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Published 3/1/2016
David J. Gandy, MD, JD, FACS, CIME

Arbitration: A Better Way of Settling Medical Disputes

Although arbitration agreements are widely used in many different contract situations, they are not common in healthcare situations. These agreements help ensure that disputes are managed by an arbitrator, rather than in a courtroom. Physicians may consider using arbitration agreements to address the risk of malpractice lawsuits.

Most states have laws governing arbitration agreements between physicians and patients. In addition, the Federal Arbitration Act (FAA), enacted in 1925, provides that agreements to arbitrate disputes are enforceable by courts. However, care must be taken in preparing arbitration agreements to ensure that they not only meet the requirements of the FAA, but also conform to state law. For this reason, it is always advisable to consult a qualified attorney when drafting these agreements.

In an arbitration agreement, the physician and the patient mutually agree that if disputes arise in the future, they will submit differences to an impartial arbitrator, appointed by agreement of both parties. These terms are spelled out in a written document, which is signed by the physician and the patient or a responsible guardian or third party.

Arbitration agreements can be written in several ways, but usually cover the clinic, the physician, and the patient. The document spells out the legal requirements of all the parties in the event of any dispute, claim, or controversy arising from or relating to the performance of medical service.

A key clause is the requirement to submit disputes to an arbitration service. The agreement may also place limits on the amount necessary to trigger the arbitration process. For example, it might stipulate that anything under $5,000 would not be subject to the formal arbitration process.

To ensure that the agreement complies with the FAA, a clause stating that all parties agree that the relationship affects interstate commerce is common. Similarly, it must be stated that the agreement will be governed by the Federal Arbitration Act and/or relevant state laws.

Most arbitration agreements also state that the cost of arbitration will be borne by the physician. The agreement used by my practice includes a limited cost sharing by the patient, and states that each of the parties is responsible for their attorney fees.

One problem with healthcare arbitration agreements is that courts often view them as contracts of adhesion that patients have no choice but to sign. Patients who decline to sign the arbitration agreement must be instructed to inform the physician before they are treated.

The agreement should state that patients who do not agree to arbitration will be referred to another clinic or physician, provided the patient is not in need of emergency care or stabilization. In emergency situations, of course, the patient must be treated as required by the EMTALA (Emergency Medical Treatment and Active Labor Act).

Most agreements also state that both sides will have a fair opportunity to present their evidence before the arbitrator. They should also note that court rules do not necessarily apply in precisely the same manner under arbitration. Agreements should also make clear that an appeal to a court can only be made under limited circumstances.

Patients should have the option to make written changes in the arbitration agreement, with the understanding that the physician has the right to decide whether to agree to those changes.

Agreements also commonly include an option to rescind the agreement within 15 days. However, any claim that arises due to treatment provided during that time must still be arbitrated.

By signing the contract, the patient agrees that any claim of negligence or medical malpractice will be decided by a neutral, binding arbitration process. The patient also gives up the right to a court or jury trial.

Because arbitration agreements are frequently written in legal terms, a separate summary page may be useful and help ensure that patients understand what they are signing. This page includes a short summary sentence of each of the topics covered in the full contract form, and patients initial their understanding of each statement.

Arbitration agreements must be fair to both the patient and the physician and should not be biased or one-sided.

Since my office introduced an arbitration agreement, I have not had to go to court in any malpractice case. Potential disputes have been dropped or settled without arbitration. Many malpractice insurers also look favorably on arbitration agreements, as a more cost-effective way to resolve disputes.

David J. Gandy, MD, JD, FACS, CIME, is in private practice at Jackson Orthopaedic Clinic, Jackson, Miss. He can be reached at

Editor's note: Articles labeled Orthopaedic Risk Manager (ORM) are presented by the Medical Liability Committee under the direction of Robert R. Slater Jr, MD, ORM editor. Articles are provided for general information and are not legal advice; for legal advice, consult a qualified professional. Email your comments to or contact this issue's contributors directly.


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