is one of the American Inns of Court, and may be the only one devoted to alternative dispute resolution. 
            The American Inns of Court are loosely modeled after the traditional English Inns of Court (Gray's Inn, Lincoln's Inn, Inner Temple and Middle Temple), and are "designed to improve the skills, professionalism and ethics of the bench and bar.  An American Inn of Court is an amalgam of judges, lawyers, and in some cases, law professors and law students. Each Inn meets approximately once a month both to 'break bread' and to hold programs and discussions on matters of ethics, skills and professionalism."
            At last week's program, New Jersey attorney and neutral John R. Holsinger provided an excellent procedural history of Hall Street and framed the issues now before the Supreme Court.  The Inn then heard from Eric P. Tuchmann, General Counsel of the American Arbitration Association, who submitted a brief on behalf of the AAA as amicus curiae, and who attended the oral argument.  It was fascinating to hear not only which Justices asked questions, but what each of them appeared to be thinking about how the resolution of Hall Street should be approached.  The consensus of opinion?  As other commentators have said, this one is tough to predict.  There is room for the Court to rule for either party, or to avoid the main issue entirely. 
           It was a rare evening.  In the company of active and retired New Jersey jurists of note and leading ADR practitioners, I was listening to a discussion of a Supreme Court case I had covered, being led by someone involved in that case.  It was everything that the Inns of Court are supposed to be, and I was grateful to be a part of it.  A special note of gratitude goes out to Robert E. Margulies, an officer of the Inn and New Jersey attorney and neutral, for inviting me into the Inn's membership last year.  Membership in an Inn of Court can restore one's faith in the professionalism that should be fundamental to the practice of law.  I highly recommend it.

Happy New Year! NAF Notes Important Healthcare ADR Cases of 2007


             [Image: "Happy New Year To You", a 1908 postcard with artwork showing a frog holding a bottle of champagne with the cork popping.]

            Happy New Year!  I return to blogging after some time off for the holidays and to get my new business life in order.
            Thank you to Christina Doucet, Communications Specialist at the National Arbitration Forum, for bringing to my attention that four of the eighteen ADR cases identified as "most significant" by the Forum's 2007 ADR Law & Policy Year in Review are healthcare arbitration cases.  Significantly, all four of these decisions affirm the enforceability of arbitration agreements in cases of alleged medical malpractice or mistreatment of patients by a healthcare facility.  The cases are Reigelsperger v. Siller, 150 P.3d 764 (Cal. 2007), Covenant Health Rehab of Picayune, L.P. v. Brown, 949 So. 2d 732 (Miss. 2007), Hogan v. Country Villa Health Services, 55 Cal. Rptr. 3d 450 (Cal. Ct. App. 2007), and Owens v. National Health Corp., No. M2005-01272-SC-R11-CV, 2007 WL 3284669 (Tenn. Nov. 8, 2007).
            It will be interesting to see if cases decided in 2008 follow this pattern.  Even more interesting will be the success of certain legislative efforts (such as the "Arbitration Fairness Act of 2007") now being directed at protecting consumers from pre-dispute arbitration contracts - and which no doubt will be applied to patient/resident complaints such as those in the cases cited by the Forum.  Stay tuned.

Werner Institute To Host Health Care Conference

         [Image: Omaha jazz great Lewis "Luigi" Waites plays the vibraphone during a tribute to Duke Ellington, July 29, 1999, Photo by Jim Williams, for "Joselyn Art Museum: Jazz on the Green," a Nebraska Local Legacies project]

         I just heard from Debra Gerardi, Chair of the Program on Healthcare Collaboration and Conflict Resolution at the Werner Institute for Negotiation and Dispute Resolution at Creighton University.  Debra alerted me to an upcoming program at the Werner Institute that should be considered by anyone interested in healthcare dispute resolution.  Creating Cultures of Engagement in Health Care - International Conference and Dialogue: New Models for Addressing Conflict, Disruption and Avoidance in Health Care, will be held at Creighton in Omaha on June 3-5, 2008.

        As stated in the program description on the Werner Institute's website, the purpose of the conference is to provide participants with an opportunity to:
  1. Learn how to apply principles and practices from the field of dispute resolution to upcoming mandates for change including the new 2009 JCAHO leadership standards related to disruptive behavior and conflict management;
  2. Learn the principles guiding conflict resolution practice in health care including the essential components for conflict management training programs;
  3. Working with experts in health care mediation, negotiation and collaborative law, create an action plan for advancing the outcomes of the conference dialogues and create an ongoing community of experts.
       A description of the Conference's Premises makes it clear that the Werner Institute is on the mark with this program in matching a discussion of conflict resolution theory with an examination of the current culture of healthcare delivery.  And you can check out Luigi while you're there.

       Thanks again, Debra! 

Supreme Court To Hear Major ADR Case Today

           [Image: Photo of Justices of the U, S, Supreme Court, March, 2006]

          Today, the U.S. Supreme Court will hear oral argument in the most important ADR case of the year, and one that could have a major impact on healthcare dispute resolution for years to come.  Hall Street Associates, L.L.C. v. Mattel, Inc., 196 F. App’x 476 (9th Cir. 2006), cert. granted, 127 S. Ct. 2875 (May 29, 2007), is not a healthcare case, but one arising from a commercial transaction in which the parties entered into a post-dispute agreement to arbitrate. In particular, their arbitration agreement provided that the federal district court could vacate, modify or correct the arbitrator’s award to correct legal or factual error, grounds not expressly stated in the Federal Arbitration Act   
(“FAA”).  The legal issue presented for decision, on which the Circuit Courts of Appeal are divided, is whether the FAA precludes parties from providing for more expansive judicial review of an arbitration award than the narrow scope of review specified in the FAA (under which awards can be vacated only when obtained by fraud or arbitrator misconduct, or if in excess of the arbitrator’s authority). 
          The legal arguments on both sides of this case are well crafted and quite interesting.  Ross Runkel, in his Law Memo, provides a summary, instant access to all of the briefs, and other sources. Sarah Cole, writing in Indisputably, handicaps the outcome and favors the argument for parties’ expansion of judicial review of arbitration awards.  On the law she may be right, but I hope her pick is wrong. 
          There are enough arguments based on legislative intent, case law and statutory construction to support an outcome on either side of this case.  My view is a simpler and more practical one.  If the Supreme Court, in effect, tells all of the lawyers in America that they can assure that their clients’ interests can be “fully protected” in arbitration by drafting an expanded provision for judicial review, that is what America’s lawyers will do.  Indeed, some  might consider it malpractice to do otherwise.
          In an industry like healthcare, which is just starting to understand and realize the benefits of alternatives to traditional litigation, the widespread expectation of “enhanced arbitration” would make it even harder to get conflicts resolved quickly and efficiently.  That is a change I would rather not see.    

AHLA To Hold ADR Teleconference

          On Thursday, November 8, 2007, the American Health Lawyers Association will present A "How To"  Teleconference: Arbitrating Healthcare Cases.  The one hour program to begin at  2:00 p.m. Eastern Time, is sponsored by the AHLA's ADR Task Force.  It will focus on the use of ADR in the healthcare industry, and how healthcare lawyers can introduce the use of ADR to their clients.


 [Image: Alexander Graham Bell on the telephone in New York (calling Chicago) in 1892.  Gilbert H.   Grosvenor Collection, Prints and Photographs Division, Library of Congress.]

Choosing Your Healthcare ADR Provider

[Image: New potato releases by Agriculture Research Service scientists give us even more choices of potatoes to eat.  Photo by Scott Bauer.]  

          If you are a party or legal counsel in a conflict or dispute in the healthcare field, and you believe that some form of alternative dispute resolution process may (or must) be utilized to solve it, you must persuade the other parties involved to share that conclusion and select a qualified ADR provider.  Often these tasks are related.  Opinions differ on how to select a neutral, but my view is that he or she should possess the following attributes:

1.  The neutral should be “neutral”.  Although obvious, the ADR provider you choose should be impartial, fair, open-minded and without conflicts of interest. 

2 . The neutral should be intelligent and creative.  Resolving disputes in the healthcare industry efficiently requires the ability to quickly grasp and understand complex facts and legal issues while simultaneously assessing and attending to the expectations of the parties. It often requires the ability to fashion creative alternatives that work both legally and practically.

3.  The neutral should understand your business.  Although many neutrals believe they can successfully resolve disputes in any industry, it is not reasonable to believe that they can do so efficiently.

4.  The neutral should understand the legal issues.  The web of legal constraints affecting most healthcare disputes is daunting. No amount of general legal experience at the bar or on the bench prepares a neutral to effectively assist the parties or their counsel in such cases.  Jerry Roscoe made this point persuasively in a particular context with his recent article: Resolving Allegations of Health Care Fraud – Does the Mediator Matter? (posted on the ABA Dispute Resolution Section’s Healthcare Committee website).

5.  The neutral should be committed to ADR.  In order to be consistently effective, a neutral must first and foremost believe that alternative dispute resolution principals actually work. Without that belief, the neutral brings no energy or additional value to the engagement, but merely serves as a technician in guiding the parties through a scripted process.

6.  The neutral should be cost effective.  A major justification for the use of alternative dispute resolution is that processes such as mediation and arbitration will be less costly than traditional litigation.  Although this is generally true, it is also true that some ADR services will cost more than others.  Generally, cost will be a function of the neutral’s hourly/daily rate and the parties’ commitment to work with that neutral.

7.  The neutral should be committed to good service.  As a party or counsel in a conflict subject to alternative dispute resolution, you are a prospective consumer of ADR services.  In evaluating a neutral, you should assess the extent to which he or she will provide the level of service that a professional service client paying significant fees should enjoy.  

Why ADR Works In Healthcare, Reason #3

          Completing the thought addressed in the two previous posts, there is a third reason why ADR works well in resolving healthcare industry disputes.

[Image: "Smeden og bageren". Illustration by Theodor Kittelsen for Johan Herman Wessel's poem]

Reason #3. 

          Parties to a healthcare dispute can especially benefit from ADR because the unique and complex subject matter of their conflict can be readily accommodated.  By selecting an ADR process and a neutral best suited to the conflict at hand, the parties move immediately into an efficient and productive mode of dispute resolution.  Resorting to traditional courtroom litigation often requires that a judge be educated on the parties’ business model, the world of healthcare finance and reimbursement, and a variety of legal constraints unique to the healthcare field.  Experience indicates that this is a difficult, time consuming and expensive process.  Although most judges are highly intelligent and capable, there is only so much time that can be devoted to each case.  Moreover, most judges sit in courts that handle cases of all varieties, in which healthcare cases are a relatively infrequent occurrence.

          By selecting an ADR neutral with substantive knowledge of the healthcare business and healthcare law, the parties achieve not only efficiency, but a much greater likelihood that they will obtain a result that is fair and mindful of both parties’ real interests.  Although the precise role of the neutral varies within the ADR process selected, the neutral can often help the parties and counsel better identify their interests and how they might mesh with those of the other party.  Where common ground is difficult to find, the neutral can help each party better understand all consequences of the proposals on the table, as well as those of “walking away”.  Sometimes, the neutral’s best value comes from affirming something a party has already heard from counsel, but better accepts with the neutral’s concurrence.  The credibility of the neutral as someone who truly understands the conflict just as well as the parties and their counsel is critical to achieving this result.

          Many examples of this advantage of ADR in healthcare can be imagined, but one may illustrate the point.  A hospital that has “exclusive” contracts with two medical groups to provide two different kinds of medical services at the hospital is faced with a dispute between the groups over which of them has the right to perform a new procedure, a dispute which quickly becomes a three way conflict involving the hospital.  Such “turf battles” are not unusual.  Aside from reviewing whatever the parties’ existing contracts say on the subject, the resolution of this conflict may require consideration of expert input on the impact of the outcome on patient care; the application of the hospital’s medical staff bylaws; provisions of existing managed care agreements;  Medicare reimbursement rules concerning permissible billing by the respective groups; state law and regulations governing hospital licensing and permitted scope of medical practice; and the resolution of other previous (or potential) “turf battles” at the same hospital.  Although the use of ADR in this case may not make all parties wildly happy, the neutral’s appropriate and timely attention to all of these factors will vastly improve the quality and fairness of the outcome.

Why ADR Works In Healthcare, Reason #2

          Continuing the thread started in my last post, there are several reasons why ADR works especially well in the healthcare industry. 

[Image: Photo of Coins in the Trevi Fountain in Rome being collected at early morning, by Giovanni Dall'Orto, March 2005]

Reason #2. 

          The parties to a healthcare dispute often (although not always) have interests at stake other than money, or which cannot easily be reduced to a specific dollar demand.  Traditional courtroom litigation is designed primarily to determine which party to a dispute must pay the other party, and how much.  Although courts can grant “equitable relief”, essentially ordering one party to do or stop doing something, that option is limited in scope and driven by the form of the prevailing party’s plea for relief.  In contrast, ADR processes embrace the notion that flexible solutions, tailored to the parties’ unique interests, offer  the best outcome to any dispute.

          An example of this advantage of ADR would be a dispute between a hospital and a medical group over the interpretation of the group’s contract to provide certain medical services at the hospital.  The dispute could involve any number of issues important to both parties, but could easily place the parties in a situation where the contract seemingly must be terminated, and one side will then sue the other for breach of contract.  Neither party in such case really wants to sue the other for money damages, nor do they want the disruption to patient care and hospital services that would accompany protracted litigation.  Courtroom litigation in such case will ultimately assure that the parties’ legal rights are determined and enforced, but it will also create the negative collateral effects that come from using too dull and heavy a tool.  The use of ADR processes in such a case would provide the parties with options and alternatives from which to jointly reach a workable solution.

          Other examples of this advantage of ADR would be disputes over the medical staff privileges to be granted by a hospital to a physician or other practitioner; conflicts between a hospital and its medical staff concerning the interpretation or amendment of the medical staff’s bylaws; disputes within the board of trustees of a health system concerning the system’s mission, or the performance of management; and disputes among providers concerning quality of care or patient access issues.  Although financial considerations may be important in all these disputes, in none of them does either party seek a payment of money.  ADR processes, as determined by the parties, could be focused immediately upon what the parties in such cases really care about. 

Starting a blog on Healthcare ADR

[Image: Musher Thomas Knolmayer at the Willow, Alaska start point of the 2005 Iditarod sled dog race, Photo by Tech. Sgt. Keith Brown]

          With this post, I start my first blog and what I think is the only blog site devoted to the topic of alternative dispute resolution in the healthcare industry.   As stated above on the masthead, I intend to blog at the intersection of ADR and healthcare law.  Both of these topics are well covered separately elsewhere (see links and blogs in sidebar), and I will try not to duplicate those efforts. 

          To make this site most useful, and to bring some order to my thoughts, I am dividing the world of ADR For The Healthcare Industry into topics that make sense to consider separately.  In alphabetical order, this blog will discuss alternative dispute resolution in the context of:

Commercial Healthcare Disputes

End of Life and Treatment Decisions

Healthcare Arbitration

Healthcare Mediation

Healthcare Regulatory Actions

Hospitals, Physicians and Medical Staffs

Managed Care Payment and Coverage Issues

Medical Malpractice Claims

These topics will overlap, and undoubtedly will subdivide and recombine over time.  But this is where I will start.  Let me know what you think.