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]

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]

Arbitration Opt-Out Provisions Look Like Good Medicine

     Whether you believe healthcare providers should ask patients to sign pre-claim arbitration agreements, it is a practice that is growing among providers tiring of the burdens imposed by the traditional litigation process. I've previously written here why I think pre-claim agreements between healthcare providers and patients requiring arbitration are fine if made under the proper circumstances and without unfair restrictions on the patient's rights. Legislatures and courts have been getting involved on this issue, although for now the ability of providers and patients to agree to arbitrate remains widely accepted.

     Nonetheless, providers seeking to require arbitration would be well advised to take steps to anticipate potential legislative and judicial limitations on such agreements, which will likely rest on the notion that they cannot be enforced because they are "contracts of adhesion."  Essentially, this argument assumes there is such a vast difference in the bargaining power of the provider and the patient that the patient's consent to an arbitration agreement while in the process of seeking healthcare services was effectively coerced. 

     One way to deal with the "contract of adhesion" argument in advance is to include in the arbitration provision an "opt out" clause by which the patient is given a reasonable period of time to reject the arbitration requirement after the agreement is signed. In a consumer case outside of healthcare decided last week, such an opt-out clause was the key to the arbitration agreement being upheld. As reported by Shannon P. Duffy in The Legal Intelligencer via the New Jersey Law Journal online (subscription required), U.S. District Judge Michael M. Baylson decided the defendant's standard arbitration clause in Clerk v. ACE Cash Express, Inc. should be upheld:

"Here, because plaintiff was given the express opportunity to reject the arbitration agreement and failed to do so, plaintiff's argument that the arbitration agreement was presented on a take it or leave it basis fails, Baylson wrote."

This same logic would appear to be compelling in the healthcare context.

     I am not suggesting that an "opt -out" clause is required or even advisable in all provider-patient arbitration agreements. Where such arbitration agreements are not already precluded by statute or binding precedent, providers may prefer to take their chances fighting off "contract of adhesion" arguments than lose the benefit of all the agreements from which patients will opt-out. However, with advice of counsel in each jurisdiction, an opt-out clause is something to consider along with all of the other techniques by which providers can seek to have their arbitration agreements upheld. They also may make mandatory arbitration provisions more palatable to providers who fear a backlash from their patients and the public.

[Image: Band-Aid brand adhesive bandage manufactured by Johnson & Johnson, by Svetlana Miljkovic, June 20, 2006]

Healthcare Self-Disclosure - "I'm Sorry" Revisited

     I just read an excellent article on the decision process for in-house corporate counsel considering self-disclosure of a regulatory infraction.  Richard Marshall's piece in Corporate Counsel, aptly titled "Uuuhhh, Look, We Messed Up Here," provides solid, practical advice that applies to the healthcare industry as well as the more general business audience for whom it was written.

     At the heart of any effective self-disclosure are the same elements often associated with effective apologies in the healthcare malpractice setting. As with patients and families who have suffered harm, just saying "I'm sorry"  to a regulator is not enough. The healthcare provider in both cases must offer an explanation of what happened; proof that corrective measures have been taken; appropriate compensation for any harm caused; and a sincere acknowledgment of responsibility.


     Having taken these steps, the self-disclosing provider has framed the discussion of future regulatory compliance in a more favorable way. Although a regulator receiving such self-disclosure will not be legally bound to approve a fair and reasonable resolution, most will. 


[Image: Mea Culpa, by Robert Bryce Muir 2006, Sculpture from Grizedale Forest, photo by Russ McGinn, June 2006]

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.

Welcome Betsy Ryan's Healthcare Matters Blog!



       I recently learned that Betsy Ryan, the President and CEO of the New Jersey Hospital Association, has started a blog called "Healthcare Matters."  It appears as part of the New Jersey Hospital Association's public website

"Healthcare Matters eamines the many issues confronting New Jersey's hospitals and their patients. Readers are encouraged to join the discussion, because healthcare matters- to all of us."

       For those not familiar with Betsy Ryan, she was recently appointed to the NJHA's top management post after years of service as the organization's Chief Operating Officer and General Counsel.  She has extensive experience in the legislative, regulatory, financial and operational issues facing New Jersey's hospitals.  As a result, her blog is well positioned to address a subject not currently covered directly in the blogosphere.

       So far, Healthcare Matters has captured some of Betsy's personal perspectives on current events affecting New Jersey's hospitals.  She has already attracted some lively discussion.  Subscription by RSS is easily done, and I encourage all to join in and expand this dialogue.

[Image: welcome kitty, by Portraitlady4306, August 27, 2007] 

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] 

Do Doctors Confess Errors Only When Caught?

     A study published on October 6, 2008 in the Archives of Pediatrics and Adolescent Medicine suggests that doctors will more frequently tell patients about errors that are obvious or likely to be detected than they will tell them of less apparent errors.  A post by Jacob Goldstein in the Wall Street Journal's HealthBlog reviews the study and places its findings within the context of our evolving healthcare culture.


     Doctors traditionally have been less than forthcoming in telling patients about errors because they fear potential lawsuits, and have been told consistently by defense attorneys to say nothing that could be construed as "an admission of guilt."  Forces are at work to change this.  These include:

- the "apology and disclosure movement" promoted by "Sorry Works";

- the enactment by some states of legislation precluding the use of "confessions" or apologies in subsequent malpractice litigation;

- required disclosure of errors that cause harm to patients under Joint Commission accreditation standards; and,

- a variety of other governmental and industry mandates for "transparency."

     Aside from these external forces, many doctors and the hospitals in which they practice have begun to realize that it is in their own best interest to adopt and implement a program under which:

- medical errors are identified and disclosed;

- with an explanation of the error;

- an assurance that it will not be repeated;

- a sincere apology; and,

- an offer of just compensation.

     These elements can be combined and put into practice using a variety of alternative dispute resolution techniques.  The July/August issue of the Patient Safety & Quality Healthcare e-Newsletter contains an excellent summary of five approaches now deployed around the country: the "Rush Model," the VA Model," the "University of Michigan Model," the "Pew Mediation and ADR Model," and the "Internal Neutral Mediator Model."

     The authors of that article, Gary A. Balcerzak and Kathryn K. Leonhardt, conclude that "the success of existing ADR models is promising.  With the potential to promote disclosure, meet the needs of patients, reduce costs, and improve patient safety, ADR in Healthcare holds great promise for the future."  I could not agree more.

[Image: People waiting for confession, Lourdes, France, by Jean-noel Lafargue, August 9, 2005]

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]

Apologizing For Adverse Healthcare Outcomes: Saying "Sorry" Is Not Enough

           [Image: Older Sorry! board game, by myguitarzz, June 5, 2006]

          Last month's 10th Annual ABA Section of Dispute Resolution Spring Conference in Seattle offered at least two break-outs sessions on the use of apologies in mediation, one of which focused on adverse healthcare outcomes.  "Breakthroughs, Benefits and Backfires of Apology in Litigation," presented by Karen S. Fasler, Debra Gerardi, Dale Hetzler and Darrell L. Puls, examined research and anecdotal evidence on the use of apologies by healthcare providers following unintended treatment events.  Their presentation was fascinating and compelling.  I have since read from other sources which appear to support their conclusions.  In short, they offered that:

1. Following adverse outcomes, patients and families want most to understand what happened, and will react with anger to any effort to hide or deny the truth.

2. Sincere expressions of compassion, before fault is determined, and without any admission of error (e.g., "I am sorry for your loss," or "I am sorry that this happened to you"), are almost always appropriate and effective in minimizing the potential for legal claims by the patient or family.

3. If it is determined that the adverse outcome resulted from a provider's negligence, a sincere and complete apology will benefit the patient, the family and the provider; and if accompanied by other appropriate measures, will actually minimize the provider's likely malpractice exposure.  As articulated by Darrell Puls in his conference paper, a successful apology includes an admission of responsibility, an expression of remorse, reassurance of a commitment not to make the same error again, and an offer of appropriate restitution.

4. Where provider fault exists, an offer of a less than sincere and complete apology will do more harm than good (e.g., "I apologize for any alleged malpractice").

          Writing in the current (May) issue of the American Health Lawyers News (members only, print volume 12, number 5), Lee Taft analyzes some of the challenges to providers and their lawyers associated with making disclosures and offering apologies following adverse outcomes.  He amplifies the conclusions stated above, and then identifies some of the pitfalls that accompany even the most well intended efforts by providers to reconcile with  patients  who have been harmed.   Most notably, he  points out the difficulty faced by providers in offering information and apologies without jeopardizing their legal defense and insurance coverage, particularly when there are multiple providers and insurers involved.

          Some have suggested that this problem can be addressed by statute.  More than half the states have enacted some form of legislation restricting the admission into evidence of statements of apology offered by healthcare providers under certain circumstances.  As reported by New Jersey Lawyer, many plaintiffs' attorneys in states (like New Jersey) without such legislation believe such laws offer defendants an unfair advantage - essentially that healthcare providers are free to apologize whenever they choose if they believe it is appropriate, and their statements should be admissible on the same basis as those of any other defendant.

          The "apology and disclosure movement," represented by organizations such as "Sorry Works!", seeks to promote the use of programs like the one Lee Taft describes at Stanford University, or the joint physician-lawyer mediation program launched in Pennsylvania by the Montgomery County Bar Association and Medical Society along with Abington Memorial Hospital recently reported by The Philadelphia Inquirer.  These programs rely upon a careful, stepwise approach to communications with patients and families following an adverse outcome.  An important aspect of all such programs is the potential for mediation of remaining issues after full disclosure is made. 

          Whether or not a healthcare provider's apology is protected by statute from admission as evidence of malpractice, that result can always be achieved by offering the apology in the course of a mediation in which confidentiality is preserved, either by agreement of the parties, or by rule of court.

          The "best practice" that appears to be emerging from research and experience around the country requires healthcare providers to participate in a  structured approach to communications with patients and their families following adverse outcomes that includes:

- A statement of compassion and support from those involved immediately following the adverse outcome;

- Disclosure of reliable information as soon as possible, and follow up to include the patient and family;

- If the result is determined to be a result of provider negligence, a sincere and complete apology (as described above) offered in a context that will permit the providers involved to speak freely (i.e., in the course of a mediated resolution or under statutory protection), including an assurance that the error will not be repeated, and a just financial settlement;

- If the result is determined not to be the result of provider negligence, a vigorous but compassionate defense.

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.

ERISA Health Plans Continue To Prove There Is No Free Lunch For Malpractice Plaintiffs

          [Image: "Men and women employees on the 'swing shift' of North American's Inglewood, Calif., aircraft plant enjoy their lunch periods," October, 1942, from the Franklin D. Roosevelt Library & Museum.]

          I previously wrote here about the growing trend for healthcare payers to pursue claims against their beneficiaries for the proceeds of malpractice settlements, relying upon subrogation provisions in their health plan documents.  Medicare has begun to adopt this approach as well, as reported here.  These cases highlight the importance of accounting for potential subrogation claims when negotiating the settlement of these disputes, and bringing all of the potential claimants to the bargaining table.

          Last week I read in Health Plan Law, a blog on ERISA group health plan law and administration, that ERISA heath plans are riding a wave of successful court decisions making it clear that these subrogation claims are here to stay.  In his ERISA Group Health Plan Subrogation Update, Roy F. Harmon, III, digests several cases already decided in 2008  that build upon the foundation laid in the U.S. Supreme Court's decision in Sereboff v. Mid Atlantic Med. Serv., Inc., 126 S. Ct. 1869 (2006).  Although he notes that plans have encountered some problems "involving decedents and their estates, and in the perennial disputes over the adequacy of plan language," in the 2008 cases he reviews, "the health plans have by and large prevailed."  But contrast the outcome in Benefit Recovery, Inc. v. Donelon, a Fifth Circuit case involving state insurance regulation of subrogation rights of an insured plan, as discussed by the same author just yesterday.

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.

Cordero v. Christ Hospital Opens A Can Of Worms

     A decision by the Appellate Division of the Superior Court of New Jersey last week will raise more questions than it answered in malpractice cases involving hospital based physicians.  In Cordero v. Christ Hospital, covered by the New Jersey Lawyer here, the Court considered whether a Hospital could be held vicariously liable for the malpractice of a member of the anesthesiology group having an independent contractor relationship with that Hospital. The Court held that:

          "...when a hospital provides a doctor for a patient and the totality of the circumstances created by the hospital's action and inaction would lead a patient to reasonably believe the doctor's care is rendered in behalf of the hospital, the hospital has held out that doctor as its agent.  We also hold that when a hospital patient accepts a doctor's care under such circumstances, the patient's acceptance in the reasonable belief the doctor is rendering treatment in behalf of the hospital may be presumed unless rebutted."

     In delineating "the relevant circumstances that should be considered in their totality in determining whether the hospital's conduct would lead a patient in the same situation to reasonably believe that the doctor acts on the hospital's behalf," the Court pointed to the following:

  • whether the hospital supplied the doctor
  • whether the medical care provided is integral to the medical treatment received in the hospital
  • any notice of the doctor's independence from the hospital
  • the patient's opportunity to reject the care or select a different doctor
  • the patient's contacts with the doctor before the incident in question, and
  • any special knowledge of the doctor's contractual arrangement with the hospital

     Applying these criteria to most hospital based physicians who provide services as independent contractors under an exclusive group contract (e.g., anesthesiologists, radiologists, pathologists, emergency medicine), the predominant model nationwide, few would escape characterization as acting "in behalf of the hospital."

     The Court's opinion disregards the reality of current hospital operations.  For reasons of efficiency and patient safety, hospitals have established exclusive independent contractor relationships with groups of specialists in key areas that are integral to the effective operation of the hospital.  Such arrangements have been approved consistently by state and federal courts in the context of unfair competition and antitrust lawsuits.  Without such exclusive arrangements, key services would be provided by a disjointed and unreliable collection of separate physicians - a result that would no doubt lead to another decision holding a hospital liable for failure to implement a safer system! 

     The Court's opinion also falsely assumes that hospitalized patients might make a different decision (i.e., that they might decline treatment) if they understood that hospital based physicians were "independent" from the hospital.  Clearly, they would not, and there would be no reason for them to do so.  The idea that patients accept the services of contracted hospital based physicians only because they believe the physicians are "provided in behalf of the hospital" is a fiction. 

     Assuming hospitals will not abandon the current model of exclusive contracts with hospital based groups, compliance with the Court's opinion will be difficult.  However, unless and until this opinion is reversed, hospitals in New Jersey would be well advised to implement measures which at least nominally address some of the factors identified by the Court.  Admission forms should be reviewed to emphasize the independence of all non-employee physicians, including the hospital based specialists (and disclaiming hospital liability for their acts); patients also could receive a standard notice whenever they are likely to utilize a hospital based physician advising the patient of the independent contractor relationship.  All of this will add expense and paperwork, and will likely have no effect on the patients' decisions or their care, but may save the hospital from significant liability exposure.

     The settlement of malpractice cases in New Jersey involving hospital based physicians will now be more difficult.  Greater risk has been created that hospitals will be held responsible for the acts of heretofore "independent" physicians.  All of the elements identified by the Court in Cordero v. Christ Hospital will take on new significance.  Hospital statutory immunities and insurance coverage issues undoubtedly will require clarification in this regard as well.  The mediator's job just got more interesting. 


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 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.

Bringing Medicare To The Settlement Table Is Not So Easy

          [Image: Br'er Rabbit at the table from Uncle Remus, His songs and His Sayings: The Folk-Lore of the Old Plantation, by Joel Chandler Harris, p. 90.  Illustrations by Frederick S. Church and James H. Moser.  New York: Appleton and Company, 1881.]

          Recently I posted on the trend among third party healthcare payers to pursue subrogation claims against the proceeds of tort settlements obtained by their covered beneficiaries.  A case involving Walmart's recovery from the family of an injured former employee underscored the importance of bringing all necessary parties to the settlement table, even those who are not immediately apparent.   This week's AHLA Health Lawyers Weekly contained a summary of a case making it clear that Medicare, too, will pursue its subrogation claims in such cases, even when the parties have tried their best to settle around Medicare's claim. 
          In Mathis v. Leavitt, No. 07-0062-CV-W-RED (W.D. Mo. Nov. 26, 2007), the family of a deceased Medicare beneficiary settled a wrongful death claim against the tortfeasor which they characterized as being "in excess of the $77,403.67 that Medicare had paid on behalf of [the decedent]" following his injury but prior to his death.  The family then asked Medicare to acknowledge that it had no lien against the settlement proceeds, and Medicare refused.  On cross-motions for summary judgment, the District Court ruled in favor of Medicare.  The Court found that since a claim under the Missouri Wrongful Death  Statute includes damages for medical expenses paid on behalf of the decedent prior to death, the proceeds of settlement included "payment by a responsible party" from which Medicare must be reimbursed.
          Although it is not clear, it appears that the Court in Mathis is saying that the parties cannot leave Medicare reimbursed medical expenses out of a settlement agreement under the Missouri Wrongful Death Statute and thereby defeat Medicare's later subrogation claim.   Since the  same result  could likely be argued under most states' wrongful death statutes, the outcome in Mathis is significant.  Whether other courts will follow, and whether the same result will occur in non-death cases under common law remains to be seen.  Plaintiffs seeking to settle all tort cases involving significant prior Medicare reimbursement of expenses will do well to bring Medicare to the table, or proceed at their own risk.

Wal-Mart Healthcare Subrogation Case Highlights Need To Get All Players At The Table

            [Image:  Photo of Poker Table at the 2004 World Poker Tour 5 Diamond Bellagio by        

           As reported by Debra Cassens Weiss in the ABA Journal, a front page story in today's Wall Street Journal highlights the growing importance of accounting for subrogation claims of healthcare payers when resolving personal injury disputes.  The WSJ article recounts the very sad story of Deborah Shank, a former Wal-Mart employee who was permanently brain damaged in a non-work  accident.  Wal-Mart's health plan paid $470,000 towards her medical expenses, but after the Shank family settled its underlying tort claim against an unrelated trucking company,  Wal-Mart sued the Shanks to recover the medical expenses that had been paid by Wal-Mart, citing a subrogation provision in the Wal-Mart health plan.  So far, two courts have upheld Wal-Mart's claim.

          The tragic circumstances of the Shank family and the huge economic disparity between the parties' drive the focus of the WSJ article and subsequent commentary in the WSJ Health Blog following a post by Joe Mantone.

          Leaving aside the moral debate that naturally arises on these facts, there is a lesson here for neutrals and all counsel involved in resolving disputes that include the payment of significant healthcare expenses by someone.  It is risky business to fail to account for all interested players, including the healthcare payers who may be well behind the curtain when a settlement is being crafted.  (This is not to say that a better result could have been obtained for the Shanks - the limits of the defendants' insurance and Wal-Mart's approach to settlement may have made the outcome unavoidable.)

          What Joe Mantone calls "a cottage industry of auditing firms" is helping payers to recoup what they estimate is between 1% and 3% of healthcare spending - big numbers by any standard.  And the fact that a company like Wal-Mart would take on the public relations cost of pursuing its claim against the Shanks tells you that big business is prepared to make the pursuit of healthcare expense subrogation a standard operating procedure. 

          Other topics spring to mind, some of which may be resolved by state law but some are not.  Can the settlement be lawfully structured to minimize the injured party's subrogation exposure?  Does it matter if the healthcare payer participates?  Has notice?  What is the neutral's role and ethical obligation in this regard?  

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! 

Healthcare Conflicts Appropriate For ADR


           [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)

ADR as Tort Reform

          All of the attention devoted to healthcare reform by the entire field of Presidential candidates reveals little mention of the need for medical malpractice reform.  Yet is there any question that reform of the current system of using unfettered, contingency fee litigation to address medical errors is essential to a meaningful improvement of our healthcare system?  As noted recently in the Healthcare Policy and Marketplace Review, an upcoming Common Good Public Forum in Washington, D.C. on November 5 will address "Health Courts, Administrative Compensation & Patient Safety: Research, Policy & Practice."  The topics and speakers promise to be interesting.

          On a slightly different track to the same destination, Kathleen Clark (on the website of the Collaborative Law Committee of the ABA's Dispute Resolution Section) suggests the use of collaborative law as an alternative to the current malpractice litigation model.  The theory of Ms. Clark's argument is compelling, and should be considered in concert with the broader, governmental initiatives to be discussed at the Common Good Public Forum.  However, I think Ms. Clark dismisses too completely the utility of "non-collaborative" techniques such as traditional mediation in reforming the current malpractice system. 

          Notwithstanding the theoretical soundness of the collaborative approach, there are serious practical impediments to its widespread use by plaintiffs' and defendants' counsel in the near future.  More importantly, there is no reason that the boundaries of traditional mediation cannot be pushed incrementally to include a wide range of techniques to help resolve malpractice claims on a case by case basis.  Writing in the current issue of Dispute Resolution Magazine (Fall 2007, Volume 14, Number 1), David A. Hoffman cogently illustrates the evolving boundary lines between mediation, arbitration and collaborative law.  Although not expressly directed at the malpractice debate, his points would apply there as well.

          Malpractice reform may be closer than we think.

[Image: Cartoon by John Tenniel, for Punch of May 25, 1867. The leading jockey is Benjamin Disraeli;  to his right is William Gladstone. The Reform Bill referred to ultimately became the 1867 Reform Act.]

Why ADR Works In Healthcare, Reason #1

          Alternative dispute resolution (or “ADR”) is increasingly being used to resolve conflicts arising in all facets of society.  The chief benefits of ADR (cost savings, faster results, confidentiality, and the parties’ control of the process) have been well established.  ADR is particularly appropriate for use in the healthcare industry for several additional reasons, the first of which is described today:

[Image: Table 10 from Gilbert Beckett, A Comic History of Rome  c. 1850, Cicero denouncing Cataline]

Reason #1. 

          The parties to a healthcare dispute often have some interest in (or need for) a continuing relationship after the current dispute is resolved.  By its nature, traditional litigation is an adversarial and combative process.  The objective of each party’s counsel is to crush the other party’s case, and in the process, the other party is often hurt as well (if not destroyed).  In contrast, although ADR involves advocacy of both sides of the conflict, the parties have jointly committed to a process of their choosing to reach a fair result that both will accept.  The likelihood of a viable relationship after resolution of the dispute is thus vastly improved.

          Examples of this advantage of ADR could occur with respect to the relationships between a hospital and members of its medical staff; partners to a healthcare joint venture; members of a professional practice; health providers and their patients; and health insurers and health providers. Because the need for healthcare services continues to grow, and there are a limited number of established participants in the delivery of (and payment for) those services, there is a significant incentive in many disputes for both parties to put their conflict behind them.

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.