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With the enactment of Senate Bill 138 by the Utah Legislature this year, a health care provider now can deny care (except emergency department care) to a patient who refuses to sign an
agreement to submit future medical malpractice claims to mandatory binding arbitration before a panel of three arbitrators. This article discusses issues concerning the new law.
Arbitration is an adversarial, evidentiary process (that is somewhat less formal than a bench trial) in which parties submit a dispute to decision by one arbitrator or a panel of three
arbitrators. Typically parties agree in a signed, written "arbitration agreement" that a future dispute between them will be arbitrated. If the parties must submit their dispute
to arbitration, the process is "mandatory." If the parties must accept the arbitrator's decision as final, the process is "binding."
Arbitration historically
was designed to provide a private dispute resolution process to resolve commercial disputes between businesses (having more or less equal bargaining power) which negotiated and agreed in
a signed, written transactional document to submit future disputes to a binding decision by arbitrators who have expertise in the subject matter of the parties' dispute. Another benefit
to businesses is that arbitration awards are not easily overturned and tend to be final. For example, Utah Code Ann. 78-31a-124 provides that an award can be vacated only if it was
procured by corruption, fraud, or other undue means; there was evident partiality, corruption, or misconduct by an arbitrator; an arbitrator refused to properly postpone a hearing, failed
to consider material evidence, or substantially prejudiced the rights of a party; an arbitrator exceeded his or her authority; or there was no agreement to arbitrate.
In recent
years, arbitration has been extended to employment and consumer disputes. In many of these situations, a mandatory binding arbitration clause is contained in a standard-form,
non-negotiable agreement prepared by the party with greater bargaining power. These take-it-or-leave-it agreements between parties of unequal bargaining power are "adhesion
contracts" and they are generally enforceable. For example, many bank credit card agreements contain a mandatory binding arbitration clause, as do many insurance policies (e.g., the
uninsured and under-insured motorist provisions of auto insurance policies). In circumstances of extreme unfairness, courts may refuse to enforce adhesion contracts, either because of
procedural abuses that occurred when the contract was formed ("procedural unconscionability") or because of unduly harsh or grossly unfair terms in the contract itself
("substantive unconscionability"). In Sosa v. Paulos, 924 P.2d 357 (1996), the Utah Supreme Court said that arbitration agreements are favored in Utah and are enforceable if they meet standards applicable to all contracts; unconscionable agreements are not enforceable; and whether a contract is unconscionable is a question of law for a court to decide.
Mandatory binding arbitration agreements are used throughout the medical field. Professional services contracts between hospitals and physicians often contain mandatory binding
arbitration clauses. Many health insurance companies require panel physicians and insured patients to submit payment and coverage disputes to binding arbitration. More and more
physicians, hospitals, and HMOs are requiring patients to sign arbitration agreements to submit medical malpractice claims to binding arbitration. In California, for example, the Kaiser
Permanente system has required patients for the past 20 years to submit such claims to binding arbitration.
In 1998 the Utah Medical Insurance Association (UMIA) began developing a
program of binding arbitration for its insured physicians to use to resolve physician/patient disputes (except fee disputes). Intermountain Health Care is considering implementing a
similar program for its physicians and patients. According to the Utah Medical Association, "the primary benefit of arbitration for physicians is that a panel of experts will hear
and decide a dispute rather than a jury. This won't reduce legitimate claims against physicians, but it should take the emotions out of decisions of fault and the awarding of damages.
This will result, we believe, in greater predictability in malpractice cases . . ."
In 1999 the Utah Legislature enacted Utah Code Ann. 78-14-17 and specified the
circumstances in which a health care provider and a patient can enter into a binding arbitration agreement. In 2003 the Utah Legislature amended this statute and authorized a health care
provider to refuse care to a patient who does not agree to binding arbitration.
Utah Code Ann.78-14-17 requires that the patient must be given, in writing and by verbal
explanation, the following information:
- patient claims must be arbitrated instead of decided by a judge or jury;
- the manner in which parties select arbitrators and an explanation of their role;
- the patient's responsibility, if any, for arbitration-related costs;
- the right of the patient to decline the agreement and still receive emergency care;
- the right of the patient to have questions answered about the arbitration agreement;
- the right of the patient to rescind the agreement within 30 days after signing it; and
- automatic renewal of the agreement each year unless it is cancelled in writing.
Utah Code Ann. 78-14-17 also requires the written arbitration agreement to provide that:
- the patient selects one arbitrator; and the physician selects one arbitrator;
- the patient and physician jointly select the third (neutral) arbitrator;
- the neutral arbitrator must be on a list approved by the state or federal courts in Utah;
- the patient and physician must agree to waive a pre-litigation hearing;
- the patient may cancel the agreement within 30 days after signing it; and
- the agreement is for one year and will be automatically renewed each year unless the agreement is canceled in writing by the patient or physician before the renewal date.
If a physician has a practice that includes both surgical and medical patients, the physician could require only the surgical patients to sign an arbitration agreement. The arbitration
agreement also may be drafted to cover not only the physician who provides care, but also the physician's group or clinic, employees, agents, partners, associates, association,
corporation, or partnership.
Theoretically, arbitration of medical malpractice claims can be cheaper, faster, less stressful, and more predictable than litigation because:
- arbitration tends to discourage the filing of frivolous claims;
- arbitration is private, whereas litigation is public and open to the media;
- arbitration proceedings (from start to finish) usually take less time than litigation;
- there is less discovery (e.g., fewer depositions) in arbitration than in litigation;
- there is less motion practice (e.g., few motions for summary judgment) in arbitration;
- it is easier to bifurcate deciding liability and damages issues in arbitration;
- an arbitration hearing tends to be shorter than a jury trial of the same dispute;
- arbitration tends to be less stressful and less formal than a jury trial;
- the arbitrators tend to have experience or expertise in the subject matter of the dispute;
- arbitrators are less likely to be swayed by sympathy or prejudice than are jurors;
- arbitration avoids or restrains the "roll the dice" unpredictability of jury verdicts; and
- it is more difficult to appeal an arbitration award than it is to appeal a jury verdict.
One Utah attorney, Paul S. Felt, has served as an arbitrator on several medical malpractice arbitration panels. Mr. Felt said that in the cases in which he has served the patient selected
a plaintiff's attorney as an arbitrator; the physician selected another physician in the same medical/surgical specialty as an arbitrator; and Mr. Felt was selected by the patient and
physician to be the third arbitrator and to serve as the neutral chair of the panel of arbitrators. Mr. Felt said that the arbitration proceedings concluded more quickly than litigation,
in part because it was not necessary to teach the arbitrators basic facts about medicine (such as what is a vertebra), which must be done in a jury trial. Mr. Felt said that in his
experience all three arbitrators worked hard to understand the malpractice claims and resolve them fairly.
Another Utah attorney, Elliot J. Williams (who is UMIA's legal counsel),
said that already over 50% of UMIA-insured obstetricians and plastic surgeons and nearly 50% of its insured general and orthopedic surgeons require their patients to sign arbitration
agreements. Mr. Williams said that, when arbitration is properly explained, over 95% of patients agree to sign an arbitration agreement. He said the UMIA suggests that the physician's
office staff should tell patients that their doctor is recommending arbitration and wants them to watch a short UMIA-prepared video about arbitration. The staff also should give patients
a UMIA-prepared brochure and arbitration agreement to read, answer any questions, and ask them to sign the arbitration agreement. If a patient refuses to sign it, the UMIA recommends that
the staff should attach the arbitration agreement to the outside of the patient's chart so that the physician can discuss it with the patient. If the patient still refuses to sign the
arbitration agreement, the physician may refuse to provide care (except emergency department care).
Mr. Williams said that there have not yet been many medical malpractice
arbitrations in Utah. He has been involved in nine arbitration proceedings that have gone all the way to an award (which was in favor of the physician in all nine cases), and seven more
which were abandoned by patients after a notice of arbitration was sent to the Utah Division of Occupational and Professional Licensing to cancel the pre-litigation hearings in those
matters. This experience parallels national statistics compiled by the U.S. Department of Health and Human Services: only 1.53% of patients injured by negligence ever file a claim;
between 57% and 70% of filed claims result in no payment to the patient; only 8% to 13% of medical malpractice cases filed in court actually go to trial; and only 1.25% to 1.9% of these
cases filed in court result in an award to the plaintiff.
Consumer rights organizations criticize mandatory binding arbitration of medical malpractice disputes for a variety of
reasons. According to an article entitled "For Patients, Unpleasant Surprises in Arbitration" written by Michelle Andrews and published in The New York Times on March 16, 2003, arbitrators in California often serve on repeat arbitrations on Kaiser Permanente cases, which creates the possibility or appearance of a conflict of interest. Ms. Andrews cites a 2000 report on managed care arbitration that was compiled by the California Research Bureau (a state-financed public policy research group) which found that none of the few arbitrators who awarded patients more than $1 million from April 1999 to March 2000 were selected by health care providers to serve again during that time. She also says that arbitration is not cheap. For example, in California the patient has to share the cost of the arbitrator's time, and rates often are several hundred dollars an hour or more. In addition, according to Ms. Andrews, critics are concerned about the secrecy of arbitration, which prevents the public from learning the facts about medical malpractice and also prevents the creation of public precedents.
In an article entitled "Arbitration Bias in Medical Malpractice" published in the Medical Expert Advisor in its Winter 2003 issue, two trial lawyers write about mandatory binding arbitration of medical malpractice claims in California. Tom Minder (who is a defense attorney in Sacramento) says, "I have found that many times arbitrators render decisions in favor of [patients] when there should have been a defense award. . . . On the other hand, in arbitration, plaintiff's awards tend more often to reflect actual damages rather than what happens sometimes in plaintiff's jury verdicts. This is because arbitrators are less likely to be swayed by sympathy and are more sophisticated about financial issues."
William Campisi (who is a malpractice attorney in Berkeley) agrees in the Medical Expert Advisor article that a patient is more likely to prevail in arbitration but will receive less compensation from an arbitrator than from a jury. Campisi also says, "it is my opinion that most of the alleged benefits of arbitration do not appear to be true. Arbitration of complex claims typically does not produce a faster decision, nor does the arbitration of complex claims generally save money, not when the parties are responsible for the arbitrator's fees of $200 to $400 per hour. But the principal problem with private arbitration concerns how the arbitrator is compensated. When one of the parties provides repeat business to an arbitrator, there may be a problem with bias." He also says, "arbitration protects Kaiser from being penalized for egregious behavior. . . . It is my belief that an arbitrator would never punish Kaiser with punitive damages because that would be that arbitrator's last Kaiser arbitration."
Arbitration in the Kaiser Permanente system is overseen by the Office of Independent Administrator which administers arbitration proceedings in much the same way as does the
American Arbitration Association. According to Mr. Minder, "The parties are provided with a randomly generated list from a large panel of qualified arbitrators along with
comprehensive information about each of the prospective arbitrators. . . . Each party is allowed to strike four names from the list and rank the remaining names, one through 10. The
lowest ranking arbitrator is selected. In addition, each arbitrator is evaluated by the parties at the conclusion of a hearing, including evaluation on the issue of bias. These
evaluations are available to each party before they submit their rankings. Finally, each arbitrator must disclose a list of past cases involving the parties, including the outcome, and is
subject to disqualification following this disclosure."
Although there is no independent administrator in Utah that oversees the arbitrator selection process in medical
malpractice cases, Utah Code Ann. 78-31a-113 requires arbitrators to disclose existing or past relationships with any of the parties, their counsel, representatives, witnesses, or other
arbitrators. Of greater concern is an equal access to justice issue: because the patient must pay the fees of one arbitrator and half the fees of the neutral arbitrator, this substantial
expense may be daunting or prohibitive to indigent patients.
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