Arbitration--Just What the Doctor Ordered

On their first visit to a doctor’s office, new patients may be asked to skim and sign an arbitration agreement, promising that if the doctor messes up their case, they’ll take the dispute to an arbitration hearing instead of to court. “I figure it’s just to protect the doctors,” says a woman who wouldn’t sign her obstetrician’s form, “because juries can award big money.”

True, a patient could get less from arbitration. But less, as they say, is more. One waives one’s constitutional right to a jury trial but avoids the clogged court system, the procedural delays that add years and costs to the case.

Arbitration, says Los Angeles attorney Robert Girard, “is sort of a private judicial system, oriented to getting through something quickly.” The arbitrators, often chosen by the disputing parties, operate in a less formal setting but their judgment may be more final. In California and other states, “the only basis for appeal from an arbitration,” says James Ludlum, the Los Angeles attorney who spearheaded the drive for medical malpractice arbitration, “would be some fraud or basic conflict on the part of the arbitrator.”

In California, most patients offered the agreement sign it, although not necessarily because they understand and endorse the concept. “When patients want treatment,” says William Shernoff, a Claremont plaintiff’s attorney specializing in medical insurance cases, “they don’t care what they sign.”

Seen as Solution

Arbitration in medical cases was a hot idea in the mid-1970s, when the medical malpractice crisis--precipitated partly by court cases, partly by sharply higher insurance premiums--was at its peak. Arbitration was viewed as a solution to both court congestion and runaway verdicts, and while most states already had general laws permitting arbitration, there was a flurry of statutes specifically covering arbitration in medical malpractice disputes.

California’s--the first passed in 1975--was one part of a larger Medical Injury Compensation Reform Act that did some even flashier things, such as limiting damages for pain and suffering to $250,000. It dictated both the format and wording of the arbitration agreement, including a warning--in red letters and larger print--that the patient was waiving his right to a jury trial and allowed him time to change his mind.

There seems no dispute that arbitration saves time. Even a major case could take “not much more than a year,” says Girard, while court cases can take four or five years to get to trial.

Thus, “the cost of the process is significantly reduced,” says Susan Schmid, malpractice attorney for the Cooperative of American Physicians/Mutual Protection Trust in Los Angeles. There is less money wrapped up in arbitrators’ time, less in defense attorneys, who charge by the hour, and, says Schmid, “you can hire expert witnesses at less cost because you can say exactly when and how long it will take them.”

Overturned by Court

It was an idea whose time was brief. The initial enthusiasm of California hospitals waned when their agreements were challenged by plaintiff’s attorneys, then “knocked down by California’s Supreme Court,” Ludlum says. Who could guarantee that a patient entering a hospital through an emergency room had read and understood what he was signing?

Doctors’ offices rarely have such emergencies, but arbitration doesn’t seem appealing. For one thing, says Mary Anne Ford of the Michigan State Medical Society, they “may be reluctant to ask the patient to sign something that talks about how something might go wrong.” For another, arbitration is widely misunderstood, confused with settlement or the non-binding arbitration sometimes recommended by courts.

Many think that arbitration, like settlement, means “let’s work this out,” says Jack Light, vice president of the California Medical Assn. And if there’s going to be settlement, the usual kind seems effective enough. Of 2,000 claims filed yearly against members of the Southern California Physicians Insurance Exchange, which provides malpractice coverage for many doctors, 75% are dropped while the exchange is investigating them; 17% are settled, and 8% go to trial or arbitration (rarely chosen)--85% of which the doctors win.

The doctors’ view of arbitration, based on financial concerns, is ambivalent. On the one hand, although there have been some million-dollar judgments, “it’s fairly clear,” Girard says, “that the mammoth awards you see in courts are less likely in arbitration.”

On the other hand, court is a win-or-lose situation, and being somewhat settlement-like “the arbitration process induces some payment,” says CMA’s Light. “Smaller claims are paid slightly higher,” says B. J. Anderson, attorney at the American Medical Assn. in Chicago, “and big claims are paid at a lower level.”

Still, Girard says, “it may be a win-win situation for everyone but the lawyers.” Defense attorney’s fees are limited by the time spent, and plaintiff’s attorneys “lose the chance to be flamboyant before a jury,” Schmid says.

There are still areas where arbitration is popular, if not prevalent--Michigan, for example. And there are individual groups that embrace the idea--Schmid’s group, for example, whose members in high-risk specialties (obstetrics, for one) must offer arbitration agreements and have 75% of them accepted.

Arbitration agreements are more often found at health maintenance organizations. Most Kaiser Permanente groups, for example, now in 16 states, make arbitration agreements mandatory for enrollment. Ironically, these agreements, part of the overall contract initially signed, have consistently been held valid, although “the insured people may not even know it’s there,” Ludlum says.

Doctor-patient agreements are another matter: “If patients enter the agreement as a condition of receiving service,” says the AMA’s Anderson, “the courts could view it as a contract of adhesion”--a contract which one side essentially forces on the other. Indeed, according to AMA surveys, all of the medical liability arbitration statutes say “that a person’s right to treatment shall not be prejudiced in any way” by his or her decision whether or not to sign the agreement.

California’s statute, for one, specifically says that an agreement including the prescribed wording is not a contract of adhesion. As a result, “doctors can refuse service to new patients who won’t sign,” Schmid says. “They can just say choose someone else.”