Healthcare executives know that litigation costs and adverse publicity pose significant risks to their business plans. Differences arising out of mergers, acquisitions, joint ventures, and from arrangements with vendors, physicians, employees and managed care companies can result in highly contentious disputes. The time, expense and uncertainty of "going to war" in traditional litigation begs for a better way to resolve disputes.
The better way, in most cases, is to include tailor-made alternative dispute resolution procedures in legal agreements. Because such agreements are governed by principles of contract law, healthcare companies are generally free to include dispute resolution provisions in merger and acquisition agreements and in contracts with vendors, physicians, managed care organizations and even patients and employees.
The parties to a contract that includes requirements of a three-step process to resolve disputes - negotiation, mediation and, if all else has failed, binding arbitration - can effectively eliminate damaging publicity as well as much of the time, cost and uncertainty of traditional litigation.
Requiring principled negotiation at the C-suite level as a first step in the dispute resolution process ensures that the dispute "rises to the top" before one side or the other "goes nuclear." If negotiation fails, mediation is the process where parties ask a neutral third person to help negotiate and possibly recommend a settlement. The mediator's efforts and his or her recommendations are not binding, but they are private. Should mediation not successfully resolve the dispute, arbitration will serve to by-pass a court action so that the dispute is fully, finally and privately resolved by the binding decision of an arbitrator or a panel of arbitrators.
If arbitration proves necessary, the parties can, in advance, select their own private judge, agree to their own schedule and even create their own discovery process and procedural rules. The final ruling of an arbitrator is just as binding as going to court and often comes more quickly than a traditional court ruling would, with less acrimony, at a lower cost and with little or no publicity.
The benefits of carefully drafted alternative dispute resolution strategies employing negotiation, mediation and arbitration include, among others, reduced costs compared to normal in-court litigation; simpler procedural and evidence rules; less hostility among the parties and less disruption of ongoing dealings among the parties; and a wider range of relief - as more equitable remedies are available.
Although mediation and arbitration are often better alternatives to traditional litigation, the process may not be best for every dispute, and healthcare executives should carefully weigh the pros and cons when entering a business contract or agreeing to waive their company's rights to the trial and appellate process.
To avoid legal challenge, special care should be taken when drafting alternative dispute resolution clauses in the patient and employment context. In addition, the danger of simply agreeing to boilerplate dispute resolution provisions could bring about some unintended results. Failure to properly consider all of the issues includes the potential loss of important procedural guarantees; the application of unfavorable law; and the loss of appeal rights, among other risks.
Healthcare executives should consider dispute resolution as an important component of their negotiated agreements. If drafted and implemented correctly, the dispute resolution process will be enforceable. The needs of the deal or the relationship should be carefully considered when deciding whether to adopt mediation and arbitration procedures as part of an overall dispute resolution strategy.
When negotiating or drafting an alternative dispute resolution agreement you must determine whether to include negotiation, mediation and arbitration; what is to be the applicable law; the location of the mediation and/or arbitration; the manner of selecting the mediator and/or arbitrators; which procedural rules to use; whether similar disputes are to be consolidate; the scope and limits of pre-mediation or of pre-arbitration discovery; whether the arbitrator will be required to give a reasoned judgment; the scope of judicial review of the arbitrator's decision; the extent of allowable damages; and whether attorneys' fees will be awarded to the prevailing party.
Healthcare executives looking for an alternative to the time, expense and uncertainty of traditional litigation will find that the final resolution of business disputes often comes sooner, with less acrimony, at a lower cost, and with little or no adverse publicity if a well-crafted procedure is adopted on the front end that calls for negotiation, mediation and arbitration.
[See also: Malpractice not cause of healthcare cost]