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Arbitration of Disputes: How is it used in Medical Malpractice?
John Shufeldt, MD, JD, MBA, FACEP, FCLM, Chief Executive Officer, NextCare, Inc., Attending Physician/Vice Chair, Department of Emergency Medicine, St. Joseph's Hospital and Medical Center, Partner, Shufeldt Law Firm
Editor's note: This is the first of a two-part series on arbitration of medical malpractice disputes. Part one will provide a brief overview of arbitration in general and of selected cases.
In arbitration, the parties agree to use an arbitrator or arbitration panel, as opposed to a judge or jury, to decide the outcome of their cases. More succinctly, arbitration is an alternative process for reaching a verdict in a case that is determined on its facts and merits. Arbitration has been defined as "an affirmative risk management [tool] that anticipates sources of conflict and puts in place systems to control costs and exposure to liability."1
Historically, arbitration was designed to privately resolve commercial disputes between businesses (having more or less equal bargaining power) that negotiated and agreed in a signed, written transactional document, to submit any future disputes to a binding decision by arbitrators who have expertise in the subject matter of that dispute.2
Arbitration is an adversarial, evidentiary process, somewhat less formal than a bench trial, in which parties tender a dispute to decision by either a solitary arbitrator or a panel of arbitrators. Typically, parties sign a written "arbitration agreement" stating that any future dispute between them will be arbitrated. If a dispute arises and the parties must submit their claim for arbitration; the process is "mandatory." If the parties must accept the arbitrator's decision as final, the process is "binding."
Arbitration to resolve medical malpractice disputes has long been recommended as a means to unclog crowded court dockets.3 In many states, the legislature has paved the way for alternative dispute resolution. According to Special Actions or Proceedings to Enforce Claims or Judgments, "A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable, and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract."4
While there is no question that medical malpractice disputes are arbitrable,5 the use of arbitration clauses in contracts between providers and patients in the health care setting is distinguishable from their use in settling labor or commercial disputes inasmuch as the legal doctor-patient relationship is determined by both private contract law and public tort law. Thus, there is a tension between contract law, the principles of which have been applied to binding arbitration clauses in labor and commercial agreements for years, and the application of tort law to enforce conformity with standards of care desired by society, particularly with standards of professional care.6
This article will provide the reader with a brief overview of arbitration and its utilization in medical malpractice. To understand the role of arbitration in the malpractice arena, the paper will review selected cases and their outcomes in an effort to distill the legal basis behind the court's decisions. Finally, the article attempts to construct the essential elements of an arbitration agreement using principles learned from the cases below and the Federal Arbitration Act.
Review of Selected Cases
Determining Enforceability. Even with a strong judicial deference to arbitration, some arbitration agreements are not upheld. This next section will discuss selected cases in an effort to determine the characteristics of agreements that are upheld in comparison with cases in which the agreement was not upheld in an effort to explore the basic tenets of drafting a defendable agreement.
Timing of the Execution of the Agreement. When a contract compelling arbitration is signed subsequent to the initiation of the patient-physician relationship, what is the court's position regarding the timing's effect on the agreement?
In Coon v Nicola, subsequent to the initial treatment of Mr. Coon at Ridgecrest Community Hospital for his injuries, the defendant surgeon performed surgery on a fractured wrist sustained after Mr. Coon fell down a mine shaft.7 X-rays taken after his surgery revealed a previously undiagnosed fracture of Mr. Coon's left arm. The defendant physician informed the plaintiff of the missed diagnosis.8 On a subsequent visit to the physician's office, Mr. Coon signed a physician-patient arbitration agreement. The agreement not only provided that claims regarding prospective care were to be covered by an arbitration agreement, but also included a provision concerning pre-agreement treatment.
At trial, Mr. Coon did not dispute that he signed the agreement and separately initialed a clause expressly agreeing to arbitrate disputes stemming from the care he received prior to signing. Despite the missed diagnosis, Mr. Coon continued to seek care from the physician for approximately 9 months. Mr. Coon argued that the statutory authority for physician-patient arbitration agreements does not authorize enforcement of retroactive agreements and that the appellant physician's attempt to enforce the agreement was unconscionable.9
The court noted that the determination of whether a contract is a contract of adhesion is "merely the beginning and not the end of the analysis insofar as enforceability of its terms is concerned."10 Assuming arguendo that the patient-physician relationship by its very nature is unequal, the court also noted that "in order to be considered a contract of adhesion, the determination turns upon whether the terms of which [participant] was unaware are beyond the reasonable expectations of the ordinary person or are oppressive or unconscionable."11 The agreement that the plaintiff signed was on a separate one-page document entitled "Physician-Patient Arbitration Agreement" and all wording provisions required by statute were followed. Moreover, the arbitration agreement at issue also included a provision that allowed for revocation within 30 days.
The court, noting Tunkl v Regents of University of California,12 reasoned that in many cases of adhesion contracts, "the weaker party lacks not only the opportunity to bargain but also any realistic opportunity to look elsewhere for a more favorable contract." In Tunkl, the hospital presented all incoming patients with a document entitled "Conditions of Admission" which provided that the patient release the hospital from liability for negligent or wrongful acts. However, unlike Tunkl, the agreement was signed at a post-surgery visit to the doctor's office and not in an emergency room or in an immediate treatment situation. "Most significantly, the present case does not limit appellant's liability in any way but merely provides for a different forum in which to settle disputes."13 Hence, Mr. Coon's treatment was not predicated upon his signing the agreement. What is clear from this ruling is that an agreement is held to a "reasonable person" standard and care cannot be predicated upon the patient signing the agreement. Also, the agreement was only to change the forum, not to immunize the physician from negligence claims.
Does an Agreement with One Provider Cover Another Provider in the Same Group? In Hilleary v Garvin, an arbitration agreement was effective for all subsequent open-book account transactions for medical services, when the patient had voluntarily signed an agreement stating that any dispute as to medical malpractice would be submitted to arbitration.14 Mrs. Hilleary signed the agreement upon her initial doctor visit for pregnancy. Later, she suffered a miscarriage and underwent surgery for removal of fibroid tumors of the uterus.
The patient presented to the medical group for a course of continuing treatment relating to complications of the miscarriage. The patient argued that the agreement covered the arbitration of medical services rendered in relation only to the pregnancy, [and] therefore was not relevant to the care she was currently receiving.15 The court opined that based on the standard of whether a reasonable person would, from the conduct of the parties, conclude that there was mutual agreement, the court pointed out that the patient voluntarily signed the agreement explicitly stating that any dispute as to medical malpractice would be submitted to arbitration.16 There was no evidence from which a reasonable person could conclude that the parties intended the follow-up surgery for removal of the tumors to be severable from the treatment for the pregnancy.17
From these cases, three distinct rules regarding arbitration agreements are clear: 1) An agreement can be signed after treatment has already ensued; 2) Patient care cannot be predicated upon the acceptance of an arbitration agreement; and 3) The agreement exists as long as a reasonable person would conclude that the care fell within the "spell of illness."
1. John E. Sands, Alternative Dispute Resolution and Risk Management: Controlling Conflict and its Costs, 338 Litig. 7, 23 (1987)
2. James R. Holbrook, Mandatory Binding Arbitration of Medical Malpractice Claims in Utah, 16 Utah Bar J. 8 (2003)
3. James W. Reaves, ADR Relieves Pain of Health Care Disputes, 49 Disp. Resol. J. 14, 15 (1994)
4. Special Actions or Proceedings to Enforce Claims or Judgments, A.R.S. § 12-1501 (2004)
5. See 61 Am. Jur. 2d., Physicians, Surgeons and other Healers, 376
6. Maureen Dulen, Twenty Years Later…Contractual Arbitration as Medical Malpractice Tort Reform, 1992 J. Disp. Resol. 325 at 329.
7. Coon, v. Nicola, 17 Cal. App. 4th 1225, 1229 (1993)
8. Id. at 1229
9. Id. at 1230
10. Id. at 1234
12. Tunkl v. Regents of University of California, 60 Cal.2d 92, (hospital presented to all incoming patients a document entitled "Conditions of Admission" which provided that the patient release the hospital from liability for negligent or wrongful acts).
13. Id. at 1237
14. Hilleary v. Garvin 193 Cal. App. 3d 322 (App. Dist 2nd 1987)
15. Id. at 324
17. Id. at 327