Medical Malpractice News

Defensive Medicine: Arbitration, Is it Feasible?

Tags: | Comments: 0 | March 6th, 2014

Defensive Medicine ArbitrationOver the past several weeks here at eQuoteMD we’ve been taking a look at the issue of defensive medicine, defined as the practice of ordering medical tests, procedures, or consultations of doubtful clinical value in order to protect the prescribing physician from malpractice suits. In other words, defensive medicine describes the result of the feeling that many physicians have that rather than using their best professional judgment there are tests, diagnostics, procedures, and more that they simply must do and order so that if they find themselves in a malpractice lawsuit they have a better chance of avoiding liability.  We’ve also seen that defensive medicine is nearly universal in the U.S according to physicians’ self-reporting, is a real frustration for doctors, and is costing a tremendous amount.

This will be our last post in the series, but if you’ve missed any of the previous ones you can read about tort reform, patient compensation systems, safe harbors, and disclosure, apology, and offer (DA&O) systems by following these links.

In our final installment we want to look briefly at arbitration.  Arbitration is certainly nothing new, and doesn’t come with the excitement of being a revolutionary approach to fighting the costs of defensive medicine, but is it a more potent option than we realize?  Could arbitration play a significant role in reforming a system that is gobbling up money and resources while frustrating physicians?

Well first let’s be clear on what arbitration is and what forms it takes.  Arbitration is essentially a method of settling a malpractice dispute outside of court.  Like a jury trial, it involves two sides making their cases—giving opening statements, evidence, rebuttals, etc.  However, rather than doing so in a court of law before a judge and jury, the process is carried out before one or more arbitrators—professionals hired to determine the merits of the case and render a judgment.

The value of arbitration is typically seen in its potential to reduce time and cost in a malpractice dispute.  Arbitration is typically a much speedier and somewhat less formal affair than the often protracted jury trial alternative.  Further, many believe that arbitrators, as professionals with experience, are less likely to offer the kind of astronomical rewards that we sometimes see in jury trials, and to be generally more conservative and even handed than a jury may prove to be.

But what are the circumstance in which a case would be arbitrated rather than go to court?  This is where things begin to get sticky.  In most cases for arbitration to happen a patient will have had to have knowingly and willingly signed a waiver of their right to a trial by jury.  This is called an arbitration agreement.  And because courts have emphasized the knowingly and willingly aspect, at times refusing to enforce arbitration agreements that they believed were signed either in ignorance or under duress, the reality is that doctors must call attention to the arbitration agreement to ensure that it is signed knowingly and willingly and thus will be binding.  Needless to say, this isn’t a particularly attractive prospect to most physicians.  Talking about the possibility of malpractice at the beginning of a doctor-patient relationship doesn’t set a great tone, and asking the patient to waive a “right” in that conversation could really sour things.

But even if a doctor can find a way to get patients to sign an arbitration agreement freely and willingly there are a few other possible drawbacks that have to be considered.  The first is what I hinted at above, and that is the legal uncertainty that goes with relying on an arbitration agreement.  While most states allow for arbitration agreements (again, assuming they are knowingly and willingly agreed to), they still reserve the right to find them invalid in some circumstances.  For instance, if the agreement is deemed to be substantially at odds with state laws it may be ruled void.  An example would be an arbitration agreement with a non-economic damages cap substantially lower than the state cap, as was the situation in this Florida case where the court did in fact rule an arbitration agreement void.  Likewise, if a court finds an arbitration agreement to be unfair, limiting one party’s options in an inequitable fashion, the agreement may be deemed void.  Finally, some states have specific statutes allowing either party to challenge the outcome of an arbitration agreement in court should they choose to.  This is unusual, but it is the case in some states.  While none of these legal issues eliminates the potential value of arbitration they collectively create added hesitation because they add an element of subjectivity that is hard to account for.  What will the courts find unfair?  What will they deem sufficiently at odds with state law to make an agreement invalid?  How do you prove sufficient knowledge and willingness?

Finally, there is the question of value.  While there are risks with a jury trial (as we know all too well) the costs are limited to representation.  In the case of arbitration the arbitrator must be paid as well.  Further, arbitrators tend to be relatively conservative as mentioned before.  While that does mean seldom ordering huge awards for patients it also means seldom dismissing a plaintiff.  They typically make a decision that could not be labeled a pure victory or loss for either side.  On the other hand, courts routinely dismiss frivolous lawsuits, and even if a defendant’s motion to dismiss is denied, counsel can always at that point seek an out of court settlement.  In other words, going through the courts gives the doctor a better chance of dismissal and still preserves the right to negotiate apart from going to trial.  This seems unlikely to change since if arbitrators got into the habit of dismissing plaintiffs patients would probably be even less likely to be willing to sign arbitration agreements.

So it sounds like arbitration isn’t much of an answer to anything, right?  Not quite.  There is one situation in which arbitration can be an effective tool and can work very well.  Arbitration agreements built into employer provided group coverage plans which require employees to settle claims via arbitration are not uncommon.  As Alex Stein of the Harvard Law Petrie-Flom Center notes, “A group health plan that obligates employees to arbitrate medical malpractice claims is valid and enforceable: see Madden v. Kaiser Foundation Hospital, 552 P.2d 1178 (Cal. 1976). The plan’s designers—employers on one side and MCOs/HMOs on the other side—have roughly equal bargaining powers and cannot easily take advantage of one another. Their preference for arbitration is part of a well thought-through deal that includes an attractively priced health benefits package for employees…”

So, arbitration isn’t wholly out of the picture when it comes to controlling costs and mitigating defensive medicine, but if we’re honest it’s probably a pretty small piece of the puzzle.  In many cases it’s just too difficult to implement, too uncertain when implemented, and offers too little in the way of value to make it attractive.  Some will no doubt continue to employ arbitration agreements and find them useful.  One can imagine certain specialties where they would be more useful than others (i.e. lower risk).

As we’ve said all along though, what you find when you begin considering ways to mitigate the costs and psychological frustration caused by defensive medicine is that there is no silver bullet.  Things like caps on non-economic damages, arbitration, DA&O, and other tort reform efforts all have a place in an overall strategy that aims at reforming the system in a way that promotes sound decision making, reasonable standards, avoidance of waste, and equity for all parties.  We hope this series has helped illuminate the issues surrounding defensive medicine and shed light on some of the ways that we may be able to oppose it going forward.  We want to hear from you though.  Are there other reform measures you think should be pursued?  Which of the topics we’ve covered do you think holds the most promise?  If you’re a physician are there any of these proposals that would change the way you practice medicine, and/or free you up from the pressure to practice defensive medicine?  Let us know either here in the comments or on our Facebook, LinkedIn, Twitter, or Google+ pages!

This post was written by Justin Donathan.
Justin at Google+