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

     
         [Image: Marionette puppet show for kids in Asbury Park,  NJ,  July 23, 2006,  by Jackie.]

         I read an op-ed in yesterday's Courier News online entitled "New Jersey Ought To Map Out Its Hospital Closings."  The position stated there was that economic forces are going to result in the closure of a certain number of hospitals in New Jersey, and it would be better for the legislature to "compile and publish a roster of hospitals it believes should be targeted for closure," and then to act on that list.  The author sees this as a better outcome than the current course, which might be called "survival of the fittest."  Admittedly, it has resulted in a string of bankruptcies and closings over the last few years, with no end in sight.  However, leaving aside what I believe is a false assumption - that a fair and politically unbiased "roster" of hospitals could be formulated - this theory is more fundamentally flawed.
          There are other options open to the governing boards of New Jersey's struggling hospitals besides filing for bankruptcy and closing down. I wrote here previously that  hospital boards need to candidly assess their financial condition and prospects long before bankruptcy becomes imminent, and collaborate with the other stakeholders involved to arrive at their optimal result.  Far better for these governing boards and their constituencies to decide their hospitals' fate than someone at the Department of Health.  But this will require hospital boards to assess, deliberate and collaborate as few have done to date. 
          Writing an editorial in the current  Metropolitan Corporate Counsel, Andrew Sherman and Boris Mankovetskiy amplify this theme by asking, "Is Bankruptcy The Cure For Distressed Hospitals?"  They point out the inherent limitations and difficulties of using a bankruptcy filing to cure a financially ailing hospital, and suggest that other options (debt restructuring, strategic alliance or sale) will often yield a better result.
          The governing boards of New Jersey's financially troubled nonprofit hospitals have the duty and the authority to assure that their hospitals' missions are fulfilled.  That means doing something other than "flying them into the side of a mountain" (a phrase favored by one of my former partners), and then handing the keys to a bankruptcy judge.  We can only hope that they will seize the opportunity to determine their own fate.

• Email This
• Print
• Comments
• Trackbacks

       
          [Image: Auctioneer and assistants, Cheviot, Ohio, 2004, by Rick Dikeman]
     

         Less than three months ago, I wrote here (with reference to Boston's Carney Hospital) about the need for financially distressed hospitals to involve all stakeholders in a collaborative process in order to achieve the best overall result.  Now I see that two New Jersey hospitals have long since passed that moment of opportunity and find themselves up for auction in bankruptcy proceedings.  Yesterday, The Record reported that auctions were set for Pascack Valley and Barnert Hospitals.  Today, reports indicate that Barnert's fate awaits the outcome of further creditors' wrangling in the Bankruptcy Court, while one of the bidders for Pascack Valley  is seeking to delay the auction of that facility scheduled for February 4.
          It is hard to imagine that any of the "stakeholders" involved in the early days of a financially distressed hospital scenario would purposefully choose to resolve their common problem by way of an auction sale in Bankruptcy Court.  Such proceedings are intended and designed to yield the best result for the hospital's creditors.  Although the interests of other constituencies (the hospital's Board, employees, medical staff, patients and community) may be brought into play, the creditors (and more precisely, certain creditors) are driving the bus.  This is not inappropriate given the underlying purpose of the Bankruptcy Code to fairly allocate the debtor's assets among its creditors.  But it makes no sense for these other constituencies to get on this bus if they have any choice in the matter.
          They often do have that choice, but fail to seize the opportunity.  It occurs well before the "B" word is first openly discussed, but when leadership of the hospital knows (or should know) that the status quo cannot be maintained.  Once that moment passes, the options available to the stakeholders begin to diminish, little by little, until one day there is no choice but to close the doors and hold an auction.
          The recently released Final Report 2008 of the New Jersey Commission on Rationalizing Health Care Resources (a/k/a the "Reinhardt Commission Report") addressed this problem to some extent by recommending (at Chapter 15, page 181) that state regulators create an "Early Warning System" to monitor and detect negative financial trends, and "to intervene at the level of hospital governance and management in a graduated fashion based on severity of financial problems and responsiveness of management."  Although a laudable effort, my guess is that this process will in many cases come too late, and when it does, will put state regulators in the driver's seat. 
          The hospital's stakeholders need to do better.  They can, but only through exercise of  leadership that acknowledges the realities of the hospital's predicament, and moves beyond pointing fingers and posturing into a collaborative process to find a solution.

• Email This
• Print
• Comments
• Trackbacks (1)

        
          [Image: Confusion of Tongues, illustration by Gustave Dore (1832-1883)]

          In a decision filed November 20, 2007, Judge Robert P. Contillo, sitting in the Superior Court, Chancery Division, Bergen County, decided cross-motions for summary judgment filed by all parties in Joseph Garcia, M.D., et al v. Healthnet of New Jersey, Inc. v. Wayne Surgical Center, LLC, et al (the "Wayne Surgical Center" case).  In a very thorough, 31 page opinion, the Court disposed of numerous claims by all parties on a variety of legal theories, all of which revolved around the propriety of the billing of Healthnet's insured patients for same day surgery services provided at the Wayne Surgical Center by otherwise unrelated surgeons who owned investment interests in that surgi-center.  Although the resolution of all of the issues was interesting and important, one aspect of the decision potentially throws into confusion the legality of physician ownership of many facilities in New Jersey to which the investor physicians make referrals.
          In addition to the federal anti-kickback and Stark Law restrictions on investments by referring physicians, those practicing in New Jersey are subject to a state statute, N.J.S.A. 45:9-22.4 et seq. (commonly known as "the Cody Act"), which generally prohibits all referrals to a health care service (other than certain named modalities) in which the physician has a significant beneficial interest.  Notwithstanding the apparently clear language of the Codey Act, the prevailing wisdom in New Jersey's healthcare community for some time has been that there is an implied exception for referrals by physicians to facilities at which the referring physician would perform the required professional service - a so called "extension of practice" exception.  This view gained support in the form of an advisory opinion issued by the New Jersey Board of Medical Examiners (the agency charged with enforcing the Codey Act's restriction on medical practice) which seemed to endorse the notion of an exception for self-referrals.  It also gained support from the presumption that ownership arrangements permitted by federal law should not, as a practical matter, have much enforcement risk under state law.
          After distinguishing the NJ BME's advisory opinion and questioning its authority to alter statutory mandates, the Court in Wayne Surgical Center made it clear that the Codey Act prohibits all referrals by physicians to surgical centers in which they hold an investment interest.  Although the Court found that the investor physicians in this case reasonably believed their referrals were proper at the time (based on the prevailing industry view), and thus dismissed Healthnet's claims of billing fraud, the  unstated conclusion of the opinion seems to be that all future referrals by the physician -owners of Wayne Surgical Center may risk exposure to such claims (that is, that the Court's decision effectively puts them "on notice").  Presumably, the same could be said of any other physician-investor at another New Jersey facility who has notice of this Court's decision.  Although it is only a trial court opinion, and is subject to appeal, it appears to me that the Court's reasoning in the Wayne Surgical Center opinion will be difficult to escape.
          Rumors abound about the fallout from this decision.  Are all physician-owners' referrals at risk immediately?  Are hospital-physician joint ventures at risk, or do they remain protected by the NJ BME advisory opinion (which the Court distinguished, in part, based on hospital involvement in that situation)?  Will emergency legislation be passed to "correct" this result?  Can anything be done by the NJ BME?  Does the Wayne Surgical Center opinion constitute the kind of event that triggers a "regulatory jeopardy" provision in existing deal documents?  Time (and I think not much time) will tell.
          Meanwhile, Congressman Pete Stark recently told David Whelan, as reported in Forbes.com, that he regrets having written the law that commonly bears his name.  I first saw mention of this in Robert Laszewski's post in the Health Care Policy and Marketplace Review, and just had to read it.  Apparently, Congressman Stark now recognizes that he has created a Byzantine morass of laws, regulations and advisories, but seems surprised that healthcare providers and their lawyers have been working hard to do business while complying with the law, calling such efforts the pursuit of "loopholes".  Don't expect much relief from the Stark law anytime soon.
          Confusion brings uncertainty - but with it opportunity.  Stay tuned.                

• Email This
• Print
• Comments (1)
• Trackbacks

                
          [Image: You talking to me? Photo by Ped Xing, Austin, Texas, 2005]

          Writing in his HealthBlawg, David Harlow tells the tale of Boston's financially distressed Carney Hospital and asks the question: When do you pull the plug on a hospital?  The story is one that has already played out at several other hospitals in the northeast over the last year, and which looms at many others.  Recounting a story and an editorial appearing in the Boston Globe, Mr. Harlow's account captures the familiar push and pull between the major "stakeholders" in these cases: the governing board (or owner) of the facility, the state regulatory authorities, the city in which the hospital is located, the financing agency or bondholders of the facility's debt, and the facility's rank and file employees (or their union). 

          These parties may, in fact, be holding productive talks, but more likely remain engaged in "a lot of wishful thinking."  So, as Mr. Harlow asks, what is to be done?

          If Carney is like most distressed hospitals, the stakeholders are approaching their  predicaments with the assistance of good legal counsel, each focused on protecting them against their respective "worst case" scenarios.  There is no lawsuit or other articulated conflict uniting the stakeholders in a common discussion, much less a common dispute to be resolved.  Thus, whatever "talking" there is takes place between only two of the stakeholders at a time and tends to be of the "doomsday" variety.  This approach ignores the fact that each stakeholder is very unlikely to achieve its "best case" scenario by unilaterally imposing it on the others, and that each stakeholder acting unilaterally will probably obtain a worse result than it would if all of them pooled their interests in a common discussion.

          David Harlow suggests one such collaborative outcome, and mentions another offered by Paul Levy in Running A Hospital.  I don't know whether their solutions would work.  My point is that all of the stakeholders need to talk with each other if the best alternative for all is to emerge.  The services of a neutral, whether called a mediator, negotiator, or facilitator, would greatly improve the chances for that best alternative to occur.  By focusing on that end result, and facilitating a collaborative process, the neutral would supply the catalyst needed for the stakeholders to achieve what they currently cannot see.  Surely in the nearby hotbed of dispute resolution there are a number of highly qualified candidates for that role.  It would be time, money and energy well spent.

• Email This
• Print
• Comments (1)
• Trackbacks (1)

        
         [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.

       Thanks again, Debra! 

• Email This
• Print
• Comments
• Trackbacks

[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.  

• Email This
• Print
• Comments
• Trackbacks (1)

           [Image: Cliffs of Moher, Ireland, Photo by Tobias Helfrich, March 27, 2004]

          The range of conflicts arising within the healthcare industry that could benefit from the application of an alternative dispute resolution process is as broad as one’s imagination.  This is a partial list of the circumstances in which conflicts can arise and ADR can be used effectively.

• Contracts between hospitals, physicians and other providers for professional services  (conflicts arising in their formation, operation, renewal or termination)

• Contracts with vendors (conflicts arising in their formation, operation, renewal or termination)

• Joint venture agreements (conflicts arising in their formation, operation or termination)

• Medical staff relations (conflicts arising in interpretation or amendment of bylaws, inter-department issues or clinical policies)

• Medical staff privileges (conflicts arising in individual applications or disciplinary matters)

• Managed care agreements (conflicts arising in their formation, operation, renewal or termination)

• Disposition of financially distressed facilities (conflicts involving creditors, government regulators, staff and community)

• Inter-institutional affiliations, mergers and acquisitions (conflicts arising in their formation, operation or termination)

• Physician practice acquisitions (conflicts arising in their negotiation or unwinding)

• Governance matters (intra-corporate board conflicts, including conflicts concerning management  performance or bylaws revisions)

• Patient relations (conflicts arising in consent to treatment, quality of care, medical errors, billing and collection matters)

• Governmental regulation (conflicts arising in licensing, compliance or enforcement matters)

• Employment issues (conflicts arising in employee discipline or termination)

• Professional practices (conflicts arising in their formation, entry of new partners, withdrawal of partners, retirement or dissolution)

• Email This
• Print
• Comments
• Trackbacks

         
[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

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.

• Email This
• Print
• Comments (2)
• Trackbacks