The role of health care ADR in reducing legal fees.

French philosopher Voltaire so aptly observed more than 200 years ago, "I was ruined but twice, once when I lost a lawsuit and once when I won one." Litigation often results in two losers. After years of being embroiled in a bitter lawsuit, the "winner" is often dissatisfied with the judgment, especially when 55-60 percent of the award is chalked up to court costs and legal fees.

Unfortunately, conflict is a growth industry, particularly in an increasingly complex health care system. Today, health care management and delivery often require the collaborative efforts of many individuals with differing tasks, objectives, and responsibilities. Quite frequently, crucial decisions must be made fast. It is not surprising that these decisions may result in conflict. Turf wars, group practice conflicts, bioethical disputes, credentialing issues, medical staff strife, denial of coverage conflicts, and malpractice claims can erupt as the medical, political, insurance, and business worlds draw closer. Trouble erupts, clashes occur, and new problems arise. One trend has become clear: Primary care physicians are being sued more than ever before, and their premiums are rising faster than those of specialists. The problem may be attributed to their being made gatekeepers by managed care plans.

Another factor is erosion of the doctor-patient relationship in many HMO settings. The lack of loyalty and rapport makes it easier for the patient to file suit.[1] "The physician who complies without protest with the limitations imposed by a third-party payer, when his medical judgment dictates otherwise, cannot avoid ultimate responsibility for his patient's care."[2] The challenge is how to manage the conflicts so that the needs and interests of all parties can be met. Often the techniques and processes of alternative dispute resolution (ADR) can be successfully used in resolving these sorts of conflicts quickly, cheaply, and with greater satisfaction for all parties.

The methods of dispute resolution are often described as a continuum: avoidance, negotiation, mediation, arbitration, litigation, and unilateral power play. The extremes represent total loss of control by one party. In avoidance, one party simply ignores the dispute. In a unilateral power play, one party takes control.[3] Examples of this include patient violence against a physician, dismissal of an employee, or resignation from a partnership. As one moves to the right along the continuum, control of process and outcome is lost, and financial and emotional costs increase.

Litigation

Litigation is the most common and most costly method of settling health care disputes. The U.S. legal system was not designed to solve personal problems or serve justice. Its goal is perhaps loftier and certainly more abstract: to find the truth. As every first-year law student learns, "from the clash of able adversaries (lawyers), the truth shall emerge.[14] Unfortunately, finding the truth does not necessarily solve problems or settle disputes. The administrative costs of litigation are high: attorneys' fees for both sides, court costs, expert witness fees, lost income to both parties. Litigation often generates as much hostility than the original dispute. The emotional cost of litigation is also high. Both parties must attend depositions, hearings, and a trial.

A medical malpractice suit is often viewed as extreme professional criticism and a threat to financial security. This stress can often result in depression, anxiety disorders, even suicide.[5] To a group practice, an antitrust suit or breach-of-contract suit can pit partners against one another and divide the group. Litigation is a lengthy process that must be endured for years. In medical malpractice cases, the average time from cause to resolution is five years, if the case settles, seven years if the case goes to trial.[6] Because of the highly adversarial nature of litigation, outcome satisfaction is very low. The process produces a winner and a loser, and the parties have minimal control or participation in the process. If the case is settled prior to trial, it is usually through the attorneys, and only after much time, energy, and expense. Even if the case goes to trial, litigation leaves very little room for parties to express themselves. The process tends to destroy relationships, and dissatisfaction with the outcome often leads to lengthy appeals.[7]

Negotiation

At the other end of the dispute resolution spectrum is negotiation, the process in which the parties directly discuss their differences to settle a dispute or manage conflict. Negotiation constantly takes place between physicians and patients, other health care providers, insurers, administrators, and partners. Malpractice claims often arise because of a breakdown in patient/physician negotiation or communication. The greatest cost savings result when disputes are resolved at the negotiation stage. Unfortunately, most health care providers are not trained negotiators, so often both parties utilize rigid positional bargaining. In addition, one or both parties may feel uncomfortable with a direct negotiation process. Even an administrator who is highly skilled in contract negotiations may feel uncomfortable facilitating negotiations in which emotional issues heavily cloud the parties' true interests. Many physicians may be bothered by their administrator taking a neutral role.

Mediation

Mediation adds a neutral third party who is skilled in negotiation and facilitation to allow the parties to negotiate face-to-face, discuss their differences, explore their interests, and come to solutions in a flexible, yet structured forum. Mediation is by definition an extension of the negotiation process. A mediator is a mutually acceptable, impartial, and neutral third party with no decision-making power. A mediator assists disputing parties in voluntarily reaching a mutually acceptable resolution. Mediation has the advantage of not being bound by rules of procedure or substantive law, or by rules of evidence. With the assistance of a mediator, disputants can consider a comprehensive mix of their needs and interests.[8] Medical disputes often carry a large emotional component, and patients or partners may desire something other than (or in addition to) monetary compensation. Patients may desire an explanation or more information, an opportunity to vent their frustrations, or an apology. Studies on the motives of malpractice plaintiffs have shown that 40 percent felt humiliated by their experiences with physicians, over 50 percent felt betrayed by their doctors, over 80 percent felt embittered b doctors' responses to their complaints/questions, and over 90 percent were very angry at their physicians. In addition, 24 percent felt physician were dishonest or misled them, 20 percent felt "court was the only way to find out what happened," and 19 percent wanted to punish the doctors. When asked what could have been done to prevent litigation, 35 percent of plaintiff/patients responded "apologize", or offer further explanations," and 25 percent responded "correct the error." By contrast, only 16 percent wanted compensation.[9] Mediation affords an inexpensive method of early resolution and an opportunity to explain an action.

Because mediation does not emphasize winning or assign blame, it allows the disputants to strive for a workable solution.[7] Through this process of integrative negotiation and discussion, parties reach a mutually satistfactory solution more than 80 percent of the time. When a solution is agreed upon, it is usually legally binding. Because the process is both participatory and conciliatory, relationship can usually continue and are sometimes strengthened. A growing number of insurance carriers now offer mediation as a method for resolving insurance claims.[3]

Mediation is usually conducted by a jointly agreed upon mediator. However, in medical malpractice disputes, a co-mediators oversee the process. One usually has a medical background, one a legal or judicial background.

Arbitration

In cases where mediation is not entirely successful, the parties may proceed with arbitration. Binding arbitration is a private form of adjudication; the neutral third party actually makes a decision for the disputants. Arbitration has been found to be very successful in situations in which both disputants desire a timely decision and are willing to abide by the potentially worst outcome. If a case has been through mediation, some of the issues will have already been resolved, leaving only contentious aspects to be arbitrated. Similarly, if money is the issue, the case may be submitted to "arbitration with limits." An impartial third arty will render judgment somewhere between the high and low limits of the two parties.

While arbitration is usually more costly d more time-consuming than mediation, it still has many advantages over litigation. Arbitration is much quicker than litigation, resulting in lower attorney fees, less time from work and family, and less lost income and emotional stress. The costs of medical experts can be drastically reduced, as arbitrators can accept written expert reports without requiring live testimony, or the arbitrator can appoint a neutral expert to testify in complex cases. Decisions in binding arbitration cannot be appealed, which eliminates the threat of years of conflict after a decision. Arbitration is private and confidential, whereas litigation is public. Arbitration is not bound by rules of evidence and is more participatory, allowing both parties to vent their frustrations and express themselves.

Various applications of ADR are currently being used or tested in several types of health care disputes in the U.S. and Canada. Because of the tremendous cost of defensive medicine to society, which is conservatively estimated at $15 billion annually, several efforts are under way to evaluate ADR in resolving medical malpractice claims.[10]

Physician Resistance

A common concern about mediating malpractice claims physician resistance due to the reporting requirements of the National Practitioner Data Bank (NPDB). Data collected by the NPDB between 1991 and 1994 show that only 3 percent of reports were due to a court judgment, while 97 percent were due to settlement or payment prior to litigation.[1] With the majority of reports due to settlement, it should not matter to a physician whether they are generated due to an attorney-negotiated settlement or a mediated agreement early in the conflict. In addition, payments made by a hospital are not reportable. If a case is referred to mediation through a clause in the hospital admission contract, any settlement may be viewed as "on behalf of the hospital" and thus unreportable. NPDB defines "a medical malpractice action or claim" as a written complaint or claim; payments made on an oral claim need not be reported.[11] So, it is possible that early identification of conflicts and referral to mediation may be done prior to any written claim. Finally, the NPDB is considering a proposal to exempt mediated settlements from required reporting. I

Enterprise Liability

In situations in which enterprise liability exists, the responsibility and liability for medical malpractice shifts from the individual physician to the HMO and provides immunity to individual providers. In these situations, doctors become fact witnesses; the HMO becomes legally accountable for the actions of its physicians. The current existence of enterprise liability has been upheld by courts. As more physicians become salaried employees vs. independent contractors, vicarious liability under respondent superior increases. In addition, increased use of practice guidelines and increased participation of utilization review personnel in patient care decisions creates direct liability for the HMO.[12] The vicarious liability exposure of an HMO varies with the specific HMO/MD relationship; respondent superior is strongest in the case of salaried employees, weaker in capitation arrangements, and weakest in fee-for-service situations.[12] As horizontal and vertical integration expands, enterprise liability increases, but if enterprise liability exists, the threat of NPDB reports becomes moot.

Some Case Histories

ADR is demonstrating tremendous success in resolving medical malpractice claims. In Austin, Tex., the majority of malpractice claims are mediated at a success rate of 80 percent. In Oakland, Calif, Kaiser Permanente's health plan has used voluntary binding arbitration of medical malpractice claims and has seen resolution time drop by almost half, and defense costs drop by 60 percent. Despite insurer concerns, Kaiser's statistics also demonstrated a 63 percent decrease in claims frequency.[13]

Duke University Medical Center recently completed a pilot program in which an informative booklet was provided to patients prior to admission. At the time of admission, patients were asked to sign an agreement requiring mediation and binding arbitration as the sole means of pursuing a claim against the university or its physicians. Participation was voluntary, et about 34 percent of patients signed the agreements. After evaluation of the pilot program, Duke University elected to offer an ADR clause to all patients being admitted. Pilot programs in voluntary or court-ordered mediation are now under way in St. Louis, Boston, and New York. Several large hospitals in Texas and Canada include mandatory ADR clauses in hospital admission contracts, and there have been no reports of patient resistance. The experiences have been so successful that ADR was the only common element of all health care reform proposals in the U.S. House and Senate last year.

The International Association of Defense Counsel (IADC) has launched an ambitious initiative to establish a presuit mediation program that will institutionalize on a national basis the use of presuit mediation to resolve civil claims. IADC's program is signatory-based. Insurance companies and corporations sign a commitment to have an authorized claims representative or attorney attend a mediation session with the claimant and the claimant's counsel before a suit is filed. The signatory company will pay three-quarters of the mediation cost. In San Antonio, IADC's pilot program demonstrated that it works to resolve claims in 85 percent of cases mediated before lawsuits are filed.[14]

While the application of mediation and arbitration to medical malpractice claims is of paramount importance, ADR offers more. The College of Physicians and Surgeons of Toronto, Ontario, has successfully used mediation in more than 100 cases of complaints against physicians. Similar trial projects are beginning in Edmonton, Alberta, Canada, and in Massachusetts. In these cases, there are three disputing parties: the patient/complainant, the physician, and the licensing/disciplinary board. The advantages to patients include the opportunity to be heard and to vent their frustrations. The advantages to the physician include decreased costs and an opportunity to confront the complaintant and to explain an action. The advantages to the licensing board include greater satisfaction with the outcome from all parties and faster complaint resolution.

A pilot program at Montefiore Medical Center, New York, N.Y., used bioethicists trained in mediation to resolve bioethical disputes, such as DNR issues, contested abortions, and confidentiality issues. The bioethicists, patients and providers reported much higher levels of satisfaction with the outcome and the process compared to control groups. In smaller hospitals without staff bioethicists, the ethics committee can be trained in the principles of interest-based negotiation and conflict management.

Medical staff disputes, economic credentialing conflicts, insurer relations issues, and denial of coverage disputes are also being successfully mediated. Professional relations and departmental staff disputes, partnership and employee conflicts, and organizational disputes within clinics, HMOS, and large group practices -have all been found amenable to ADR.

Intervention

The first step in implementing a system of ADR for health care disputes is prevention. The earlier a dispute can be resolved, the simpler, cheaper, and faster for all involved. Education and training of physicians and office staff helps. A formal dispute resolution system may be incorporated into the organizational structure of a hospital, HMO, clinic, or group practice that includes training, policies, triggering mechanisms to identify potential conflicts and backup support in and outside the organization. The design of a dispute resolution system for a health care organization incorporates elements of organizational architecture, organizational design, risk management, human resource management, and dispute resolution processes. Ideally, the scope of the system will be broad enough to include internal and external disputes. A team of staff change agents is formed, and an intervention plan is developed. A thorough assessment is conducted to analyze systemic problems and develop diagnoses. The current system is outlined, then redesigned or recreated. The new system is tested through analysis by the change team, and an implementation strategy is developed. Once implemented, mechanisms for ongoing supervision, monitoring, feedback, and quality control are provided. Some form of prelitigation methodology is usually included, often a contract clause that requires disputes to be settled through mediation or binding arbitration. These clauses are currently being used in hospital admission contracts, HMO/insurer enrollment contracts, physician-patient contracts, and employer-employee contracts. Unless the agreement is unilateral (i.e., patient's claims are submitted to arbitration, but the provider reserves the right to sue for monies owed), the courts will compel mediation or arbitration.[12] A free sample of a contract clause has been developed by the Institute for Medical Conflict Management in Tucson, Ariz.

A dispute may be brought into mediation by either party, or either party's attorney. One disputant contacts a mediator or ADR organization, who then contacts the other party to discuss the mediation option. The process is explained, questions are answered, and the representative seeks a commitment to at least one introductory mediation session. Despite frequent initial resistance, more than 70 percent of the time, the second party agrees. An insurer may also refer the case to mediation, a common practice for many personal injury insurers.

In Austin, where the majority of medical malpractice cases are mediated, approximately 60 percent of voluntarily mediated cases are referred to mediation by the plaintiff's attorney and 40 percent by the defense attorney or defense insurer. Mediation may also be court-mandated in certain states. The success rate of mediation is not significantly affected by whether it is voluntary or court-ordered.

About Mediators and Arbitrators

The issue of who is qualified to serve as a mediator or arbitrator is still contentious. There are no national licensing or credentialing boards for ADR professionals. While states vary in their requirements, most require a health care background, as well as formal training in negotiation, mediation, facilitation, arbitration, dispute resolution systems design, and medicolegal issues. In selecting a health care dispute resolver, consider background, training, experiences, and credentials. Membership in the American Arbitration Association, National Health Lawyers Association, CPR Institute, or National Institute of Dispute Resolution lends credibility. Graduates of Boston University's Health Care Negotiation and Conflict Resolution program are very well-respected. The Institute for Medical Conflict Management, in Tucson, provides a full range of dispute resolution and conflict management services nationwide. The design of comprehensive dispute resolution systems for hospitals, HMOs, clinics, and group practices is a specialty of both IMCM and Chorda Conflict Management, Austin.

Mediators and arbitrators are usually paid hourly or daily, at a rate similar to attorneys. In medical malpractice mediation, sessions average seven hours. The cost of mediation is usually significantly less than a contested hearing, often similar in cost to a single deposition or court appearance. Arbitration hearings usually last two to four days in medical malpractice cases. Contract disputes and employer/employee conflicts are usually resolved in less time. Partnership and group practice disputes span the full time range, while complex multiparty, multi-interest issues may take days or weeks. Unless otherwise decided, the two parties (or their insurers) split the costs.

Recent developments in the health care industry have reduced physician control; decision leverage has shifted to insurers, while capitation payments shift risk from insurers to providers. When consumer choice and physician autonomy are diminished, the balance of power within organizations shifts. Lack of control over process is a factor in physician dissatisfaction. In health care-related disputes, physicians have lost a great deal of control over the process and the result of the dispute resolution process and have turned to litigation. Once a lawsuit is threatened or filed, the insurer and attorneys usually control the process. The result is also controlled by the insurer and attorneys, or ultimately by a judge or jury.

By using ADR via a form of prelitigation methodology in a patient-physician care contract, a hospital admission contract, or an HMO enrollment contract, physicians can regain some control of the dispute process. By using interest-based negotiation and mediation, the physician can become an active participant in the process. The use of ADR to resolve health care disputes is one change that can be made within the medical community, without being dependent on federal or state tort reform or other legislative actions.

References

[1.] Crane, M. "The Malpractice Dragon Wasn't Dead( Just Asleep." Medical Economics 71(20):52-9, Oct. 24, 1994. [2.] Wickline v. the State of California. 142 CAL.app.3d. 1645, 228 CAL. RPTR. 661, 1986. [3.] Slaikeu, K. "Designing Dispute Resolution Systems in the Health Care Industry." Negotiation Journal 5:(4) 395-6, April 1989. [4.] Lovenheim, P. Mediate, Don't Litigate. New York, N.Y.: McGraw-hill, Inc., 1989. [5.] Miller, F. "Medical Malpractice Litigation: Do the British Have a Better Remedy?" American Journal of Law and Medicine 11(4):433-463, 1986. [6.] Hatlie, M. "National Practitioner Data Bank: Implications for Reaching Settlement in Medical Malpractice Cases." 22nd Annual SPIDR Conference, Dallas, Tex., 1994. [7.] Reeves, J. "ADR Relieves Pain of Health Care Disputes." Dispute Resolution Journal 49(3):14-21, Sept. 1994. [8.] Moore, C. The Mediation Process. San Francisco, Calif: Jossey-Bass, 1986. [9.] Dauer, E. "National Practitioner Data Bank: Implications for Reaching Settlement in Medical Malpractice Cases." 22nd Annual SPIDR Conference, Dallas, 1994 [10.] Quayle, D. "Less Litigation, More Justice." Wall Street Journal, Aug. 14, 199 1. [11.] Croft, T. "National Practitioner Data Bank: Implications for Reaching Settlement in Medical Malpractice Cases." 22nd Annual SPIDR Conference, Dallas, 1994. [12.] Leone, A. "Is ADR the Rx for Malpractice?" Dispute Resolution Journal 49(3):4-14, Sept. 1994. [13.] "Arbitration Seldom Used in Medical Malpractice Cases, GAO Discovers." Daily Report for Executives (Bureau of National Affairs). Dec. 9, 1992. [14.] National Institute for Dispute Resolution New. 1(6): Sept. 1994.