Alternative dispute resolution: A remedy for malpractice disputes?
Introduction
Alternative dispute resolution (ADR) refers to techniques used to resolve disputes that are alternatives to courtroom litigation, our legal system’s traditional method to formally settle differences. Primary alternatives to litigation include negotiation, mediation, arbitration, med-arb (which combines mediation and arbitration), mini-trial, and summary jury trials. The limitations of our traditional court process provide reasons to consider other methods to resolve a dispute. A court is a good forum for decision making when there is a question of public policy or the need to establish a legal precedent that will impact future cases. A court, however, is a public forum where negative publicity can be created, without regard to the merits of the case, simply because a medical malpractice lawsuit was filed.
On the other hand, ADR privatizes the dispute. ADR often shortens the time frame for coming to a final decision and is generally less expensive than litigation. Another advantage of ADR is the ability of the parties to select the person who will serve as mediator or arbitrator. Parties may select a person or panel with particular expertise in the issues involved in the dispute. A 1992 General Accounting Office study of medical malpractice litigation found that arbitration took less time than litigation, was effective in compensating more plaintiffs for their injuries, and resulted in awards were lower and more consistent.1
In spite of the advantages of ADR, it is still not widely used. An important reason for its limited use is that the attorneys often control when ADR is used, and insurers and attorneys have a certain comfort level with the traditional litigation process. The Institute for Civil Justice studied arbitration practices in California. It found that 91% of hospitals and physicians did not use an arbitration agreement. The principal reason cited by physicians was that they were unfamiliar with them. Other providers felt that an arbitration agreement set the "wrong tone" in working with a new patient. In addition, medical malpractice insurer and provider group preferences seemed to have a significant impact on whether arbitration agreements were used. Among providers insured by carriers who encouraged arbitration, 50% of managed care physicians used arbitration agreements.2
Types of ADR
While ADR terms are often used interchangeably in common conversation, in actual practice, each alternative is a specific process with some unique characteristics.
Negotiation has been defined as conferring with another to arrive at a settlement. What distinguishes negotiation from other ADR processes is the fact that, in negotiation, the parties involved in the dispute control both the process and outcome of the dispute. Negotiation is often the dispute resolution technique that occurs in the shadows of the courthouse to settle cases on the eve of a trial. It has been estimated that only 8% of lawsuits filed ultimately go to trial for resolution. The remainder are either dismissed, settled, or decided through an alternative dispute resolution procedure.3
Mediation refers to the process in which the parties meet with a neutral third party, or mediator, who helps them resolve their dispute. The mediator may control the process by which the dispute is decided, but the parties to the dispute control the outcome or final decision. The mediator does not make a final decision as to the resolution of the dispute. The mediator generally asks each party to present a statement of their view of the case. The mediator then asks questions to encourage an interactive discussion and resolution of the case. Some mediators may be asked to give a legal opinion regarding the merits of the case if it were to go to court, as an encouragement for the parties to settle. Mediation is distinguishable from negotiation in that the mediator, not the parties, controls the process. Mediation is similar to negotiation, though, in that the parties make the final decision.
Arbitration is another process in which the parties meet with a neutral third party to resolve the dispute. In this case, the third party is an arbitrator. In arbitration, the parties generally present their statements of the case, the parties may call witnesses to testify under oath, and then the arbitrator ultimately reaches a decision on the merits of the case. In "binding arbitration," pursuant to the parties’ earlier agreement, the decision reached by the arbitrator will be final and is generally not appealable by the parties unless there has been fraud. In "nonbinding arbitration," the arbitrator’s decision is not final and serves only as an advisory opinion that the parties can use to evaluate the merits of their case. Like negotiation and mediation, arbitration is a private proceeding that takes place outside of the courtroom. Unlike negotiation and mediation, an arbitrator controls both the process and the final decision that is made. In this way, binding arbitration can be quite similar to traditional litigation.
Med-arb combines mediation and arbitration. The parties first try to resolve their dispute themselves through mediation. If they are unable to do this, they move on to arbitration. The arbitration may be scheduled to immediately follow the mediation or at a later time. Parties may decide whether the same individual will serve as both mediator and arbitrator, or whether they will use different people. While in mediation, a single mediator is used, in arbitration there may be a single arbitrator or a panel of three arbitrators. Med-arb has the advantage that it gives the parties control of the outcome through mediation, but if they are unable to reach an agreement, the subsequent arbitration allows the parties to proceed to a definitive conclusion of their case. On the other hand, proceeding through this two-step process can certainly add to the time and expense involved.
A mini-trial refers to a shortened version of a trial in which each party presents its case to a neutral expert who gives an opinion as to the merits of the case. The mini-trial is similar to nonbinding arbitration except that the expert may not issue a formal opinion. The goal of a mini-trial is similar to nonbinding arbitration in that it provides an unbiased opinion on the merits of the case in an effort to encourage early settlement of claims. Like mediation and arbitration, it is also a private process.
A summary jury trial is similar to traditional litigation in that a judge presides and regular jurors are impaneled. It is the only ADR technique that is public. It is different from a regular trial in that there are no witnesses called, each party has only one hour to present its case, and the decision of the jury is advisory only. Again, the idea is to give feedback on the merits of the case to encourage settlement. The summary jury trial also provides the jury with regular jury instructions, so it forces the parties to have their case prepared and ready prior to trial.4 If settlement is not reached following the summary jury trial, the case will proceed to full trial.
State Arbitration Panels
Morrison v. Therm-O-Rite Products Corp. was a Pennsylvania case involving use of an arbitration panel.5 The state malpractice act gave an arbitration panel original exclusive jurisdiction to hear and decide any claim brought by a patient or his or her representative for loss or damages resulting from medical services. In this case, the plaintiff’s decedent underwent surgery, and the defendant’s Hypo-Hyper Thermia equipment was used to treat the man following surgery. Allegedly as a result of the equipment, the plaintiff received third-degree burns over a substantial area of his body and subsequently died. The plaintiff initially filed a notice of complaint with the arbitration panel against the medical center, two nurses, a physician, and a medical group, but later filed a lawsuit in federal court.6
Therm-O-Rite filed a motion to dismiss. One of its grounds was that, because the state malpractice act provided that an arbitration panel would have original exclusive jurisdiction over such claims, the court lacked jurisdiction. The court reviewed the malpractice act and found that it provided for original exclusive jurisdiction not only over claims against health care providers, but also over claims asserted against a nonhealth care provider who is made a party defendant in a lawsuit against a health care provider. The court found that Therm-O-Rite fit the definition of a nonhealth care provider over which the panel had exclusive jurisdiction because the thermal device was used at the time the medical services were rendered. As a result, the court granted the defendant’s motion to dismiss because it lacked jurisdiction, and the appropriate forum was the arbitration panel. The Pennsylvania Supreme Court, in a later case, reaffirmed arbitration as a "viable expeditious, alternative method of dispute resolution," but found that the fact that actual arbitration panel delays left 73% of cases unresolved after four years was unconstitutional as an impermissible and oppressive infringement of the right to a jury trial.7
Other states have also used arbitration panels for the resolution of medical malpractice claims. The intent of these prelitigation panels is to encourage early settlement of cases and encourage voluntary dismissal of nonmeritorious cases. As of 1998, 16 states required a mandatory panel review of a medical malpractice claim prior to filing a lawsuit.8 The names of the panels vary from state to state: conciliation panel, medical review panel or screening panel, arbitration panel, prelitigation screening panel, tribunal review, etc. States also vary as to whether the panel decision is binding or admissible in court. Some panel decisions are informal and nonbinding, while others are binding or admissible as evidence at trial. Other states have provided for optional arbitration. Some states adopt a voluntary approach to arbitration that provides for arbitration upon agreement of the parties.9 States that do not specifically address arbitration in the medical malpractice context provide a basis for arbitration through general arbitration statutes that have been enacted in every state. These general statutes formalize public policy favoring arbitration as an ADR process to resolve disputes.
State Mediation Panels
In Webb v. Priest et al.,10 the Florida Court of Appeals reviewed the admissibility of the mediation panel’s decision at a later trial. The case involved a man with a complaint of abdominal pain who was evaluated in a hospital emergency department. A diagnosis of urinary tract infection was made, and he was discharged. Five days after his discharge, he was evaluated by a general surgeon who practiced at a different facility. The surgeon informed him that he had a lump in his abdomen of undetermined origin and advised hospitalization; however, the man refused hospitalization. Later that same day, the patient’s appendiceal abscess ruptured, and emergency surgery was performed at a third hospital. Unfortunately, during the surgery, the surgeon perforated the patient’s colon. As a result, additional surgery was required. Multiple physicians and hospitals were joined in the plaintiff’s lawsuit, including the original emergency department physician for alleged failure to diagnose the abscess.11
The trial court refused to permit the plaintiff’s attorney to comment on the results of the pretrial mediation other than during the plaintiff’s opening statement and arguments to the court. Florida law, at that time, provided that the results of such mediation could be brought to the court’s attention only during such times, and the court had discretion to limit comments regarding the results of the mediation.12 In addition to Florida, four other states provide mandatory mediation panels that may render an advisory opinion on the merits of a malpractice claim.13
State Panels and EMTALA
The Louisiana Supreme Court recently reviewed whether medical review panels, which the state requires as part of its medical malpractice statute, apply when the plaintiff has filed claims for both medical malpractice and violation of the Emergency Medical Treatment and Active Labor Act (EMTALA).14 In 1995, a man took his wife to the emergency department of a private hospital with complaints of vomiting, upper back pain, fever, and diarrhea. The woman was examined, laboratory tests and a chest X-ray were done, and the emergency physician diagnosed a right upper lobe pneumonia with a provisional diagnosis of right upper lobe malignancy. The doctor discussed this with the couple and arranged for her transfer by ambulance to a public hospital about 45 minutes away. The woman suffered a cardiac arrest that night and died early the following morning. At autopsy, the probable cause of death was determined to be Pseudomonas pneumonia.15
The Louisiana Medical Malpractice Act includes a requirement of mandatory review by a medical review panel prior to filing a lawsuit for medical malpractice. The court noted that medical malpractice claims are state claims that are distinct causes of action from federal EMTALA claims and that the reasons for the state malpractice act and EMTALA were different. The medical review panels provided for in the state malpractice act were enacted during the malpractice crisis of the 1970s to limit nonmeritorious lawsuits against health care providers. EMTALA, on the other hand, was enacted to prevent hospitals from "dumping" patients by refusing to provide services to persons who were indigent.16 State malpractice claims and federal EMTALA claims often overlap because the standard for determining the appropriate screening of an patient may be related to the standard of care in a malpractice claim. Failure to comply with the standard of care might result in a violation of EMTALA in addition to malpractice liability.
The court determined that judicial efficiency warranted reviewing the claims together. The court held that, to the extent the state statute required mandatory review by a review panel prior to filing an EMTALA claim, it was in direct conflict with EMTALA and was therefore pre-empted (i.e., void). The court, however, left open an option for the trial court to determine whether it would be appropriate to grant a motion to stay the EMTALA action while the medical review panel reviewed the merits of the medical malpractice case. While the court held that the requirement of review by a review panel could not be a barrier to filing an action under EMTALA, it endorsed the legitimate role of mandatory screening panels in the medical malpractice context.17
Comparing Options to Resolve Claims
Courtroom Litigation. Camp v. EMSA Ltd. 18 In Camp, a 79-year-old woman was admitted to the emergency department of the hospital with "mid-sternal chest pain that radiated to her shoulders and neck, a severe headache, vomiting, diarrhea, and sweating." The woman told the nurse that her symptoms had begun earlier in the day when she sneezed while outdoors. The emergency physician was concerned that she might be having a heart attack and ordered tests to rule out that possibility. A neurological exam did not demonstrate neck rigidity, loss of function in the extremities, a worsening headache, or other signs or symptoms suggestive of a neurological problem. The physician then ordered X-rays of her sinuses and treated her for sinusitis. The woman asked to return home and was discharged from the hospital. She died early the following morning. Expert testimony was conflicting over the cause of death.19
At trial it was argued that the physician had not properly evaluated the patient for a cerebral aneurysm and that an undiagnosed aneurysm ultimately caused her death. A physician expert witness for the plaintiff testified that the emergency physician breached the standard of care when he failed to diagnose the patient’s aneurysm. A physician expert witness for the defense testified that the physician had complied with the applicable standard of care for emergency physicians and that the autopsy was inconclusive regarding cerebral aneurysm. The defense’s expert also expressed the opinion that the aneurysm was not the cause of death. A second physician expert for the defense also testified that he did not believe the patient died from an aneurysm. The jury reviewed the conflicting testimony and facts and concluded that the medical care rendered by the emergency physician met the standard of care.20
The plaintiff requested that the court set aside the jury’s verdict based on its assertion that the jury’s decision was against the weight of the evidence. The trial court denied this motion, and the plaintiff appealed the case to the Georgia Court of Appeals. The Court of Appeals held that, even though there was conflicting testimony and evidence, there was sufficient evidence to support the decision below. The decision of the trial court was afffirmed.21
In this case, five years passed between the incident that led to the malpractice claim and the final resolution of the case by the Court of Appeals. It has been estimated that most litigation cases take 35 months once the process has started.22 In addition, up to two years, and sometimes more, may pass, depending on the relevant statute of limitations, between the incident and the filing of the lawsuit. Then, once the lawsuit begins, the litigation process involves the exchange of multiple pleadings, motions and hearings, discovery, pretrial conferences, and then the trial itself. If the case is subsequently appealed, another year or more per level of appeal may be added for final resolution of the dispute. In some cases, this process can take up to 10 years. During this time, the physician does not have a way to definitively predict his or her potential liability.
Arbitration. Following arbitration, the arbitrator summarizes the facts of the case, the legal issues and, if the defendant is found liable, determines an award of damages. Because arbitration is private, most arbitration decisions are not publicly reported.23 Using the previous case as an example, we can compare how the case would have proceeded had arbitration been the method of resolution.
The American Arbitration Association (AAA) in New York City, a national provider of arbitration services, has established rules that arbitrators may follow in conducting an arbitration. Its rules will be used to illustrate the arbitration process, and we will assume that the parties had agreed that the AAA would resolve their dispute. In the previous case, the plaintiff began a lawsuit by filing a complaint with the court. In arbitration, the party begins the proceeding by sending a Request for Arbitration to the other party along with two copies to the AAA. The party receiving the request has 10 days to respond.24
The parties select an arbitrator, or arbitrators, from the AAA Panel of Arbitrators according to the following procedure. The AAA provides an identical list of arbitrators to each party accompanied by a short biography of each. Each party then has 10 days to cross off any names that it objects to and to prioritize the remaining names. If the claim is for less than $100,000, one arbitrator is selected. If the claim is for more than $100,000, three arbitrators make a decision as a panel, and the panel usually includes a health care provider. The arbitrator or panel is then formally appointed. The AAA selects an arbitrator approved by both parties according to their order of preference. If there is no agreement between the parties, the AAA independently selects the arbitrator. When there is a panel of three, each party selects an arbitrator, then the two arbitrators select the third arbitrator who chairs the panel.25
For the purpose of expediting the arbitration, the parties have the option of scheduling a preliminary hearing within 90 days of when the Request for Arbitration was initially sent. The arbitrator will establish a schedule for the production of relevant information, confirm the identity of witnesses to be called to testify, have the parties exchange witness lists, decide whether depositions will be taken, and schedule a hearing to resolve the matter.26 The final arbitration hearing must be held within 180 days of the preliminary hearing, although the arbitrator may grant a postponement if agreed to by both of the parties. The parties have the right to be represented by an attorney during arbitration and may elect to have a stenographer there to document the hearing. The hearing is private and, while people with a direct interest may attend, the arbitrator has the power to exclude witnesses from attending (other than while testifying) and determine the right of any other person to attend. During the hearing, the arbitrator may ask for statements by the parties on the issues of the case. Each party then has the opportunity to present evidence to support its claim. Witnesses may be called and other documents or exhibits submitted. The arbitrator has the discretion to determine the relevance of information submitted without relying on formal rules of evidence. The hearing will then be closed, and the parties will have the option of submitting post-hearing briefs regarding their respective positions. A hearing may be reopened for good cause or on the arbitrator’s initiative any time before an award is made.27
An award should be rendered in writing within 30 days of the hearing. Panel awards are decided by a majority. The arbitrator has the authority to grant any remedy or relief that is considered just and within the scope of the agreement of the parties. The arbitrator may assess any fees or expenses due as part of the award. If the parties settle their dispute during the course of arbitration, the arbitrator may set forth the terms of the agreement in a "consent award." Copies of the award are delivered to the parties, and the parties may then have the arbitration award entered in a federal or state court that has appropriate jurisdiction.28 This makes the award as binding as a court decision. Binding arbitration awards are generally not appealable unless there is fraud or the arbitrator has exceeded the scope of his or her authority. The arbitration process generally takes about 10 months. Even when parties agree to extensions of the proceedings, most arbitration decisions are finalized within 18 months. When an arbitration award includes damages for medical malpractice, the awards tend to be lower, as a general rule, than jury verdicts.
Mediation. Like arbitration proceedings, mediation proceedings are private and not generally reportable. A case can arrive at mediation in several ways. Many courts now have court-annexed mediation programs. "Opt in" programs allow parties in litigation to choose mediation at any point prior to trial as a means of settling their case prior to trial. "Opt in" programs are completely voluntary at the request of the parties. Other courts have "opt out" programs that require the parties to participate in mediation and obtain a Certificate of Participation in Mediation prior to proceeding with the litigation process. "Opt out" programs require that the parties to the lawsuit attempt a mediated resolution before court proceedings go forward. The court-annexed mediation programs have rosters of court-approved mediators from which the parties may choose. Court annexed programs may exist in either federal or state court. Other mediations take place without any involvement of the court.
If the Camp case had been resolved through mediation rather than litigation, the plaintiff would have begun the process by filing a request for mediation with the appropriate mediation organization and the defendants. Again, AAA rules will be used as illustrative, even though several other organizations provide for mediation and have mediation rules. A single mediator is appointed unless the parties request an additional mediator.29 Ten days prior to the first mediation session, each party provides the mediator with a brief statement of its position on the issues that need to be resolved and the remedies it seeks. The parties then meet with the mediator in a mediation session. The parties provide information regarding their respective views of the case. Unlike an arbitrator, the mediator does not have the authority to impose a settlement on the parties. Instead, the mediator facilitates resolution of the dispute by asking appropriate questions.
The entire mediation session may be held jointly or, alternatively, the mediator may separate the parties at times and meet with each party separately. The mediation proceedings are considered confidential, and no formal record is made of the proceedings. Some claims are resolved in one mediation session, while other more complex claims may require multiple mediation sessions.30 Mediations often are scheduled fairly promptly and may result in the dispute being settled within a few months. Unlike arbitration, mediation decisions may be more easily appealable. For this reason, many mediators encourage the parties to discuss and decide what the next step will be if the terms of the agreement are not kept.
The mediation concludes when the parties reach an agreement, when the mediator concludes that further discussion is unlikely to bring about agreement, or in some cases, when either party wishes to conclude the mediation. If the mediation is required by the contract between the parties, that contract should provide for the conditions under which mediation will be terminated. Often, the written agreement between the parties will simply refer to an extrinsic set of rules, e.g., the rules of the AAA. Mediation decisions are documented through a "Memorandum of Understanding" that documents the terms agreed to by the parties during the mediation session, which is subsequently formalized in an agreement between the parties having the same legal effect as any other contract.
In 1995, Rush-Presbyterian-St. Luke’s Medical Center in Chicago established a voluntary mediation program for medical malpractice claims because of the volatility and unpredictability of jury awards. Prominent trial lawyers and judges were asked to participate in the program and attend a mediation training session. Under this program, the parties may select either a retired judge or two attorney mediators to mediate their dispute. Prior to mediation, the parties each submit a statement of the facts, descriptions of the alleged injury, alleged special damages, and past and future expenses. The parties meet at a neutral location. The mediation process begins with an opening statement by each party. Next, the mediators meet separately with the parties and, finally, the parties reconvene to conclude negotiations. In most cases, the mediations have been successful. The program found that mediation takes about four or five hours and costs less than $5,000 per case compared with a jury trial that may take days or weeks and costs, on average, $15,000 to $25,000. There have been 45 mediations during the program operation.31
Who is Bound by the Agreement?
Kukowski v. Piskin,32 an early medical malpractice ADR case decided by the Supreme Court of Michigan, involved a woman who had been treated for tuberculosis. The doctor prescribed ethambutol, which was the appropriate drug for treatment of tuberculosis. The drug was begun while the plaintiff was an inpatient at one hospital, and was continued as an outpatient through another hospital. The woman later lost her vision and filed a lawsuit claiming that the doctor was negligent in failing to warn her of the known adverse effects of the drug. Each time the woman was treated at either of the hospitals, she signed an agreement to arbitrate. The arbitration agreements for both facilities were about the same. They provided that any claims or disputes would be submitted to arbitration and that the agreement covered the hospital and its employees, as well as independent staff physicians and consultants who had also agreed to arbitrate. The issue before the court was whether the physician who was sued, an independent staff doctor, had agreed to arbitrate.33
The plaintiff claimed that the agreement to arbitrate was between her and the hospital, but did not include the physician. The Michigan statute, at that time, provided that "all surgical and medical procedures performed by a participating health care provider in a hospital shall be covered by the terms and conditions applicable to the agreement between the patient and the hospital."34 In a split decision, the court held that the agreement to arbitrate applied to the independent staff physician, as well as the hospital. This decision demonstrates the difficulties that might arise if an arbitration clause is not drafted clearly. If the hospital and physicians wanted the physicians to be included in the arbitration agreement, the hospital should have more clearly specified this in the agreement with the patient. The hospital also should have had an arbitration requirement for physicians in its medical staff bylaws. If the hospital and physicians wanted to separately decide on whether to use arbitration, the hospital should have specified in its agreement that the arbitration requirement only applied to the hospital and its employees. Then, the physicians who choose to arbitrate could separately enter into arbitration agreements with their patients.
Implementing ADR — Notice
In Morrison v. Colorado Permanente Medical Group, et al.,35 a medical group and physician asked the court to dismiss the plaintiff’s medical malpractice claim and to enforce an arbitration clause. The facts of the case were that a woman went into the emergency department on a Saturday afternoon complaining of a severe migraine-like headache and high temperature. Before being discharged, she complained of pain in her buttocks and a red, inflamed spot on her left flank. Her temperature was 103.9° F. She was given IV fluids by the emergency physician and discharged about 10 p.m. that day. She returned the following morning with complaints of intense pain in her abdomen, hips, and legs. She had bullae on both buttocks, her skin was pale, and she had hypotension and tachypnea. About 11 a.m. that day, the bulla on her left flank ruptured and drained serosanguinous fluid. The patient reported that the fluid had a foul odor. The physician told the patient, her husband, her friend, and the nurse that the woman did not have an infection. That afternoon, the physician and nurses examined the woman again and found that a second bulla had ruptured and also contained a foul-smelling fluid. The physician made a diagnosis of decubitus ulcer and discharged the patient that afternoon.
The patient returned to the emergency department a third time that evening complaining of pain in her abdomen and legs. A different physician examined her and made the diagnosis of necrotizing fasciitis/myositis, infection by the so-called "flesh-eating bacteria." The patient was taken to surgery very early the following day and had bilateral radical debridement of the areas of infection. During surgery, she suffered a cardiac arrest and was resuscitated. After surgery, she returned to the ICU, where she suffered five more cardiac arrests and eventually died later that morning. An autopsy confirmed that the cause of death was necrotizing fasciitis/myositis.36
An arbitration clause had previously been signed that provided that "any claim arising from alleged violation of a duty incident to this agreement irrespective of the basis for the duty or of the legal theories upon which the claim is asserted, shall be submitted to binding arbitration if the claim is asserted. . . for any reason, including . . . bodily injury or economic loss arising from the rendition or failure to render services, or the provision or failure to provide benefits under this Agreement."37 The arbitration agreement was between the plaintiff’s decedent and the health plan, hospitals, medical group, physician, or employee. The plaintiff initially filed a demand for arbitration, but later filed a lawsuit claiming that the arbitration clause was invalid under Colorado law. The plaintiff’s claims were for medical malpractice and EMTALA violations.
The Colorado statute delineated specific notice and drafting requirements to establish binding arbitration. It required any arbitration agreement for medical malpractice to contain the following notice in at least 10-point, bold-faced type:
BY SIGNING THIS AGREEMENT YOU ARE AGREEING TO HAVE ANY ISSUE OF MEDICAL MALPRACTICE DECIDED BY NEUTRAL BINDING ARBITRATION RATHER THAN BY A JURY OR COURT TRIAL. YOU HAVE THE RIGHT TO SEEK LEGAL COUNSEL, AND YOU HAVE THE RIGHT TO RESCIND THIS AGREEMENT WITHIN 90 DAYS. . . . NO HEALTH CARE PROVIDER SHALL WITHHOLD THE PROVISION OF EMERGENCY MEDICAL SERVICES TO ANY PERSON BECAUSE OF THAT PERSON’S FAILURE OR REFUSAL TO SIGN AN AGREEMENT CONTAINING A PROVISION FOR BINDING ARBITRATION OF ANY DISPUTE ARISING AS TO PROFESSIONAL NEGLIGENCE OF THE PROVIDER. . . .38
The parties agreed that the arbitration language in the agreement at issue did not contain the notice requirements specified in the statute.
In order to determine the validity and enforceability of the arbitration agreement, the U.S. District Court for the District of Colorado reviewed a previous Colorado Supreme Court case in which that court had held that the statute requiring specific notice provisions for medical arbitration was invalid. In that case, the court had relied on the Federal Arbitration Act that broadly provided for the enforceability of arbitration agreements: A "contract . . . to settle by arbitration . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."39 Essentially, arbitration contracts are presumed to be enforceable and are only revocable for those reasons that would make any other contract unenforceable. The notice requirements of the Colorado statute went beyond the usual reasons to revoke a contract and the statute was, therefore, held invalid because it was pre-empted (i.e., "trumped") by the Federal Arbitration Act. Because the Federal Arbitration Act created a presumption that arbitration agreement were valid, the court found that the arbitration agreement that had been executed by the patient and the health care providers was valid. Because the arbitration agreement was valid, the court could not review the claims. The case was sent back to be arbitrated.40
This case demonstrates the general presumption of enforceability of arbitration clauses in our courts, even when certain specific notice provisions might be missing from the agreement. As a practical matter, certain basic provisions should be included in any arbitration clause. These include: the type of dispute that will be covered, where the dispute may arise, the rules that will apply to the arbitration, who will have the authority to appoint the arbitrator, how many arbitrators will be used, where the arbitration will be held, whether the arbitration will be binding, any appeal rights, protection of confidentiality, and the amount of discovery that will be allowed. Some arbitration agreements are "self-executing," meaning that arbitration is presumed and will take place even if one party does not participate. In such cases, the party seeking to avoid arbitration must obtain a court order to stop the arbitration if it does not want it to proceed. This differs from other, nonself-executing arbitration provisions that might require a party to sue in order to enforce the arbitration clause if the other party does not voluntarily participate.
Retrospective Agreements, Contracts
In Coon v. Nicola,41 a man was injured when he fell down a mine shaft. He was treated at the hospital, where he underwent an open reduction and fixation of his fractured wrist. Later X-rays showed a mid-shaft fracture of the left radius that had not previously been diagnosed. The physician informed the man of this fracture and told him that it would be all right. The man returned for a follow-up visit the next week. At the time of the follow-up visit, he signed a physician-patient arbitration agreement. The agreement indicated that it would govern claims prospectively and could also cover retrospective claims: "If patient intends this agreement to cover services rendered before the date it is signed (for example, emergency treatment) patient should initial below: Effective as of date of first medical services."42 The man signed the agreement and separately initialed the clause extending the agreement to cover services rendered before the date it was signed. The man filed a malpractice lawsuit against the physician. The physician asserted an affirmative defense that the matter should be determined in binding arbitration. A petition to compel arbitration was denied by the trial court.
The trial court ruled that the entire arbitration agreement was invalid based on the fact that the California medical arbitration statute did not specifically authorize retrospective arbitration agreements and that the man was medicated at the time he signed the agreement. As a result, the court found the agreement to be fundamentally unfair. On appeal, the California Court of Appeals held that: 1) the statute did not preclude retroactive arbitration agreements; and 2) the medical malpractice agreement complied with the provisions of the state statute. The court then addressed whether the agreement was a "contract of adhesion." Contracts of adhesion are contracts that courts refuse to enforce because the bargaining power of the parties is so lopsided in favor of the party that drafted and receives the benefit of the contract that the other party is powerless to negotiate a change in the contract language. Contracts of adhesion are usually "take it or leave it" contracts, e.g., insurance contracts. In this case, the court considered the following factors: whether there was an opportunity for the patient to question the terms of the agreement, whether the patient was required to sign the agreement or forego treatment, whether the liability of one party (the physician) was greatly limited, and whether the arbitration process itself was unequal. The court concluded that these factors were not present when the agreement was signed and, therefore, the agreement was not an adhesion contract.43
As a practical matter, the factors the court reviewed can be used as a guideline to make sure that implementation of an arbitration agreement will be considered fair and the agreement will be upheld. The patient should be given the opportunity to review and question the terms of the agreement. The agreement should not be a condition of receiving necessary medical treatment. In the Coon case, the fact that the patient did not need immediate treatment and that other physicians were available to provide treatment created an opportunity for the patient to choose whether to accept the agreement or not. The agreement should not be so one-sided that it is considered unfair. For example, provisions in the agreement that require the patient to pay all costs for both parties in arbitration, that limit the physician’s liability to a maximum of $1,000, and that allow the physician to select the arbitrator would likely be considered too one-sided. Reasonable and fair provisions generally will be upheld and allow the parties to mutually agree to an ADR process.
Ensuring a Fair ADR Process
Engalla v. Permanente Medical Group.44 In March 1986, the plaintiff presented to a facility with a complaint of cough and shortness of breath. Tests were performed including a chest X-ray that showed abnormalities in his right lung. Previous chest X-rays performed at the same facility four years earlier had been destroyed. The radiologist recommended follow-up if the prior X-rays could not be found, but, despite the fact that they were never found, no specific follow-up was arranged. For the next several years, the man repeatedly returned with various respiratory complaints. The patient was seen by a doctor on some visits and by a nurse practitioner on others. He was prescribed inhalers over a period of years for common colds and allergies. In 1991, a chest X-ray was done that revealed adenocarcinoma of the lung. By the time the cancer was finally diagnosed, it was inoperable.45
The patient had signed an arbitration agreement prior to his receiving any services. In 1991, he filed a request for arbitration of his claim that the health care professionals had negligently failed to timely diagnose his lung cancer. At the time that arbitration was requested, the man requested a quick resolution of his claim because of his poor health. Despite repeated requests for arbitration, the HMO repeatedly delayed the selection of an arbitrator over months. An arbitrator was finally appointed six months after the request for arbitration, but the patient died the following day. A lawsuit was then filed on behalf of the man’s estate claiming malpractice and fraud in the inducement and enforcement of the arbitration agreement, as well as other claims related to breach of the arbitration agreement.
The court reviewed the facts and found that the arbitration provisions required that an arbitrator be appointed within 60 days, however, this actually occurred in only 1% of cases. Three percent of cases had an arbitrator appointed within six months, and the average time to appoint an arbitrator was 674 days — nearly two years. The court held that the HMO (Kaiser Permanente Medical Group) controlled so much of the process as to make the agreement too one-sided. In addition, Kaiser continued to include arbitration clauses in its agreements with patients even after it knew that it was not meeting the arbitrator appointment deadlines. While the court reiterated the general principle that arbitration agreements are presumed valid, it held that, in this case, the failure of Kaiser to comply with its own process and Kaiser’s domination of the entire process were sufficient to render the arbitration agreement unenforceable.46
This case is an example of an arbitration process that had gone awry. It is important to be alert to signs that the arbitration system is not working as it was intended. In this case, the arbitration process that was established by the provider was not followed. While some delays in decision making are acceptable, when mutually agreed to by the parties (e.g., to facilitate additional discovery or preparation of evidence), continual delays and, in particular, one-sided delays are red flags that the process itself may be found to be unfair. Another factor to consider is who has control of the process. For the process to be fair, both parties should be involved in the selection of the arbitrator and have input into the process. If one party dominates selection of the arbitrator, when the arbitration will occur, and how the proceedings will continue, then there is a risk that, to the extent that party benefits, the agreement will be found to be unfair. As a result of this court decision, Kaiser established a panel to make recommendations regarding ways to improve its arbitration process and later appointed an independent administrator for its arbitration program.47 By doing this, a neutral person was given control of the arbitration process, including selection of any arbitrators.
Conclusion
ADR includes several options to resolve medical malpractice claims, other than through traditional litigation. These options include negotiation, mediation, arbitration, med-arb, mini-trial, and summary jury trial. The various ADR processes have the advantages, generally, of being private proceedings, being less time-consuming and less expensive, while giving the parties the opportunity to select the decision maker. Some states use a mediation panel to provide prelitigation screening of the merits of malpractice claims. Where the review panel is mandatory, the plaintiff cannot file a malpractice lawsuit until the screening panel has made its decision. It is hoped that such panels will encourage withdrawal of nonmeritorious claims and encourage early settlement of claims by getting facts out in the open early in the proceedings.
When lawsuits include both medical malpractice claims and EMTALA claims, courts distinguish between the state medical malpractice claims and federal EMTALA claims, though they differ in deciding the most efficient way to proceed. There is still a belief that pretrial screening panels serve a useful function and are appropriately incorporated into the litigation process for medical malpractice claims.
In comparing the most commonly used ADR options of arbitration and mediation to litigation, arbitration and mediation are more private than litigation, both generally reach final resolution more quickly than litigation, and both are generally less expensive than litigation. ADR also provides for more control of the process by the parties than does litigation. In mediation, the parties are in control of both the process and the outcome of the matter. In arbitration, the parties may control the process but do not control the outcome.
Implementation of ADR can take place through the use of ADR clauses in contracts. Under the Federal Arbitration Act, arbitration clauses are upheld unless they are shown to be invalid based on the same reasons that any other contract would be held invalid. Courts presume that arbitration is a good alternative to litigation. As a practical matter, ADR contract provisions should be drafted to include enough specificity to allow for arbitration to proceed without question or argument about the process. They can provide that arbitration will proceed unless challenged in court by the party opposing the arbitration.
Retrospective arbitration clauses may be upheld if they are put in place in a manner that is fair. To determine the fairness of such retrospective clauses, courts will look at such things as the bargaining power of the parties, whether the agreement was required for treatment, whether liability was greatly limited, and the mechanics of the arbitration process.
The intent of ADR is to implement fair processes to resolve disputes as an alternative to traditional litigation. It is important that actual processes be implemented in a manner that is fair and equitable for all parties involved. Items to consider include whether the ADR process is being implemented in the time and manner agreed to and whether both parties have equal control over the process. A fair process gives both parties the opportunity to present their case in a forum that can help to resolve the dispute. When appropriately implemented, ADR provides an effective alternative to litigation.
Endnotes
1. Medical Malpractice: Alternatives to Litigation, United States General Accounting Office Report to Congress, 9 (January 1992).
2. Binding Arbitration Is Not Frequently Used to Resolve Health Care Disputes, RAND/ICJ (1999), http://www.rand.org/centers/icj/.
3. Leandra Lederman, Which Cases Go To Trial? An Empirical Study of Predictors of Failure to Settle, 49 CASE W. RES. 315 (1999).
4. Glenn Newman, The Summary Jury Trial as a Method of Dispute Resolution in the Federal Courts, 1990 U. ILL. L. REV. 177 (1990).
5. 468 F. Supp. 1295 (Mid. Dist. PA, 1979), Aff’d 612 F.2d 574 (3rd Cir. Penn. 1979).
6. Id. and Mattos v. Thompson, 421 A.2d 190, 196 n. 1980); and Heller v. Frankston, 475 A.2d 1291, 1293 (PA 1984). The statute that the Morrison decision was based upon has been partially repealed.
7. Id.
8. States with Mandatory Medical Review Panels as of 1998 include Delaware, Hawaii, Idaho, Indiana, Louisiana, Maine, Maryland, Massachusetts, Montana, Nebraska, Nevada, New Jersey, New Mexico, Utah, Vermont, and Virginia.
9. States with voluntary arbitration panels in the malpractice context as of 1998 include Alabama, Alaska, California, Colorado, Connecticut, Florida, Georgia, Illinois, Kansas, Minnesota, New York, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, and Rhode Island.
10. 413 So. 2d 43 (Ct. App. Fla., 1982).
11. Id.
12. Id.
13. States with mediation panels include Michigan, North Carolina, Washington, and Wisconsin.
14. Spradlin v. Acadia-St. Landry Medical Foundation, 2000 La. LEXIS 506, (S.Ct. LA).
15. Id.
16. Id.
17. Id.
18. 518 S.E. 2d 482 (Ga. Ct. App., 1999).
19. Id.
20. Id.
21. Id.
22. Amy E. Elliott, Arbitration & Managed Care: Will Consumers Suffer if the Two Are Combined? 10 Ohio St. J. on Disp. Resol. 417 (1995).
23. Some arbitration awards are reported in the labor context when disputes arise out of a collective bargaining agreement between a labor union and an employer. However, most medical malpractice arbitration awards are not reported.
24. American Arbitration Association Health Care Claims Settlement Procedures, Arbitration Rules, Rule 3, effective July 1, 1992, Web site: www.adr.org.
25. Id., at Rules 7-8.
26. Id., at Rule 5.
27. Id., at Rules 12-21.
28. Id., at Rules 30-36.
29. American Arbitration Association Health Care Claims Settlement Procedures, Mediation Rules, Rule 3, effective July 1, 1992, Web site: www.adr.org.
30. Id., at Rules 1-16.
31. News Release: Alternative Dispute Resolution Using Mediation Proves Successful for Chicago Hospital, June 27, 1999. Web site: www.rush.edu/new/news/medicalrelations/99/072799mediation.html.
32. 327 N.W. 2d 832 (S.C. Mich. 1982).
33. Id.
34. Id.
35. 983 F. Supp. 937 (Dist. Colo. 1997).
36. Id.
37. Id.
38. Id., quoting C.R.S. § 13-64-403. Note that California has similar notice requirements for medical malpractice arbitration.
39. Id., quoting 9 U.S.C. § 2.
40. Id.
41. 21 Cal. Rptr. 2d 846 (Cal. App. 1993).
42. Id.
43. Id.
44. 938 P.2d 903 (S.Ct. Cal. 1997).
45. Id.
46. Id.
47. Kaiser Appoints Panel to Oversee Arbitration Program in California, 6 Health Care Policy. Rep. 18 (BNA), 763 (May 4, 1998) and Kaiser Should Create Independent Arbitration Administrator, Panel Says, 7 Health L. Rep. 2 (BNA) 54 (Jan. 8, 1998).
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