Effective Use of Mediation and Arbitration in Health Care ... - Jams

Effective Use of Mediation and Arbitration in Health CareDisputesR. Wayne Thorpe, JAMSVarious dynamics at play in the health care industryare likely to contribute to disputes uniquely suitedfor resolution through mediation and arbitration. Ifthe Patient Protection and Affordable Care Act(PPACA) survives attacks in the courts, continuedconsolidation and reorganization among health careindustry participants will likely occur. Moreover,Congress has significantly enhanced the federalgovernment’s ability to pursue fraud claims, and theU.S. Department of Justice (DOJ) is devoting substantialattention to investigations and prosecutionof criminal and civil cases involving alleged healthcare fraud.Overview of Health Care DisputesThere are many types of significant disputes in thehealth care industry:• Patient safety claims against hospitals,nursing homes, physicians and otherprofessionals, and product liabilityclaims against drug and device manufacturers;• Disputes among members of physiciangroups (or between the “group” and individualphysicians) or between hospitalsand physicians and other staff;• False Claims Act (FCA) and other fraudcases against hospitals, physicians, drugand device manufacturers, pharmacies,suppliers, etc.;• Complex disputes arising from mergersand acquisitions or from costly transactionsinvolving technology and intellectualproperty;• Payment and reimbursement disputesinvolving private and governmentpayors and pharmacies, physicians,hospitals, and patients; and,• Risk management controversies (includinginsurance coverage) involving issuesabout responsibility for patient injuriesand deaths (especially those outside thenorm of “garden variety” med malclaims) and for various commercialclaims, for example relating to paymentdisputes or fraud claims.Dispute Needs and Concerns in the Health CareIndustryMany health care industry disputes are uniquelysuited to resolution outside the judicial system becauseof particular needs and concerns of thehealth care industry:• Concerns for patient privacy and businessconfidentiality;• Reduction of time and cost devoted todisputes in an industry under special________________© 2011 Bloomberg Finance L.P. All rights reserved. Originally published by Bloomberg Finance L.P. in the Vol. 4, No. 7 edition of the Bloomberg Law Reports—HealthLaw. Reprinted with permission. Bloomberg Law Reports® is a registered trademark and service mark of Bloomberg Finance L.P.This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressedto particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney‐clientrelationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification tosuit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions.Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposedunder the United States Internal Revenue Code. Any opinions expressed are those of the author. Bloomberg Finance L.P. and its affiliated entities do nottake responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.

economic, political, and social pressuresto control costs;• Timely elimination of disputes thatthreaten the very existence of participants(e.g., government fraud claimsthat may threaten criminal exposureand exclusion from government contractingincluding Medicare and Medicaid);• Management of important relationshipswith investors, lenders and financialanalysts; employees/staff; and customers,vendors, and other business “partners”—allof which can suffer greatly inthe midst of an ugly public dispute;• Preservation of on‐going business relationshipsamong disputants, particularlyin the context of expanding businesses,a consolidating industry, and developmentof new business relationships;• Elimination of business and personaldistractions among highly trained andhighly compensated professional staffwho truly “have better things to do”(i.e., treating patients and producingrevenue) than spending days in conferencerooms and courtrooms with lawyersand administrators;• A particular aversion to public controversyon the part of educational and religiousorganizations who often ownhealth care facilities or play other importantroles in the delivery of healthcare services; and• Satisfaction of the patient safety concernsfinding expression in the JointCommission Standards requirementsfor conflict management systems.Overview of Health Care ADRIn mediation, a disinterested, impartial third‐partycan assist parties and their counsel in effectivelycommunicating their respective positions to eachother and in negotiating a settlement. As appropriate,the mediator may provide questions, comments,observations or opinions about parties’ positionsand may make suggestions or proposals abouthow to settle the dispute. A settlement reached inmediation is documented in a binding contract enforceablein court. In arbitration, a disinterested,impartial third‐party will make binding decisionsresolving the dispute and enter an award that canbe enforced in court, although the decisions have aloud ring of finality to them because courts will onlyrarely review arbitration decisions. In bothprocesses the mediator or arbitrator will assist partiesin exchanging sufficient evidence and other informationto make the process informed and fair.Mediation and arbitration can address particularneeds of disputants in health care in various ways:• Mediation and arbitration are more privateand confidential than court proceedings;even required public releaseof information about a dispute is bettercontrolled in managed privateprocesses than a multi‐year publicbrawl in a courtroom potentially full ofreporters and competitors;• Any form of ADR should be quicker toresolution at materially reduced costand with greater finality than disputesin the judicial system;• ADR proceedings allow for utilization ofdispute resolution professionals withapplicable dispute resolution expertise,plus relevant regulatory, scientific orother health care subject matter expertiseas needed;• ADR processes provide an opportunityfor thoughtful resolution of emotionaland highly charged disputes surroundingmedical errors, patient safety, endof life, bio‐ethics, and inter‐staff controversy;• Mediation can provide a forum for resolvingdisputes among multiple participantswho might not always be parties© 2011 Bloomberg Finance L.P. All rights reserved. Originally published by Bloomberg Finance L.P. in the Vol. 4, No. 7 edition of the Bloomberg Law Reports—HealthLaw. Reprinted with permission. Bloomberg Law Reports® is a registered trademark and service mark of Bloomberg Finance L.P.

to the same lawsuit, and can devise solutionssometimes not available incourt.Current Use of ADR in Health CareAlthough at least three organizations (JAMS, AmericanArbitration Association, American Health LawyersAssociation (AHLA)) offer health carespecializedpanels of mediators and arbitrators, thehealth care industry has been slow to adopt ADR.There could be many possible explanations whyADR is underutilized in health care. One possibleexplanation is that health care lawyers as a groupmight not have the same opportunities for exposureto mediation and arbitration as full‐time litigationcounsel (think employment, construction, insurancedefense and family law) who may participate in adozen or more mediations or arbitrations per year.Many health care lawyers are “specialists” in everysense of the word, but they are often “health carespecialists” who work with their health care clientson a variety of regulatory, transactional and litigationlegal issues. Other health care lawyers, especiallyin the health fraud bar, have come to healthlaw practice after years of practice in white collarcriminal prosecution and defense work with littleADR experience. Some private lawyers in fraud casesare skeptical about whether government agenciesare genuinely interested in mediating fraudcases, although anecdotal interviews with both privateand government lawyers reflect both genuineinterest and successful experience on the part ofboth federal and state governments in mediatingappropriate health fraud cases.Against this backdrop, there are many types ofhealth care disputes in which ADR can make a positiveimpact. Two particular examples include disputesrelated to professional business relationshipsof physicians and government health care fraudcases.Government Fraud CasesAmong the most difficult disputes facing participantsin the health care industry are FCA casesbrought by federal or state agencies (often initiatedby relators) for alleged fraud in connection withpayments under government health care programsincluding Medicare and Medicaid. The high stakesinvolved in these cases is one important reason whyparties should carefully consider attempting settlementthrough mediation.Federal False Claims cases can result in civil penaltiesincluding treble damages plus $5500 to $11,000per claim, corporate and individual criminal liability,and exclusion from government health care programs.Most states provide for similar liabilities. TheU.S. Department of Justice has reported that it recoveredover $2.5 billion in 2010 and $4.6 billionsince January 2009 in health care fraud cases. Severalreported recoveries against pharmaceutical anddevice companies have exceeded $100 million. Accordingto the U.S. Department of Justice, “Fightingfraud committed against public health care programsis a top priority for the Obama Administration.”http://www.justice.gov/opa/pr/2010/November/10‐civ‐1335.html.Recent legislative changes have enhanced the abilityof the federal government and FCA qui tam relatorsto pursue False Claims:• PPACA § 6402 amended the federal Anti‐KickbackLaw to make clear that violationsof the Anti‐Kickback Law can bebrought under the FCA.• The Fraud Enforcement and RecoveryAct (FERA) imposed FCA liability foroverpayments, expanded DOJ’s powerto issue civil investigative demands, andamended the FCA anti‐retaliation pro‐© 2011 Bloomberg Finance L.P. All rights reserved. Originally published by Bloomberg Finance L.P. in the Vol. 4, No. 7 edition of the Bloomberg Law Reports—HealthLaw. Reprinted with permission. Bloomberg Law Reports® is a registered trademark and service mark of Bloomberg Finance L.P.

visions to protect contractors andagents in addition to employees.• PPACA further defined overpaymentliability to provide that retention of anoverpayment for over 60 days afteridentification by a provider can becomea false claim.Government investigations of possible FCA casesprovide opportunities to use mediation to satisfyimportant goals and interests of both governmentand accused, while also potentially saving time,money and other important resources. The consequencesto private businesses of an FCA case arepotentially catastrophic in the form of monetary,criminal, and exclusion liabilities. A mediated settlementagreement may avoid (or at least diminish)exclusion and criminal responsibility while quantifyingcivil monetary exposure at a known, agreedupon level. Even where a potential FCA defendantgenuinely (and perhaps correctly) views a potentialclaim as defensible, such an approach to mediationand settlement may often have some merit because,among other reasons, a defendant can utilizea mediated settlement to avoid the potentiallyenormous financial cost of lengthy further investigation,discovery, motion practice, and trial, theadverse impact on relationships, and a drain on thetime and energies of senior management and legalpersonnel. From the government’s perspective,substantial and adequate financial payments can berecovered without the time, risk, and cost attendantto a trial against a well‐heeled and committeddefendant. Similarly, governments can devote verysubstantial, but nonetheless limited, financial, legal,and investigatory resources to health care fraudcases, and a mediated settlement may allow governmentagencies to move on to other importantinvestigations.When a mediation occurs prior to the unsealing of arelator’s FCA complaint, a defendant may also havea chance to vindicate an interest in privacy, or atleast in diminished public and media scrutiny. A defendant’ssettlement of an FCA case will be publicand likely publicized with some fanfare. But on theday after the announcement, investors, lenders,financial analysts, employees, vendors, customers,and other key constituencies will start to view theissue in the rear‐view mirror, rather than throughthe continuing scrutiny of a pending case with a stilluncertain outcome. The government in turn gets achance to make a splashy announcement, satisfyingthe important goal of potentially deterring futureputative wrongdoers, without the cost of a longerinvestigation and trial, and without the risk of sendingthe wrong deterrence message if the trial is notsuccessful.Finally, use of mediation in government fraud casesprovides a “forum” for resolution of issues withmultiple parties and agencies. Settlement of quitam matters under the FCA can be particularly challengingbecause each settlement typically has multipleparties, including DOJ, the Inspector General ofHHS (which has administrative authority to excludethe defendant from Medicare), the relator(s), andthe defendant(s). If a defendant seeks a release ofany state liability for Medicaid claims, a settlementwill also require the involvement of state authorities,which ordinarily include a state Assistant AttorneyGeneral, and sometimes many of them. AlthoughDOJ and most state Attorneys General willrequire most FCA settlements to be approved atvarious levels of management (for example, AssistantU.S. Attorneys and trial counsel at DOJ cannotordinarily make binding settlement offers andcommitments), this challenge should rarely be significantbecause final, “official” higher levels of approvalare obtained routinely in the mediation andsettlement of many types of cases involving federal,state, and local governments.ADR in Physician Business/Employment DisputesWhen physicians’ relationships with one another orwith other providers are fractured, a host of claimsmay ensue, including: for repayment of loans; forbreach of non‐compete, non‐solicitation, and antitheftprovisions; for breach of fiduciary duty; for© 2011 Bloomberg Finance L.P. All rights reserved. Originally published by Bloomberg Finance L.P. in the Vol. 4, No. 7 edition of the Bloomberg Law Reports—HealthLaw. Reprinted with permission. Bloomberg Law Reports® is a registered trademark and service mark of Bloomberg Finance L.P.

violation of federal, state and local laws prohibitingemployment discrimination; and for violation offederal and state anti‐fraud laws. Both mediationand arbitration can potentially assist parties in attainingseveral often mutually shared goals in thesephysician fights.When physicians’ business arrangements with oneanother sour, a principal goal is (or should be) to getthe business and legal issues resolved quickly, inexpensively,and fairly. Many of these business organizationsand contracts can benefit from contractualrequirements that the parties arbitrate all disputesamong the parties. These disputes often escalateinto ugly charges among former colleagues aboutquality of care, billing legalities, employment discriminationand harassment, or “stealing” patients,employees, and technology. Ordinarily, neither sidebenefits from airing those charges publicly. A welldrafted arbitration clause in the organizational documentsfor a professional practice or other contractdocumenting the business arrangements betweenphysicians can require an appropriate type of expertiseon the part of the arbitrator (including certaintypes or years of experience as arbitrator and/or inhealth care cases), and a hearing within a fewmonths after an exchange of necessary documentsand information but without the lengthy contentiousdiscovery process that often makes litigationin the courts so protracted and costly. A businessarbitration, when properly managed by an experiencedarbitrator, should almost always be quickerand less costly than a comparable lawsuit in court.Mediations in physician disputes are particularlywell suited to focusing the parties on the real businessdisputes needing resolution and away from theinevitable hurt feelings and sometimes exaggeratedmutual claims of personal and professional misconduct.Mediation is private and confidential and canresult in the amicable termination of business relationshipsor the salvation and perhaps redirectionof those relationships through negotiated outcomesoften not achievable through the legal system—both points having special import at times in physiciancases. Finally, mediations are successful in settlinga very substantial majority of cases where attempted,but as mediations result in settlementonly when the parties agree upon an outcome, it isnot overly simplistic to say that in contrast with litigation,where a judge or a jury makes the parties’basic business decisions for them, the parties to amediation decide the outcome.R. Wayne Thorpe, Esq. has been a full‐time ADRneutral since 1998. He has served as mediator, arbitrator,special master, case evaluator and in otherneutral roles in more than 1,400 cases, in at least 15states, involving all kinds of civil disputes, includingat least 100 health care disputes. He can be reachedat wthorpe@jamsadr.com.© 2011 Bloomberg Finance L.P. All rights reserved. Originally published by Bloomberg Finance L.P. in the Vol. 4, No. 7 edition of the Bloomberg Law Reports—HealthLaw. Reprinted with permission. Bloomberg Law Reports® is a registered trademark and service mark of Bloomberg Finance L.P.