Bypassing Litigation in the New Healthcare Environment

Abraham Lincoln once said, "Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often the real loser - in fees, expenses, and waste of time."

Written more than 150 years ago, the words of the former U.S. president ring true today, especially given a healthcare industry experiencing great change following the Affordable Care Act. Michelle M. Skipper, vice president of the American Arbitration Association, said from the "vagueness" of physician-hospital collaboration through accountable care organizations (ACOs) to heavy reliance on EHR vendors to deliver promises tied to "meaningful use" incentives to practices, one thing is certain: disputes will arise.

"It is not a matter of how many or when, but disputes will happen due to healthcare reform," she told attendees of the 2010 MGMA annual conference in New Orleans on Tuesday. "There needs to be another mechanism to resolve these disputes, however, besides litigation."

Skipper discussed the principals of alternative dispute resolution (ADR), which takes such disputes outside of the courtroom. The result, she noted, can save time by avoiding lengthy court dockets amid budget cuts at both the local and state levels, money for legal representation, and perhaps most importantly, reputation by not "airing your dirty laundry out in front of the whole world."

"The first step in resolving disputes is to create an atmosphere which is conducive to resolution not rancor," Skipper said.

In her session, Skipper outlined three key aspects of ADR: negotiation, mediation, and arbitration.

Negotiation involves parties sitting together to communicate differences to one another in an effort to reach resolution. Mediation involves the use of a third party to reach a mutually agreed upon outcome and arbitration calls for a subject expert to hear both sides and make a final ruling, or as Skipper called it, "presenting one winner and one loser."

Both mediation and arbitration involve someone with set knowledge of the issue at hand, she said. In healthcare, it can be important to have someone who knows what a CPT code is or what relative value units (RVUs) calculate, versus an attorney explaining this to a jury or judge.
But while promoting the upside of ADR, Skipper also noted that its elements do have limitations. For example, mediation cannot work without both sides agreeing to cooperate and is not guaranteed to end in a resolution. American Arbitrator Association data indicates successful mutual resolutions 75 percent to 80 percent of the time.

Arbitration also comes with its pros and cons, Skipper said. Limitations include costs that can be substantial the more complex the case, and final awards by an arbitrator that are not often accompanied by written opinions or explanations of their decision. It is also difficult to appeal an arbitration decision, barring some action by the courts if the proceedings are found to be fraudulent, for example.

But the main point, she said, is that ADR puts the parties in control, not before the mercy of a court, judge, or jury. With that in mind, Skipper advocated that practices, hospitals, and other healthcare partners include ADR clauses in their contracts for employees, vendors, and other partners. These clauses should include when negotiations, mediation, and arbitration would take place if a dispute arises, clearly explaining the process up-front.

"In my experience, folks without [these methods] spelled out in a contract will not go to arbitration - they will sue each other and go right to litigation," she said.

No matter if it is a payer, a vendor, a consultant, or another possible partner in healthcare, the Affordable Care Act includes a great deal of partnerships and agreements, so if one relationship fails, airing the public details in a courtroom could potentially hurt future connections, Skipper said.

"Given today's world following healthcare reform," she said, "it is important to preserve relationships as you move forward."