UO > Feature > Keep it Out of the Courtroom

Two years ago, obstetrician Catherine Wheeler of Salt Lake City, Utah, started asking her patients to sign agreements which stipulated that malpractice disputes will go to arbitration for settlement. In these agreements, an arbitrator or panel of arbitrators not connected to a specific case hears arguments from both sides and arrives at a decision that both parties must accept.

Wheeler has not actually been through the arbitration process, but she says these agreements are good for both physicians and patients. Arbitration provides parties involved in a dispute with an economic, efficient, confidential, and neutral forum to resolve their dispute, she says. In addition, parties in the arbitration process can bypass crowded court dockets and schedule a hearing at their convenience.

“Arbitration also cuts down on frivolous lawsuits and allows patients who are truly injured to receive the majority of the award, which is rightly theirs,” she adds.

The process of arbitration also saves time spent during the hearing and pre-hearing motions, says Gordon Ownby, general counsel for the Cooperative of American Physicians, Inc.-Mutual Protection Trust (CAP-MPT), a California-based medical professional liability protection provider run by physicians. In addition, medical malpractice trials can last from one to four weeks, whereas arbitration will rarely last more than three to five days, Ownby says.


	Catherine Wheeler, MD, of Salt Lake City has been asking her patients to sign arbitration agreements for malpractice disputes. “Initially, some of my patients are put off by the agreement, but once I explain what is involved in arbitration, most readily accept it,” she says. ©2006 / joshua waldron

Wheeler is not alone in asking patients to sign arbitration agreements. Although statistics on the use of arbitration are not available, health-care experts believe more physicians, especially obstetricians and neurosurgeons, are beginning to use arbitration as a way to settle malpractice claims. Statistics from the American College of Obstetrics and Gynecology indicate approximately 76 percent of ACOG fellows have been sued at least once. What’s more, obstetricians, on average, experience 2.6 liability claims during their careers.

“These concerns over lawsuits as well as escalating insurance premiums have led some excellent physicians to stop practicing medicine,” says Wheeler. For example, one in seven ACOG fellows no longer practices obstetrics, she says. In addition, the number of medical students choosing to enter ob/gyn residency has declined. In 2004, only 65 percent of residency slots were filled by U.S. medical school seniors, compared with 86 percent a decade earlier.

Skyrocketing malpractice premiums, particularly for ob/gyns and surgeons, are believed to be one of the reasons why some physicians and insurers are turning to arbitration. Medical malpractice insurance premiums continue to rise, especially in states that have taken no steps to make their legal systems function better.

Arbitration is not new and has been recognized as a method of settling disputes for years in many industries. Those who have experience with pre-injury voluntary arbitration agreements say the process is beginning to have an impact on malpractice insurance rates.

Utah is one state where arbitration agreements are being used to a significant degree by physicians over the past two years. “The year 2006 will be the first one in a long time that the Utah Medical Insurance Association, a not-for-profit self-insurance company, will not be raising insurance premiums,” says Mark Fotheringham, the vice president of communications and membership for the Utah Medical Association.

“After experiencing premium hikes of 30, 25 and 15 percent in previous years, arbitration has prompted a reduction in the cost of defending against claims, which we are told is the major reason for the premium stability this year,” he says.

The greater the risk of malpractice lawsuits, the greater is the interest in using arbitration in a medical practice. “Neurology, ob/gyn, and surgical specialties are the ones most likely to use arbitration,” Fotheringham says. Even so, the benefits of arbitration are substantial enough that many low-risk practitioners in the state are using the agreements as well.

Utah first passed the medical arbitration law in 2003 and amended it in 2004 to say physicians are free to use arbitration agreements, but that they may not deny care based solely on the failure of a patient to sign the agreement. Cases must be settled within one year, which helps shorten the amount of time it takes to get a judgment. In addition, Utah law prohibits the use of arbitration agreements in emergency rooms and by anesthesiologists as lawmakers thought it unfair to the patient to be presented the agreement just before acutely needed services would be rendered. As a contractual situation, both sides must have an equal opportunity to accept or reject the agreement without undue pressure.

Under Utah law, patients in the state may revoke an arbitration agreement within 10 days after signing it. The agreement remains in force and automatically renews annually unless either party issues a written revocation, which will terminate the agreement on the next anniversary date. “This may seem like a long time if you decide to terminate shortly after the anniversary date has passed, but a patient always has the option of seeking care elsewhere if they don’t want to be treated under the provisions of the agreement. In addition, if both parties mutually agree to terminate the agreement immediately, they can do so,” says Fotheringham.

Existing federal arbitration legislation theoretically should allow any physician to use arbitration in any state, but some states specifically limit or restrict the use of such agreements by physicians. While the federal law should supersede a state law that bans the use of arbitration agreements, the state law would likely have to be challenged in federal court for the federal law to come into play, says Fotheringham.

Despite some state restrictions on the use of arbitration in the health-care field, a number of health insurance plans in a handful of western states are encouraging physicians to use these agreements. A recent Rand Institute for Civil Justice report on the topic found most physicians who asked patients to agree to binding arbitration reported they did so based on the recommendation of their insurer, and one-third said they did so because it was the policy of their physician group.

Arbitration should not be confused with mediation, which involves a process in which a facilitator attempts to help parties solve a dispute by way of settlement. Unlike an arbitrator, a mediator may only make suggestions and has no authority to enforce a decision on the parties.

In California, CAP-MPT requires arbitration agreements of all new ob/gyns and neurosurgeons who are insured by the company. Currently, more than one-half of CAP-MPT’s 9,000 members use arbitration agreements in their practice settings to reduce their risk, says Ownby.

Surgeon and CAP-MPT member William Choctow, who practices in Covina, California, has been using arbitration agreements for about three years. Although he has never been through the arbitration process, he believes asking patients to sign agreements is beneficial to both physicians and patients.

New patients receive the arbitration agreement along with other registration forms, he says. The office manager explains the process to patients and if there are additional questions, he is more than happy to answer them. Most of his patients sign the agreement, he says.

An important benefit is that the transaction costs of arbitration are significantly lower than those associated with a jury trial, says Ownby. “Throughout our 20 years of experience with arbitration, we have consistently saved about one third on our defense costs,” he says. These savings help lower the cost of membership and operating costs for the company, and eventually trickle down to savings for patients as well, he says.

The Doctors Company, a physician-owned medical malpractice liability insurer based in Napa, California with physician clients in all 50 states, makes arbitration materials available to its member physicians, but it does not specifically request that physicians use them.

Kaiser Permanente, one of the state’s largest health insurers, has used arbitration to resolve all legal claims since 1971. Physicians with Kaiser are not staff physicians but are part of the Kaiser group in Northern and Southern California. Under the Kaiser plan, arbitrators are free to award any amount of damages as there is no cap on the size of an arbitration award and patient members are eligible to receive punitive damages. Kaiser makes it a practice to inform all its members that it requires the use of arbitration to resolve disputes.

According to Kaiser, most claims are resolved within 11 months. Even so, the company reports the vast majority of cases are informally resolved before arbitration—some are settled in mediation, others are settled without the intervention of a third party, and still others are decided by way of “summary judgment,” a procedure whereby a neutral arbitrator reads and considers affidavits and declarations and makes a decision without any evidentiary hearings. Still other cases are dismissed.

While there is support for arbitration among some physicians and insurers, the process does have its critics. Attorneys, for example, believe it is inappropriate for citizens to give up their constitutional rights to the country’s court system. In addition, they argue that it is not wise to sign such an agreement prior to a dispute. They also say any flaws in arbitration agreements can lead to further litigation and expense, which physicians are trying to avoid.

In some cases, patients have moved to deem arbitration agreements worthless and then pursued legal action in the courts. In other situations, patients may challenge the decision reached in arbitration, says Geoffrey Anders, an attorney with Health Care Law Associates and a practice management consultant with the Health Care Group, Inc., based in Plymouth Meeting, Pennsylvania. Arbitration may lead to litigating two cases, he says.

These difficulties may stem from how the arbitration agreement is written. It is important that agreements are correctly completed so legal challenges are avoided. The most typical errors found on the agreements include missing dates, failure to include the physicians group name as well as the employed physician’s name on the agreement, and failure of a minor’s legal representative to sign and date the agreement.

If a patient decides she wants to challenge the arbitration agreement, it is possible to bring a petition to compel the use of arbitration to settle the dispute, according to Ownby. “The rate of having those arbitration agreements overturned is extremely low,” he says. In addition, he says in his experience with CAP-MPT, plaintiffs’ attorneys who are experienced in litigating medical malpractice cases are much more likely to agree to arbitration without a court fight than those attorneys who don’t regularly practice in California.

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