AAOS Now

Published 7/1/2008
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A. Thomas Williams, MD; Elliott J. Williams, Esq.; Dennis H. Gordon, MD

Arbitration: A promising method of alternative dispute resolution

Utah physicians have positive experiences

Many Utah physicians are testing arbitration as an alternative method of resolving medical liability claims. Arbitration is a common method of dispute resolution used to mitigate the expense and time of wading through a court supervised liability suit. Most people readily, and sometimes unknowingly, consent to arbitration when signing contracts for rental cars, bank accounts, insurance policies, and loans.

Arbitration in Utah
Utah Medical Insurance Association (UMIA), a physician-owned medical liability carrier, encourages insured physicians to ask every potential patient to sign an arbitration agreement. UMIA initiated this program in 1999, after the state legislature passed laws enabling the use of arbitration in medical liability claims.

In a 1996 ruling, the Utah Supreme Court specifically held that physician/patient arbitration agreements are enforceable and are a preferred method of dispute resolution for medical liability claims. Following the initial success with arbitration from 1999 to 2003, one Utah-based vertically integrated healthcare system decided to require individuals who enrolled in their plans to sign arbitration agreements. As a consequence of this policy and the subsequent public reaction, the Utah legislature modified the arbitration law in 2004 to make it illegal to deny care to anyone who refused arbitration.

Patient notification and agreement essentials
The current law requires that patients be notified of the following features when they sign the agreement:

The patient waives any right to a trial before a judge or jury for all claims.

  • The patient chooses one arbitrator and agrees to a neutral arbitrator.
  • The patient pays for his or her chosen arbitrator and one half the expense of the neutral arbitrator.
  • The agreement automatically renews annually and can only be rescinded in writing 30 days before the anniversary. A separate arbitration agreement must be signed for each new pregnancy.
  • The patient has the following rights:
  • to decline arbitration and still receive care
  • to have questions answered by the physician or a member of his or her staff
  • to rescind the agreement within 10 days of signing
  • to require the claim be mediated

Use and advantages of arbitration
Physicians insured through UMIA who offer arbitration to their pa­tients receive a 5 percent premium discount. As of year-end 2007, 36 percent of UMIA’s 2,500 insured physicians and 50 percent of physicians with clinical access to patients were offering arbitration. In the surgical specialties, use of arbitration agreements is quite high (
Fig. 1). Physicians report very high patient acceptance; more than 90 percent of patients sign the agreements.

Utah’s medical arbitration law has unique and important attributes that distinguish it from other arbitration laws. The most important feature is that three arbitrators are used—one chosen by the patient, one chosen by the physician, and a third neutral arbitrator agreeable to both parties. Physicians and patients choose from an experienced pool of arbitrators who have been carefully chosen for their expertise on the medical and legal issues surrounding the claim.

Arbitrators are able to quickly identify and address the key issues in a claim, avoiding the emotion and sensationalism that often characterize court proceedings. Thus, arbitration more closely represents a hearing before “medical peers” because the arbitrators understand complex medical arguments and issues of causation and are less likely to be influenced by individual biases or limited perspectives than a lay jury.

Another important aspect of the arbitration law is that causation and damage issues are determined separately. Causation is determined first; damage is not addressed unless a breach in care is found to have resulted in injury. This approach eliminates the problem seen in many court proceedings of awarding compensation that is not supported by causation.

Arbitration also costs less than a court trial. The plaintiff shares in the costs of the arbitrators equally with the physician. A plaintiff may or may not employ a lawyer to arbitrate the claim; these fees are negotiated and are not necessarily on a contingent basis. Plaintiffs are responsible for paying their chosen arbitrators and half the cost of the third, neutral arbitrator.

The time involved with arbitration is also significantly less than with a court proceeding. A court trial will often take weeks, hundreds of thousands of dollars, and many days or weeks away from work, while most arbitrations take just 1 or 2 days.

The rules for providing evidence to arbitration panels also differ from those employed in a court trial. Expert testimony can often be given by conference calls or by videotape, which reduces the cost, scheduling problems, and other difficulties. The more relaxed environment of an arbitration hearing reduces stress on both the patient and the physician. Moreover, arbitration hearings remain confidential, unlike court trials, which are open to the public.

Suitability of arbitration
Arbitration is not a panacea, nor is it suitable for all liability claims. Because arbitrators are chosen based on their expertise and intelligence, they will carefully and thoroughly scrutinize the important issues. Consequently, case selection is very important. In cases in which problems with the care rendered are evident, arbitration is not the answer.

Not all claims covered by an arbitration agreement end up being arbitrated. Many suits are dismissed if allegations are not supported by expert testimony. Claims involving problematic care can and should be settled—either informally or by using mediation. For defensible claims involving conflicting expert testimony or in those instances in which a reasonable settlement cannot be reached, arbitration offers many advantages over a court proceeding.

Arbitration results
What effect does arbitration have on medical liability claims? The most current data show that between 1978 and 2007, UMIA took 91 claims to court and experienced 23 losses (about 25 percent of all trial-mediated claims), while 39 claims went to arbitration, with seven losses (about 18 percent). Since 2002, 35 of 39 claims have been arbitrated, with only 3 losses (about 9 percent), and 14 cases went to court, with two losses (about 14 percent).

Costs for arbitrated claims appear to be significantly less than court trials in both time and actual dollars spent. Comparing claim costs for arbitrated or court-resolved claims is problematic, however, because no two claims involve the same management, lawyers, issues, or expenses. The 14 court trials involving UMIA between 2002 and 2007 cost an average (allocated loss adjustment expenses) of $234,642 compared to an average of $115,659 for 21 arbitrated claims. Arbitration appears to significantly lower the underwriting costs of settling claims.

The future
Many plaintiffs’ attorneys do not like arbitration and are working hard to challenge it on the basis of its validity in the case of heirs and unborn infants, as well as on the belief that binding arbitration is procedurally and substantively unconscionable. The fate of arbitration as a way to resolve medical liability claims may depend on the rulings by the Utah State Supreme Court on these issues. Barring any future legislative emasculation of the law, arbitration may survive as a reasonable, lower cost, friendlier, and more efficient alternative to court actions.

A. Thomas Williams, MD, is assistant medical director for UMIA; Elliott J. Williams, Esq., is the UMIA general counsel. Dennis H. Gordon, MD, is an AAOS member in private practice in Salt Lake City.