MANAGED CARE April 1997. ©1997 Stezzi Communications
Many large institutions, including HMOs, know the advantages of resolving disputes outside the legal system through mediation and arbitration. Physicians, too, can use these procedures to save time and money.
"I'll see you in court." Impressive when uttered by a tough-talking tycoon in a TV drama. But in real life, that little sentence usually guarantees a big headache. Regardless of whether you are the plaintiff or defendant in a lawsuit, you can expect to pay serious legal bills and lose substantial time from your practice. What's more, litigation often takes a heavy emotional toll on the combatants. This holds true for all types of lawsuits, including medical partnership disputes, employment complaints, divorces and even claims against the contractor who botched your kitchen remodeling job.
See you outside of court
Hiring a lawyer and marching into court to resolve disagreements or seek damages for injuries appears to have replaced baseball as this country's national pastime. Sensational court trials grab the headlines and provide endless fodder for an array of columnists and talk show hosts, but the real action in ordinary disputes these days is happening away from the courtroom.
Businesses of all sizes — from medical practices to large metropolitan hospitals to Fortune 500 companies — are looking for alternatives to "see you in court." They know that answering pre-trial discovery motions, conferring with lawyers and preparing for trial diverts precious time and resources from running their businesses. They dislike clogged court calendars, delayed decisions, and an adversarial process that entitles lawyers to engage in virtually unlimited discovery — a hunt for any document or memo that is even remotely relevant to the case. Lawsuits cost American companies an estimated $80 billion a year in direct litigation payments.
Whether in private practice or employed by a hospital or an HMO, a physician should be aware of the growing trend to settle conflicts out of court through mediation, arbitration, or other methods of alternative dispute resolution (ADR). Physicians are beginning to realize that resolving conflicts in forums other than the courthouse can save time, money and aggravation. For instance, it's not unusual for a mediator to resolve a partnership dispute between physicians in two or three days, or even a single afternoon if it's uncomplicated. In court, it may take three or four months for the judge to rule on a single pre-trial motion, and up to three years before the case is even heard.
Indeed, many law firms that once viewed alternative dispute resolution as a threat to their litigation business are now setting up mediation practices. Hundreds of rent-a-judge companies specializing in ADR have also sprung up around the country.
Advantages to avoiding court
"ADR" generally refers to any alternative to traditional court litigation. It covers a wide spectrum of methods for managing conflict and settling disputes; most involve a neutral third party in a private proceeding. The two most widely used methods are mediation and arbitration.
Aside from saving time and money for both sides, the advantages of ADR include:
- Preserving relationship: The process is not adversarial; unlike lawsuits, which often engender bitterness, ADR can allow the disputing parties to resolve their problem quickly without disrupting their business relationship.
- Control: The parties, in consultation with their lawyers, retain control of the process by selecting a mediator or arbitrator, setting a hearing date to suit their schedules, meeting in a conference room or other business setting, and taking charge of resolving the issues without an overlay of formal, legalistic procedures.
- Confidentiality: Unlike civil trials, which are open to the public and may result in unfavorable publicity, ADR proceedings are generally private. No one except the parties observes or even knows about the proceedings.
- Expertise: In court, a judge or jury with no background in health care matters may be assigned to hear your case, but with ADR, the parties can select a mediator or arbitrator with expertise in health care matters.
Virtually any kind of dispute that might end up in court can be submitted to ADR, particularly mediation. Here are some types that can typically be resolved this way:
Large practice In some group practices, friction develops when a few physicians feel they are carrying a disproportionate share of the work load without being compensated accordingly. A 12- member New Jersey radiology group nearly broke up over this issue recently. The six senior radiologists performed garden-variety radiological diagnostic services, while the six younger physicians provided therapeutic services for patients and were active in research and academic pursuits. The older partners had brought the younger ones into the group to expand the practice.
It wasn't long before resentment bubbled over. The senior physicians came to work early, read X-rays and cranked out diagnostic reports all day long. In their view, they worked hard, generated the lion's share of revenues and shared too much of it with the young turks who didn't seem to exert themselves as much. For their part, the younger partners felt they were the "real" doctors since they provided patient care; the older doctors just didn't understand them.
The senior doctors asked John Dizzia, a Cranford, N.J. lawyer, to initiate a breach-of-contract action against their younger brethren. But he suggested that they first try to resolve their differences amicably. In three separate meetings lasting a total of about nine hours, the partners — without their lawyers — sat around Dizzia's conference table, aired their grievances, and ironed out a new partnership agreement that adjusted the economic package to suit both sides' needs. Productivity bonuses were refigured to give weight to scholarly achievements that enhanced the group's reputation (pleasing the younger partners), as well as to day-to-day diagnostic work (pleasing the older partners).
The mediation saved the partnership thousands of dollars in legal bills and, more important, "preserved the relationships among the partners that are critical to maintaining the practice," says Dizzia. "Mediation can help unravel the personal and emotional issues that unfortunately get mixed into the controversy," he adds.
Small practice Two Pennsylvania ophthalmologists got into a messy legal brawl over a partnership that went awry. The senior physician, "Dr. Smith," employed the junior physician, "Dr. Jones," for over a year before they decided to become equal partners. Anticipating an expanded practice, they spent over $200,000 ripping down walls and renovating their office. On the morning they were to sign their partnership agreement and close on the bank loan that helped finance the renovations, Jones abruptly changed his mind and quit the practice. Later that same day, he moved into his own office and began treating Smith's patients.
Smith claimed that Jones had stolen his patient list and secretly persuaded several patients to switch to his new practice. They decided to take their conflict to arbitration.
In preparing for the arbitration hearing, each physician gained a better perspective on the other's position (Jones, for example, claimed he was owed back wages), and they settled their dispute. In return for a chunk of cash, Jones agreed to relocate his practice and sign an agreement not to compete with Smith. The physicians later agreed that the arbitration forced them to a quick resolution and saved them substantial lawyers' fees.
Hospital/physician disputes A Pennsylvania surgeon received a letter from the local hospital notifying him that his staff privileges would not be renewed for the next year due to "quality of care" issues. The hospital indicated it would file a formal complaint and begin the process of terminating his privileges. Steaming mad, the surgeon called his lawyer to take legal steps to stop the hospital. His lawyer, however, defused the situation by calling the hospital's general counsel and suggesting that they try to resolve the issue informally before the hospital initiated proceedings. He also reminded the hospital's counsel that litigation could require the hospital to reveal its normally private, internal administrative processes to the outside world, and that a nasty lawsuit might harm its public image.
In the course of the two-day mediation, the hospital chief of staff admitted that the complaints against the surgeon were partly clinical and partly due to his obnoxious personality. Result: The surgeon's privileges were renewed on a limited basis (to be fully restored after he received additional training) and litigation was avoided.
HMO/physician disputes To date, ADR has been used sporadically in disputes between managed care companies and individual doctors. Few HMOs include ADR clauses in their contracts with physician providers. Several state and federal laws require HMOs to maintain grievance and appeal procedures for patient enrollees, but offer far less protection for providers.
As the deeper pocket, managed care organizations generally prefer to take their chances in court if there is a dispute with a doctor. Health plans figure that the slower, more cumbersome and expensive process of fighting it out in court generally plays to their strength as large, corporate entities fielding small armies of lawyers. Their attitude can be summed up as: "We can outlast you, so if you don't like it, take us to court."
Not all managed care companies, of course, object to ADR. Some HMOs submit disputes with physicians concerning incentive payments from withhold pools to mediation or arbitration. Incentive payment clauses may appear straightforward in a contract but can be a nightmare to interpret. Disagreements affecting the withhold amounts a physician is entitled to may arise over which physician hospitalized a particular patient or referred the patient to a specialist, or whether a patient's serious condition and lengthy hospital stay triggers the contract's "outlier" section, which removes unusually severe cases from the withhold computation.
Employment disputes Employment disputes are a growth area for ADR. Mediation or arbitration may be used by a physician group challenging its deselection from an HMO provider panel, a staff physician who is fired from the hospital, or a physician employed by a group practice that terminates her contract. The contract will usually spell out what rights, if any, the doctor has to submit the dispute to ADR. If there's no ADR clause, the doctor might still manage to persuade the managed care plan, hospital, or employer to submit the dispute to mediation or arbitration.
Let's say a physician employed by a practice for the past two years decides to bolt off to start his own practice five blocks away. That may be a violation of the non-compete provision in his employment contract. If he continues to keep practicing despite warnings, the practice that em- ployed him might be able to enforce that provision by submitting the problem to a mediator or arbitrator specially trained in employment matters. The American Arbitration Association, for instance, has panels of dispute resolvers with employment law expertise throughout the country. (For more information, call the AAA at 1-800-778-7879, or e-mail at email@example.com).
Compared to what you would spend litigating in court, the AAA's fees are reasonable. Its employment mediation filing fee of $500 and the hourly fee of the mediator (which varies according to region) are usually split in half by the parties. For employment arbitration, the party filing for arbitration pays AAA filing fees that are based on the size of the claim. For instance, claims under $10,000 cost $500, and claims between $10,000 and $50,000 cost $750. The parties also split the arbitrator's fee of $600 for each day of the arbitration hearing.
A final word about ADR: In almost every case involving mediation and arbitration, each side will still need a lawyer's help. Even if one or both parties decide to attend a mediation hearing without counsel, they should get legal advice on how to best present the case and how the process will work.
Mediation vs. arbitration
Mediation is a voluntary process in which the parties discuss their dispute with an impartial person — the mediator — who assists them in reaching a mutually acceptable settlement. Unlike litigation, mediation is conducted in private, informal meetings with minimal paper work. Mediation involves little risk, since a party can walk out at any time and move on to arbitration or litigation.
The mediator has no decision-making authority — he or she may suggest ways to resolve the dispute, but can't impose a settlement on the parties. The goal in mediation isn't to assess blame or determine who's "right" and who's "wrong," but rather, to find practical solutions that preserve the ongoing business relationship between the parties. And, since it's a flexible process, mediation can take place before, during or even after other procedures, such as arbitration or litigation, have been employed.
Arbitration is the next level up from mediation. It is mostly used to avoid costly litigation or when mediation fails to result in agreement. The biggest difference between arbitration and mediation is that the neutral third party — the arbitrator — acts as a judge and makes a final and binding decision after hearing both sides' cases. The major risk is that arbitration decisions can almost never be appealed.
Arbitration is much more formal than mediation, and each side usually is represented by a lawyer. As in a court case, proper notice to the parties must be given, rules and procedures must be followed, document requests are allowed, witnesses are common, and a stenographer may be hired to transcribe the proceedings.
Although this formality drives up costs, some businesses favor arbitration because it's final. Arbitration hearings may take three or more days, but the entire process — from filing the initial arbitration request to completion of the case — may run six months.
ADR by and for health care professionals
If you need a mediator or arbitrator, you may want to contact the National Health Lawyers Association, which runs an ADR program specifically geared to resolving disputes involving physician contracts, employment matters and other managed care issues.
The advantage of this program over other ADR services is that of the NHLA's 400 mediators/arbitrators in 49 states, most are attorneys who practice exclusively in the field of health care law. Over 35 of the dispute resolvers are physicians, nurses and hospital administrators with expertise in key areas of health care. That means the person who helps resolve your dispute is likely to have the sophistication and background to understand the issues you are facing.
The mediator/arbitrators typically charge between $150 and $300 per hour. The NHLA also charges a one-time fee — from $500 to $1,000 — for sending a list of arbitrators/mediators with descriptions of their background and experience to the parties. These fees are typically shared by the parties.
(For more information: NHLA Alternative Dispute Resolution Service, 1120 Connecticut Ave., NW, Suite 950, Washington, DC 20036; (202) 833-1100; e-mail — firstname.lastname@example.org).