Executive Session: Alternative dispute resolution — Using negotiation, mediation and arbitration to reduce legal costs

 

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While most practice executives are experienced negotiators and are very familiar with processes that can lead to a positive deal, most are not practicing attorneys.

At one time or another, every medical group needs to resolve a legal dispute or lawsuit, whether it’s a malpractice claim, a disagreement with a payer, human resources complaint or other contract dispute. The costs of litigation in these areas can be considerable — which is why practice leaders need a good understanding of their options for mediation and arbitration.

Dawn Plested, MBA, JD, FACHE, Esq., spent many years working in a variety of healthcare settings, including federally qualified health centers (FQHCs) and accountable care organizations (ACOs). She is also licensed to practice law in Minnesota. As an MGMA consultant, she is trained in alternative dispute resolution as a mediator and arbitrator who understands what practice leaders face in their day-to-day work and the unique challenges healthcare providers face in the legal realm.

Editor’s note: The following is an abridged Q&A of the podcast discussion.

Q. You've devoted a significant portion of your legal practice to alternative conflict resolution. What are the alternatives a practice can employ to avoid going to court to resolve a dispute?
A. Litigation is generally something people seek to avoid. It's expensive, it's time consuming, it's emotionally draining — and it's pretty unpredictable. Until a judge or jury decides a case, you can never really be certain of an outcome. Alternative dispute resolution, which includes arbitration and mediation, has become increasingly popular. It's an opportunity to resolve the issue at a much lower cost. In a way, that's a lot more satisfactory for the parties participating, in that it is a much more participatory process than litigation tends to be.

Q. How do mediation and arbitration differ as methods of dispute resolution?
A. Both options are going to help you solve a legal issue outside of the traditional court process, but they really use two different methods to get you from A to Z. Mediation is typically a non-binding process, generally conducted with a single mediator who doesn't judge the case, but really focuses on facilitating discussion, and then eventual resolution of the dispute.

By contrast, arbitration replaces the full trial process with multiple people (often three) chosen to serve as judges in your case and whose judgment typically is binding on all parties.

Q. How are those individuals chosen?
A. One popular method is for each party to agree in advance to the terms of the arbitration. Each party typically has an opportunity to choose an arbitrator themselves or an arbitrator of their choice, with the third arbitrator being someone they must agree upon. And that can be drawn from a particular pool or association of arbitrators that is approved by both parties.

Q. When opposing parties fail to negotiate a solution, I often hear that they move directly to litigation, and may not realize the alternatives of mediation and arbitration, which could resolve the dispute at much less cost than a court trial. How should practice leaders progress through these options?
A. Mediation is a really great point to start. It tends to be non-binding, and it's very participatory between the two parties.

In litigation, there is a tendency toward winners and losers. … The beauty of mediation is that you get a say in the outcome and you're an equal player at the table. Having a knowledgeable mediator can help provide some insight into what happens throughout the industry … and can help diffuse some of the emotion that can come from the other side of the table [to] facilitate an open conversation.

If you want to mediate a dispute, the ideal process for that is entering into a pre-mediation contract, which should include the following:

• It should be confidential and non-binding.
• The parties should agree who would conduct the mediation and how the mediator will be paid. The cost is typically split between two parties.
• The parties should agree on the length of mediation. Most mediation is scheduled for either a half day or a full day (although if it’s a very complex topic, it can go longer than that).
• The parties should agree to mediate in good faith until either party reasonably determines that it's pointless to continue.

If they can't reach an agreement, the mediation will result in an impasse, and at that point, you can really go to the next level: arbitration. Arbitration is essentially entering into another contract, and the results of an arbitration are final. So there's a lot less control than a mediation, and arbitration has much more rigidity in its final judgment. But it does differ from litigation in that it can be very specialized; you have more control in choosing your arbitrators. And they typically have industry knowledge and expertise that really help facilitate that process as well.

Q. How do you choose mediators and arbitrators, and how would those choices differ? And would someone who serves as a mediator also serve as an arbitrator?
A. Typically speaking with arbitration, it is often three arbitrators who comprise that panel, but it's not always. That's just a very fair and balanced approach because it provides a neutral third. That certainly gives a feeling of balance to the panel.

It can be difficult, from a practice management perspective, to find somebody who's really very familiar with practice management. A lot of mediators and arbitrators have extensive experience with the government and with payers who tend to use mediators and arbitrators rather liberally. It is possible to find a neutral third party who really can reflect the needs of the individual practice or provider, but you do have to do a little due diligence to find somebody who's going to have enough industry knowledge to really give you that perspective.

The other question that you asked is, would the individual who served as a mediator then in turn serve as an arbitrator? The shorter answer to that is “no.” If both parties were comfortable with that and chose that, it would be a possible solution. But you typically see fresh neutrals or new individuals operating in arbitration.

Q. Many payers put mandatory arbitration clauses in contracts. What should a practice leader do when negotiating a contract with a payer or other organization to ensure that they're properly represented in the arbitration?
A. The first and foremost thing anyone entering into a contract really needs to understand about a mediation or arbitration clause is that it exists: Understand what it means within your contract and what that gives you in terms of paths forward.

Mediation is almost always a positive thing. It's non-binding, and it's an opportunity for both parties to reach consensus with the help of a third party. There's very little not to recommend having that in your contract.

What you see far more commonly, however, is the mandatory arbitration clause. I think that there are a lot of positives to arbitration, but I do think one needs to proceed a little more cautiously when you see an arbitration clause. It's very important to advocate for your ability to choose one arbitrator. Often the choice of arbitration or the choice of the neutrals is left to the party who devises the contract. It's very important that some of that is made a little more balanced or fair.

Other issues include payment — who is paying — and how it will be conducted, where it will occur, and what your recourse is if you are unhappy with arbitration. … Arbitration clauses should be carefully reviewed, and I would absolutely recommend legal counsel to review your individual options on each contract.

Q. How often do you see “boilerplate” arbitration clauses in contracts from a payer? Can these be adjusted?
A. You see arbitration clauses all the time. Payers will often present contracts and say, “everyone signs, these, we don't make adjustments.” I can tell you payers make adjustments to their contracts all the time. There is negotiation available on individual payer contracts.

Ensure that the arbitration clause is something that you can both live with. I don't think arbitration is anything to be scared of, and I don't think that there should be an attempt to necessarily strike arbitration.

Q. While mediation and arbitration are usually less expensive than a court trial, they're not inexpensive. What can you suggest a practice leader do to minimize the cost of conflict resolution?
A. One of the ways that you can really control those costs is around timing. Litigation tends to be drawn out in terms of just the length of time it takes to work through a process. An HR dispute and termination can be months of letters back and forth between the attorneys before you even really get into settlement negotiations and/or discussion around trial preparation, depositions and so forth. That's costly in terms of emotional and mental headspace for a practice administrator or provider. It's costly in terms of just pure time outside of the day-to-day work and operations. Of course, it's costly from paying your lawyers.

Mediation gives you a lot more control, in that it tends to speed up that time — you can get into mediation or arbitration much more quickly than you can bring something to court.

Mediation is typically done in half-day or one-day segments. The goal is to really put your interests on the table and come to some sort of consensus in that timeframe. That is a very condensed period. You will know in advance what the cost of your mediator/arbitrator is. You can walk in, essentially knowing what it is that you're willing to settle for [and] what you're willing to compromise on.

Q. There’s a popular belief that court litigation favors the party with the deepest pockets, either from devoting more resources to a case or the ability to delay judgments, waiting for the other party to drop a case. Does this happen with mediation and arbitration?
A. One of the wonderful things about mediation and arbitration is it can really level the playing field. That comes back to the value of having somebody who is trained in mediation and arbitration, who really understands the industry. Judges and juries don't, that's not their profession. Typically speaking, they're coming at it from a lay person's perspective, which means that they're heavily dependent on expert testimony, expert witnesses and are inclined to give some credence to that.

By the same token, the appeals to emotion can be very strong in those environments. You can level and reduce the disparity in that bargaining position by having that neutral party who can help balance the playing field.

You asked if one side can refuse to participate. In the case of mediation, it is something that if you've entered into a pre-mediation contract, both parties essentially agreed to it. That’s a contract, and if you breach that contract, the opposing side has a legitimate claim against you. Certainly, the same is true with an arbitration clause: If you've signed and agreed to arbitration, you are contracted to participate.

Mediation and arbitration operate under the perspective that both parties will be performing in good faith. That doesn't always happen, but the expectation is that if they're going to engage in alternative dispute resolution, they will be negotiating in good faith.

Should you come to agreement in mediation, that mediation discussion really gets drafted into a contract, it gets memorialized, summarized and sent to both parties, and both parties essentially enter a new contract which obligates them to the agreement that they made in mediation.

The very nature of arbitration is binding. So you are essentially agreeing that the arbitrators will make that final decision, and you are obligated to it.

Q. Are there any other suggestions for what a practice leader can do to reduce these costs?
A. An ounce of prevention is worth a pound of care. If you can engage legal counsel upfront and early on in your business ventures in practice, you're going to avoid a lot of pitfalls that can become very costly and very expensive down the road. For example, engage upfront in a compliance and risk management program, get your ducks in a row, get your compliance manual and your training of your staff in place early on. It saves a world of hurt and a world of cost down the road.