THE ARBITRATION AGREEMENT by bqd12976

VIEWS: 59 PAGES: 9

									PACKAGING
THE ARBITRATION
AGREEMENT
Lynn Wagner
               he escalating medical mal-     front of a neutral arbitrator who is not
               practice liability crisis is   as swayed by emotion.”
                                                                                          Patients
T              driving a growing number
               of long term care
               providers to seek an alter-
native to costly, time-consuming litiga-
tion. As multmillion dollar jury awards
and soaring insurance costs increasing-
                                              Benefits Of Arbitration
                                              Proponents say arbitration offers both
                                              sides key advantages. For providers,
                                              the amount awarded to a plaintiff is
                                              unlikely to match so-called runaway
                                                                                          may accept
ly threaten to destabilize the health
care marketplace, one method of dis-
                                              jury verdicts, which can add up to mil-
                                              lions. By tempering awards, arbitration
                                                                                          or reject the
pute resolution, arbitration, is gaining      brings down the ultimate cost of a dis-
favor across the spectrum of health
care settings, including nursing facili -
                                              pute. For consumers, the process holds
                                              the promise of an expedited resolution,     concept of
ties, legal experts say.                      compared with a court proceeding,
   Arbitration lifts patient care disputes    which can take years.
from the emotional hothouse of a
courtroom to a private setting in which
                                                 Research measuring the impact of
                                              arbitration is spotty. But data high-
                                                                                          arbitration
arbitrators, who are typically lawyers        lights from various surveys and studies,
and judges with some expertise in the
medical malpractice arena, weigh evi-
                                              which appear on the National
                                              Arbitration Forum’s Web site, suggest
                                                                                          based on
dence and assess liability and damages        that benefits accrue to both sides in
in lieu of a jury trial.
   Jury trials are often packed with
                                              arbitration:
                                                 ■ A survey published in February         how the
“high emotion, high drama, and it is          2004 by Co rpo rate Legal T imes reported
difficult to explain the evidence rela-       that 78 percent of
tive to the death of an elderly patient,”
says Gavin Gadberry, a shareholder in
                                              business attorneys
                                              found arbitration
                                                                                          agreement is
Underwood, Wilson, Berry, Stein &             led to faster recov-
Johnson, a law firm in Amarillo, Texas.
“These are complex cases with high
                                              ery than litigation,
                                              60 percent said it
                                                                                          presented.
stakes.” Arbitration takes a case “out of     was less expensive,
a high-emotion forum and puts it in           and 83 percent said
                                                                                               Provider • August 2004 17
it was equally or more fair than                                                        Millennium: Much Ado About
litigation.                                                                             Nothing?”, published in 2000 by the
   ■ Seventy-eight percent of litigation                                                Pepperdine Dispute  Reso lutio n Law
attorneys surveyed by the American                                                      Jo urnal.
Bar Association’s (ABA) Section of                                                         Consumers need to know that their
Litigation Task Force last year said                                                    rights will be protected in arbitration,
arbitration was more timely than litiga-                                                Nevers adds. They will have the right
tion, and 56 percent said it was more                                                   to legal counsel, the right to present
cost effective.                              Debate over the role                       witnesses and evidence, and to get a
   ■ Claimants prevail more frequently                                                  fair hearing.
in arbitration involving employment          of this decades-old                           “What makes arbitration favorable is
disputes—46 percent of the time, com-                                                   looking at it in light of the big picture
pared with 34 percent in court—              approach to civil                          in health care,” she adds. Rising costs
according to a study published by ABA                                                   and the malpractice liability crisis may
in 2003. Furthermore, median awards          justice in the                             drive out some providers, cutting of f
were higher, $100,000 for arbitration,                                                  access to patient care, Nevers says.
compared with $95,554 in court, and
the median resolution time from filing
                                             medical malpractice                        “Arbitration is a more reasonable alter-
                                                                                        native to losing providers. It’s not
to judgment was significantly shorter,                                                  always explained to consumers that
16-1/2 months for arbitration, com-
                                             arena is ongoing.                          way.”
pared with 25 months for litigation.
   ■ An April 2003 update to a 1999                                                     Laying A Foundation For Arbitration
survey of Americans’ awareness,                                                         A longstanding statutory foundation
knowledge, attitudes, and experiences      treatment, with the exception of emer-       exists for arbitrating disputes rather
regarding arbitration found that 64        gency services. When physicians work-        than taking them to court. The
percent of respondents would choose        ing for one of the state’s largest insur-    Federal Arbitration Act (FAA), signed
arbitration over a lawsuit in disputes     ers and hospital chains sent a letter        into law by President Coolidge in
involving monetary relief, a 5 percent     informing 170,000 patients in the Salt       1925, asserts the validity of arbitration
increase over the four-year period. The    Lake City area of the new policy, how-       and prohibits states from barring or
survey, conducted for the Institute for    ever, the result was a consumer back-        restricting such agreements. Under the
Advanced Dispute Resolution by the         lash that ultimately forced lawmakers        FAA, written arbitration agreements
market research firm RoperASW, also        to reverse themselves this year, barring     are “valid, irrevocable, and enforce-
found that two-thirds of Americans         providers from requiring such agree-         able, save upon such grounds as exist at
feel lawsuits take too long.               ments before rendering care.                 law or in equity for the revocation of
                                              Providers and legal experts say           any contract.”
Arguments Against Arbitration              Utah’s experience underscores the               “The purpose of the FAA is to com-
Arbitration has detractors, however,       importance of presenting arbitration in      pel courts to honor contractual
who claim it strips consumers of their     a way that fully explains its benefits       covenants to arbitrate disputes, even in
constitutional right to due process, as    and rationale. In the cur rent climate, it   the face of state legislative efforts to
written arbitration agreements invari-     is also critical for providers to develop    restrict the enforceability of arbitration
ably include a waiver of the right to      fair and balanced arbitration agree-         agreements,” says a May 2004 report
jury trial. Debate over the role of this   ments that stand up to legal challenge       on arbitration by attorney Gadber ry
decades-old approach to civil justice in   and take the time to describe the mer-       and co-author Dan Schapp.
the medical malpractice arena is ongo-     its of this alternative dispute resolution      Prior to enactment of the FAA, U.S.
ing, and in some parts of the country      process to consumers, observers say.         courts had a tradition of “judicial hos-
challenges have become contentious.           “The approach that makes the dif-         tility” toward arbitration, a bias that
   Last year, for example, Utah legisla-   ference is when there is a good expla-       can be traced to English courts where
tors passed a law that allowed health      nation of the process and the reasons        judges’ pay was based on the number
care providers to present patients with    for arbitration,” says Ann Nevers,           of cases they decided, according to a
mandatory arbitration agreements,          founder of the Health Law and                2002 report by the Congressional
meaning they would be required to          Resolution Center in Salt Lake City          Research Service (CRS) on the history
sign an agreement to arbitrate future      and author of the paper, “Medical            of the FAA. As a result, “arbitration
disputes as a condition of receiving       Malpractice Arbitration in the New           infringed on [judges’] livelihood,” and
                                                                                                             Provider • August 2004 19
  English courts were reluctant to cede       ensured “the validity and enforcement        Minneapolis. “Arbitration is becoming
  jurisdiction over disputes.                 of arbitration agreements in any ‘mar-       a hot idea now,” says Elise Brennan, a
     An inherited disdain for arbitration     itime transaction or a contract evidenc-     partner in the law firm Doerner,
  in the U.S. judicial system ebbed, how-     ing a transaction involving com -            Saunders, Daniel & Anderson, in
  ever, during industrialization as busi-     merce,’” CRS reported. But for               Tulsa, Okla., and chair of the alterna-
  ness disputes mounted, and in 1924 the      decades following enactment, courts          tive dispute resolution service of the
  U.S. Supreme Court “upheld a New            remained divided over the breadth and        American Health Lawyers Association
  York law that compelled arbitration in      application of the phrase “involving         (AHLA). In the midst of a medical
  a dispute involving a maritime con-         commerce.” In 1995, the U.S.                 malpractice liability crisis, “people see
  tract,” creating an opening for enact-      Supreme Court decided a case that            this as a way to keep a case away from
  ment of the FAA, CRS said.                  interpreted this language as affecting       what some consider outlandish jury
     The original statute, which has since    all interstate commerce, both the phys-      verdicts. The theory is if it goes in
  been fine-tuned through amendments          ical shipment of goods and contracts         front of an arbitrator, a lawyer or judge
  and interpreted by courts through legal     related to such commerce.                    is unlikely to make huge financial deci-
  challenges to specific arbitration cases,      As a result, many of the legal chal-      sions for plaintiffs for reasons of pas-
                                              lenges to arbitration agreements in          sion,” Brennan adds. “Nursing homes
                                              recent years have focused on whether         in particular are looking at putting
                                              they represent valid, enforceable con -      binding arbitration in contracts with
                                              tracts based on the terms of the agree-      patients.”
    ‘People see this as a                     ments and the circumstances under               The Arkansas Health Care
                                              which they were signed.                      Association, for example, has hosted
     way to keep a case                                                                    training for nursing facility owners on
                                              Crisis Drives Interest In Arbitration        implementing arbitration and sur-
     away from what                           While arbitration is not a new form of       rounding issues, says Randy Wyatt,
                                              legal recourse, its relatively new appli-    executive vice president of the
    some consider                             cation to long term care disputes is          organization.
                                              linked to liability costs, which have           Arkansas was identified in the Aon
     outlandish jury                          spiked in recent years.                      report as one of the nation’s highest-
                                                 A June 2004 report by Aon Risk            cost states for liability, with per bed
    verdicts.’                                Consultants found that the average           losses of $5,760. An analysis by the
                                              annual cost for general and profession-      Arkansas Health Care Association of
                                              al liability rose from $310 per long         state Medicaid cost reports found that
                                              term care bed in 1992 to $2,290 in           aggregate liability insurance costs for
                                              2003. Nationwide, long term care             Arkansas nursing facilities rose from
                                              operators incur 15.3 claims annually         $777,740 in fiscal year 1999 to a stag-
                                              for every 1,000 occupied skilled nurs-       gering $27.48 million in fiscal 2003. A
                                              ing facility beds, a threefold increase in   May 2003 survey conducted by the
                                              frequency since 1992, Aon reported.          association, which drew responses from
                                              Based on data gathered from providers        203 of the state’s 237 facilities, found
                                              representing 24 percent of the long          that 106 had no liability insurance, and
                                              term care market, nursing facilities         an additional 60 identified themselves
                                              reported a cumulative $3.1 billion in        as “self-insured,” Wyatt says.
                                              liability claims from 1992 to 2003 and          Insurers have pulled out of the state,
                                              expect the ultimate cost for this period     and one of the largest remaining
                                              to reach $5.2 billion.                       underwriters for nursing facilities
                                                 The emerging preference for arbi-         charges such high premiums that cov-
                                              tration among long term care                 erage availability “is a joke,” Wyatt
                                              providers is “driven by the lawsuit cri-     says. “It is almost impossible to get
                                              sis,” which is costly even for companies     insurance.” As a result, a growing
                                              that don’t get sued, as insurance premi-     number of Arkansas nursing facilities
                                              ums skyrocket, says Edward Anderson,         are including arbitration agreements in
                                              managing director of the National            admission packets, he says.
                                              Arbitration Forum (NAF) in                      “We are just starting to see [arbitra-

20 Provider • August 2004
tion] pick up,” says Elizabeth Andreoli,     cost of a case, says Brennan, who arbi-      realm of contract law and are often
an attorney with Mitchell, Williams,         trates disputes among businesses but         asked to determine whether an agree-
Selig, Gates & Woodyard in Little            not consumers. “Frequently, there is so      ment is enforceable according to the
Rock, Ark.                                   much litigation going on over whether        state’s contract standards.
                                             arbitration should go forward that you          These decisions run the gamut and
Comparing Costs,Time                         end up with trial and arbitration            are governed by a patchwork of differ-
Scant data exist comparing the cost of       expenses,” she adds. Discovery and           ing statutes and precedents. Never-
arbitration to litigation, but experts say   investigative work related to the case       theless, they serve as a guide for draft-
the difference can be substantial. R.        must be done, much as it would be for        ing agreements that have the best
Chet Loftus, general counsel for the         a court trial, and some arbitration          chance of surviving a legal challenge,
Utah Medical Association in Salt Lake        agreements call for a panel of three         experts say. “Courts want to make sure
City, gives the example of two similar       arbitrators rather than one, in which        that if there is unequal bargaining
cases in his state involving newborns.       case all of those parties must be paid.      power, which there would be between
Defense costs for the litigated case            Some consumer arbitration cases,          a nursing home and resident or family,
totaled $500,000, while the case in          including patient care disputes, have        that there are safeguards in place that
arbitration cost $100,000.                   become so mired in legal challenges
  The arbitration time frame is also         and controversy that a few large arbi-
compressed, says NAF’s Anderson. In          tration firms have pulled out of con-
general, an arbitrated case can be           sumer and medical malpractice dis -
resolved in six to nine months, com-         putes, Brennan says. AHLA’s alterna-
                                                                                              State decisions run
pared with litigation times up to seven      tive dispute resolution service no
years in California, six years in            longer takes such cases, and the                 the gamut and are
Chicago, and more than five years in         American Arbitration Association has
Washington, D.C.                             discontinued its representation in med-          governed by a
  “No one is incentivized in the court       ical malpractice cases.
system to get the case over with,”              NAF accepts patient care disputes,            patchwork of
Anderson says. While all parties may         but would not arbitrate a case in which
be of good will, the judge receives the      the provision of care was contingent             differing statutes
same salary no matter how long it            on the patient signing an arbitration
takes, and lawyers “are incentivized to      agreement, says Anderson.                        and precedents.
drag out and use every possible process         “Our bill of rights requires that indi-
in the rules.”                               viduals have a reasonable opportunity
  That is “not necessarily bad,”             to consent” and a period of time in
Anderson adds. “But as a business per-       which they can opt out of the agree-
son it is rational to trade prolonged        ment, he says.
remedies for a process that takes one-          Because arbitration services operate
quarter as long and costs one-third the      according to a set of rules and those
amount.” Both sides are entitled to all      rules vary, Brennan advises providers
the same remedies in arbitration as          that use such services to select one
they would be in court, but the              whose terms do not conflict with their
“motion process and gamesmanship is          own arbitration agreement.
reduced,” he says.                              “A lot of services are marketing to
  According to attorney Brennan,             nursing homes, but there’s a Catch
however, arbitration is not always less      22,” she adds. “If a service is seen as
costly, “particularly in a very compli-      too nursing-home-friendly, they are
cated or highly charged case,” which         not seen as neutral,” and that becomes
can be “so controversial that lawyers        an issue consumers can challenge in
for patients frequently spend time in        court.
court litigating whether arbitration
should go forward or be handled in           State Courts Weigh In
court.”                                      While arbitration is supported by fed-
   Legal challenges to the enforceabili-     eral law, state courts retain jurisdiction
ty of arbitration agreements add to the      over the arbitration agreement in the

                                                                                                               Provider • August 2004 23
  make it not heavy-handed on the nurs-                                                      of Alabama agreed with a lower court
  ing home side,” says Andreoli.                                                             ruling and enforced an arbitration
     “In an abundance of caution,” arbi-                                                     agreement signed by the patient’s
  tration agreements should be drafted                                                       daughter. The court found that since
  in a way that “cures every defect                                                          the daughter was acting as guardian
  found, so that no matter where it is lit-                                                  and sponsor and had handled all of the
  igated, it is upheld,” says Karen                                                          paperwork upon admission, the agree-
  Goldsmith, a principal in Goldsmith                                                        ment was valid even though the nurs-
  Grout & Lewis, the Winter Park, Fla.,           While an arbitration                       ing facility did not explain arbitration
  firm that serves as general counsel to                                                     to the patient herself. The agreement,
  the Florida Health Care Association.
     In an Oklahoma case described by
                                                  agreement may be                           a freestanding document, was not hid-
                                                                                             den, nor did it contain terms that were
  attorney Brennan, for example, the                                                         “grossly favorable” to the nursing facil-
  court declined to uphold an arbitration
                                                  deemed a contract of                       ity or convey to it “overwhelming bar-
  agreement that required that the pro-                                                      gaining power,” the court said.
  ceedings take place in New Mexico,
                                                  adhesion, this does                           ■ In a second Alabama case in the
  where the nursing facility was head-                                                       same year, the state’s Supreme Court
  quartered. This imposed an onerous
                                                  not automatically                          reversed lower court rulings that inval-
  travel burden on elderly patients “to                                                      idated arbitration agreements in two
  get their day in court,” she says.              invalidate it.                             separate but consolidated cases alleging
     A case in Utah, which also went                                                         wrongful death. Executors of the
  against the provider, involved an arbi-                                                    estates argued they were not bound by
  tration agreement that was “fairly one-                                                    arbitration because they hadn’t signed
  sided,” requiring consumers to pay            a contract of adhesion, this does not        them in their capacity as executors,
  additional fees if they lost and giving       automatically invalidate it, legal experts   though they had done so at admission,
  the provider control over the process,        say. It means, however, that providers       as agents for the patients. The execu-
  including selection of the arbitrator,        must ensure they are fair and balanced       tors also claimed that the arbitration
  says Nevers.                                  and take reasonable steps to ensure          provision was part of a contract of
     In one of the most widely known            that patients understand what they are       adhesion and was unconscionable
  cases, the California Supreme Court in        signing.                                     because the agreement stipulated that
  1997 reversed an appellate court deci-           ■ Unc o nsc io nab.le
                                                                       Courts may deem a     arbitration would be administered by
  sion and invalidated an arbitration           contract unconscionable, and therefore       the National Health Lawyers
  agreement when it determined that             unenforceable, on procedural grounds,        Association (NHLA), which they
  Kaiser Permanente had dragged its feet        such as the unequal bargaining power         claimed was a “puppet for the health
  so long in an arbitration case that there     of the parties and their ability to          care and long term care industries.” As
  was a “gap between its contractual rep-       understand the terms of the agree-           a result, the arbitration procedure was
  resentations and the actual workings of       ment, or for substantive reasons related     “unreasonably favorable to the industry
  its arbitration program.”                     to the terms of the contract itself. In      and is oppressive, one-sided, [and]
     Court decisions often turn on two          1985, for example, the Nevada                patently unfair to the typical, aged
  critical legal concepts:                      Supreme Court upheld a trial court           nursing home resident.”
                            . This is a con -
     ■ Co ntrac t o f adhesio n                 ruling that a physician-patient arbitra -       The court said the executors wer e
  tract offered on a take-it-or-leave-it        tion was unenforceable because the           bound by the agreement and that there
  basis without giving consumers an             patient had no opportunity to revoke         was no evidence showing NHLA was
  opportunity to bargain. Arbitration           consent and claimed that clinic staff        biased in its arbitration proceedings, or
  contracts between health care                 had failed to explain the agreement. As      that the arbitration provision signifi-
  providers and patients “tend to fit this      a result, “informed consent was not          cantly favored the nursing facility.
  description,” though nursing facility         offered, and no meeting of the minds
  care is often not required on an imme-        occurred,” Gadberry says.                    Fair And Balanced Agreements
  diate or emergency basis, giving                                                           Gadberry’s arbitration report includes
  patients an opportunity to shop for           Cases Supporting Arbitration                 a description of several arbitration
  long term care services, says Gadberry        Several pivotal rulings, however, have       cases and their outcomes, among them
  in his report on arbitration. While an        upheld arbitration:                          a case decided last December, Ho well v.
  arbitration agreement may be deemed             ■ Last October, the Supreme Court                                         , in
                                                                                             NHC Healthc are-Fo rt Sanders which

24 Provider • August 2004
a Tennessee appellate court refused to     she adds. Otherwise, “you may not        “plain language” and emphasize
enforce an arbitration agreement and       have an enforceable contract.”           important rights in bold type, most
listed key factors in its decision: The       Goldsmith also warns against bury-    notably that by signing the agreement,
admission agreement was 11 pages           ing arbitration agreements in larger     the individual gives up the right to a
long, and the mediation and arbitra-       admissions contracts, where they are     judicial proceeding.
tion provisions were buried on page        likely to be overlooked.                    If a resident cannot read, the arbitra-
10; arbitration procedures were not           In Arkansas, attorney Andreoli says   tion agreement should be read aloud,
adequately explained; the patient had      the agreement should be written in       she adds. Furthermore, providers
to be admitted to the nursing facility
quickly, and the admission agreement
had to be signed first; the admission
agreement was offered on a take-it-or-
leave-it basis to the patient’s husband,
who had no real bargaining power; and
the husband could not read, and the
provision that waived the patient’s
right to jury trial was not adequately
explained to him.
   In cataloguing these problems, the
Tennessee court “shed some additional
light” on how to draft and present to
consumers supportable arbitration
agreements, Gadberry says.

Designing An Appropriate Agreement
Gadberry developed a boilerplate
agreement that the American Health
Care Association makes available to
members. The one-page document
addresses a variety of concerns raised
in legal challenges.
   The agreement discloses that parties
waive their right “to have any claim
decided in a court of law before a
judge and a jury” in bold capital let-
ters, incorporates the widely accepted
procedures of the National Arbitration
Forum, stipulates that signing the
agreement is not a precondition for the
provision of services, and gives con-
sumers 30 days after signing to rescind
the agreement.
   Florida attorney Goldsmith says
providers should be careful about the
wording of arbitration agreements,
print them in large enough type for an
elderly person to read, and ensure that
the residents who sign them are com-
petent, or that their agents have the
legal authority to sign on that person’s
behalf.
   “You have to make sure the person
signing understands” the document,

                                                                                                           Provider • August 2004 27
  should not include in their arbitration      have a binding arbitration agreement         of an effective consumer rollout of
  agreements provisions such as a limit        was between a nursing facility and           arbitration, especially mandatory arbi-
  on damages that “foreclose any reme-         patient and that CMS’ role was to            tration, observers say. The collapse of
  dies provided by state law,” Andreoli        focus on “the quality of care actually       state-sanctioned mandatory arbitration
  says.                                        received by nursing home residents           is widely traced to Intermountain
     Nevers advises providers to make          that may be compromised by such              Health Care (IHC), which stirred a
  sure the arbitration process described       agreements.” CMS said a nursing facil-       consumer backlash when it mailed
  in the agreement is fair. One concern        ity could not require existing patients      materials to 170,000 patients inform-
  that “resurfaces continually with arbi-      to sign an arbitration agreement as a        ing them that on their next scheduled
  tration in medical malpractice cases” is     condition of remaining in the facility       visit they would be asked to sign arbi-
  ensuring that consumers have a “fair         and deferred to state law on allowing        tration agreements or seek services
  shake” in the arbitration                                                                          elsewhere.
  process. “Generally, courts have
  upheld arbitration when the                                                                        Case Study
  process is set up in a fair way,”                                                                  Harlan Hammond, assistant
  she adds. “It’s when providers                                                                     vice president of risk manage -
  try to make the arbitration                                                                        ment services for health care
  process too one-sided and unfair                                                                   giant IHC, said the organiza -
  that courts have said we are not                                                                   tion’s intent was to be open,
  going to uphold it.”                                                                               inform patients in advance, and
     Consumers and providers                                                                         give them an opportunity to
  should both be bound by the                                                                        review the agreement so they
  terms of the agreement, and                                                                        would not have to make a deci-
  consumers should have an                                                                           sion to sign it on the spot.
  opportunity to select an arbitra -                                                                 Materials were pilot-tested
  tor and gather evidence through a dis-       binding arbitration for Medicaid             before the large mailing. In September
  covery process, Nevers says.                 patients.                                    2003, the 17,000 patients of an IHC
     Legal experts also agree that arbitra-       In Utah, the legislative debacle over     clinic in Sandy, Utah, received a letter
  tion agreements should include an            mandatory arbitration “probably set          explaining the shift to mandatory arbi-
  “opt-out” period, during which time          back arbitration five years,” says attor-    tration, a brochure about the process,
  consumers can revoke or rescind the          ney Nevers. “There is a negative per-        and a copy of the agreement they
  agreement.                                   ception of arbitration, and it will take a   would be asked to sign.
                                               while to overcome it.”                          The result was that only 17
  Mandatory Or Voluntary?                         At the Utah Health Care Association       patients refused to sign the document
  A critical issue is whether arbitration is   (UHCA), Deputy Director Deb                  and “indicated they would seek a
  mandatory or voluntary. A mandatory          Burcombe says the organization had           provider elsewhere,” Hammond
  agreement means consumers must sign          hoped mandatory arbitration could be         says.
  onto arbitration at the time of admis-       used by nursing facilities “to negotiate        Encouraged by the response, IHC
  sion as a condition of receiving care. A     liability insurance [premiums] down.”        sent the same materials to patients in
  voluntary agreement does not make a          UHCA had conducted seminars                  the larger Salt Lake City region. But
  signed arbitration agreement a require-      “encouraging facilities to enter into        the response was not the subdued reac-
  ment for the provision of care.              arbitration agreements,” but members         tion IHC encountered in Sandy. Angry
     Facilities that take a mandatory          were hesitant to embrace it, concerned       patients organized, hired a law firm,
  approach should “pay attention to pro-       about raising the issue of a potential       launched a Web site, and held a news
  cedural safeguards,” such as the avail-      patient care dispute at the point of         conference, all of which generated
  ability of other nursing facilities to       admission, she says.                         broad public awareness and reaction,
  choose from in the area, says Andreoli.         Because arbitration is not widely         Hammond says.
     The Centers for Medicare &                embraced in the long term care com-             The company set up a hotline to
  Medicaid Services (CMS) released a           munity, the legislative reversal did not     answer consumer questions and con-
  memo on this issue early last year, in       have a big impact on providers, she          cerns, but it was not enough to appease
  which it gave no indication that             adds.                                        the public outcry.
  mandatory arbitration violated federal          Nevertheless, Utah’s experience              In hindsight, Hammond says the
  rules. The agency said the decision to       reflects the difficulty and importance       company could have told a more

28 Provider • August 2004
expansive story up front about why arbitration was need-
ed. “Many in the public didn’t catch on to the idea that we
had a medical malpractice crisis that was causing some
physicians to contemplate leaving their practice” and that
arbitration was an attempt to respond to that “in a way
that ensures future access to medical care,” Hammond
says.
   IHC also could have “eased more gradually” into arbi-
tration by making it voluntary at the outset. Some
observers outside IHC say the furor erupted primarily
because the company has such a large presence in the
state.
   “A smaller provider could have done the same thing and
not made a stir,” says Nevers. With large providers, “more
care needs to be taken so people feel [arbitration] is a fair
process.”

Be Prepared For Opposition
Hammond says the experience underscores a “reality sur-
rounding arbitration that [providers] can’t afford to over-
look: There will be opposition [among those who] feel
their interests are compromised by shifting to an arbitra-
tion system.”
   Providers considering moving in that direction should
anticipate resistance and develop a plan for dealing with it,
he adds. IHC had such a plan, but did not expect the level
of opposition it encountered.
   “Whatever you can do to plan ahead, be prepared, and
make a case to the public would be helpful,” Hammond
says.
   IHC is proceeding with arbitration on a voluntary basis
and hopes to have enough participants to generate com-
parative data. At the end of each arbitrated case, IHC will
track the time it took to reach a resolution and compare
that to the litigation time frame, Hammond says. The
company will also “make our most reasonable best esti-
mate” of what the case would have cost had it gone to liti-
gation and a jury verdict. The goal will be to evaluate
“whether it really is saving us costs.”
   Some legal and long term care experts remain skeptical
about the potential for arbitration to serve as a quick fix
for the medical malpractice crisis, saying it may mitigate
costs over time if coupled with a reduction in jury
awards.
   Tom Metzloff, professor of law at Duke University Law
School, says arbitration can make dispute resolution
“more timely and fairer.” It may also take the bite out of
high-end awards, but at the same time it may generate
more claims because the process is easier to access than
the courts, he adds. ■

LYNN WAGNER is a freelance writer based in Shepherdstown,
W.Va.
                                                                Provider • August 2004 29

								
To top