Arbitration in the Indian Healthcare Industry
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Arbitration in the Indian Healthcare Industry

Commercial arbitration is currently the preferred mode of dispute resolution for complex disputes. The growing popularity of arbitration has led parties to include arbitration clauses for all large transactions and commercial agreements. An increasing number of government entities and public sector ventures include arbitration clauses in their standard form contracts. These entities are also regularly parties to arbitrations.

The existing law relating to international arbitration was considered archaic and changes were indispensable. This was the reason that in 1995, the Minister for Law, Justice and Company Affairs introduced, in the Upper House of Parliament, a bill to implement the UNCITRAL Model Law and to provide statutory recognition for the process of conciliation. Thus, the Arbitration and Conciliation Act 1996 was enacted. The Indian Arbitration Act heavily corresponds to the recommendations flowing from the UNCITRAL Model Law in that all countries signing it have to give consideration.

There have been many amendments to change the Arbitration landscape in India. These have added quite a few imperative changes to the Arbitration Act to increase its efficiency, speed, and credibility. Some of the important additions to the Arbitration Act include:

  • Discouraging the filing of frivolous applications related to arbitration awards;
  • Discouraging the delays in arbitration creating an efficient cost regime;
  • The imposition of time limits;
  • Encouraging institutional arbitration;
  • Limiting court intervention at the pre and post-arbitration stages;

The executive branch has sought to bring about efficiency in arbitration involving government entities by encouraging ministries to comply with arbitration awards, pending any proposed challenge, in the interests of ensuring cash flow, particularly in relation to large disputes.

However, with the positive amendments come disputes that are more complex. The healthcare industry has been plagued with such disputes in recent times. Some significant ones are:

  • Disputes among members of physician groups or between different hospitals and other staff;
  • False Claims Act (FCA) and other fraud cases against hospitals, doctors, pharmacies, drug manufacturers etc.;
  • Complex disputes arising from mergers and acquisitions;
  • Reimbursement disputes involving government agencies, pharmacies, physicians, doctors;
  • Risk management controversies and Personal Accident Insurance;

The disputes are never ending. This is the perfect opportunity for the healthcare industry to transition from traditional litigation to Alternative Dispute Resolution Mechanisms.

Alternative Dispute Resolution in the Healthcare Industry

There is a continuous debate about the ongoing healthcare crisis in several countries including India. These effects are felt throughout the system and the entire economy. These legal costs are passed on to the consumers, which intensifies patient dissatisfaction in the healthcare industry. This is where an inexpensive, fast-moving lawsuit option also known as “Alternate Dispute Resolution” process come into play.

Various healthcare providers and insurers are choosing Alternative Dispute Resolution processes- mostly mediation and arbitration- as a way to address increasing legal costs. By including a pre-dispute arbitration and mediation clause in healthcare admission agreements and contracts, the providers and insurers agree to route future disputes through these processes instead of lawsuits.

Different Models of Alternative Dispute Resolution in the Healthcare Industry

The Veteran Affairs (VA) Model

The Department of Veteran Affairs (VA) instituted this model. A policy where a full disclosure agreement was paramount to the model. This includes complete disclosure of facts related to the error and all actions taken to mitigate it. The disclosure also contained an apology from the Chief of Staff accepting responsibility for the adverse event. Compensation in this model includes corrective medical or surgical action and/or monetary awards. Between 1987 and 2003, only 3 out of 170 settlements resulted in trials. This shows that model suits the needs of the patient and is frequently chosen over traditional litigation.

The University of Michigan Model

The University of Michigan Health System adopted this policy in 2001. This model is based on fair compensation when the medical expenses are unreasonable and led to the patient’s injury. It also emphasizes learning from the mistakes and experiences of the patient. This model includes an open discussion related to the error caused by the medical staff. This disclosure policy has been largely successful and has reduced the average cost per case from $48,000 to $21,000.

The Pew Mediation and ADR Model

This model was adopted in four Pennsylvania healthcare systems in 2002. It mainly focuses on improving communication between the physicians and the patients in distress, briefing disclosure conversations, use of mediation to settle potential claims. This process facilitates discussion and increases the transparency between the physician and the patient. This ecosystem helps the parties to explore monetary and non-monetary solutions. Only two cases have been filed in the current two-year period and the settlement between the parties was satisfactory.

The Chicago Rush Medical Centre Model

This model was developed at the Chicago’s Rush Medical Centre in 1995 and is the most widely used model in mediation. This process begins with an early exchange of pre-mediation agreement submissions, brief presentations from both sides, and deciding caucus procedures. The mediators are selected by the plaintiff which acts as an immense motivation for them to take part in the process. An official list of trained medical malpractice lawyers are presented in the process and the plaintiff has the liberty to choose any one of them. Over 80% of the cases that used this model were successful and were resolved within 1 year of filing the complaint.

The Internal Neutral Mediator Model

This model uses an ombudsman to resolve healthcare issues. An ombudsman is a neutral party trained to participate in disclosures and lays down the route to solve the ongoing issue. The National Naval Medical Centre (NNMC) in Maryland was the first acute care hospital to start an ombudsman program. The ombudsman handled 82 cases in the first 18 months and a majority were solved within 10 hours with no further claims on those cases.

Choosing Mediation and Arbitration over Lawsuit Litigation

Alternative Dispute Resolution processes provide way more benefits than normal litigation. For the purpose of this article, we would cover some of them.

ADR is Less Time-Consuming

Part of the cost-savings in mediation and arbitration is related to the fact that they are much faster than traditional litigation. Various studies have indicated that arbitration hearings require two to four days as compared to several weeks for court hearings in traditional litigation. The same study showed that medical malpractice disputes took 19 months on average for medical malpractice arbitration and 33 months for normal litigation. Recently, The Corporate Legal Times published that 78% of attorneys find arbitration and mediation faster than traditional litigation.

ADR is Less Expensive

Studies have shown that medical malpractices disputes are costly if, solved through traditional litigation. One study showed that the cost of mediation and arbitration could be as low as one-fourth the cost of traditional litigation. Duke University Law School’s Private Adjudication Centre reported that arbitration fees are far more reasonable than going the traditional way.

Mediation and Arbitration is Fair

Various commentators have concluded that individuals do well in arbitration compared to litigation, if not better. Researchers Michael Delikat and Morris Kleiner reported that complaints in the Southern District of New York prevailed 46 percent of the time in arbitration versus 34 percent in Court. This trend is also changing in India. Individuals have started receiving monetary awards in arbitration similar to those in courts. 93% of people in a group study believed that their cases where handled fairly and without any bias in arbitration and mediation.

Drafting the Perfect ADR Agreement

The ideal ADR agreement will have certain key needs that we have identified here:

  • Open to Judicial Review- There is no point in an arbitration agreement if it cannot be enforced in the Court. Drafting an agreement that is open to judicial scrutiny is imperative.
  • Beneficiary Clause- Arbitration agreements between “businesses” and “consumers” are frequently challenged on the grounds that they are unconscionable. Courts have recently rejected these challenges and have routinely enforced these arbitration agreements. They are much more inclined to do so because of the procedural and substantive safeguards that guard the consumers against unfairness.
  • Covering All Disputes and Making it Mutual- It is crucial that both the patient and the provider are bound by the agreement. It is equally important that any disputes regarding the enforceability and interpretation of the agreement, will be decided by the arbitrator.
  • Availability of Legal Remedies- Legal remedies that are available in Court should also be available through arbitration and mediation. This is especially imperative when both parties do not have equal bargaining power.
  • Providing an “Opt-Out” Provision- Allowing the consumers to “opt-out” of the provisions within a certain period of signing, such as 10 days, is key.
  • Educating Patients- Educating them about what they are getting in return- a fair, cost effective method may serve to balance any hesitation in signing the ADR agreement. We should consider offering them the “Patient’s guide” that many regulatory bodies provide.
  • Making the Agreement Bold and Understandable- The agreement should make it clear to the patient that he or she is foreclosing the option of a judge and instead agreeing to an alternative forum.
  • Invoking the Federal Arbitration Act- Invoking the Federal Arbitration Act ensures; that  healthcare organizations can use the same agreement in several States.

Implications

Early disclosure and apology programs, mediation, arbitration, and negotiation are among the forms of ADR that have been successfully implemented in the healthcare industry. However, certain limitations arise. First are the central data banks, such as the National Practitioners’ Data Bank (NPDB), that record all malpractice claims against a physician. This becomes a part of the physician’s permanent record and hampers his/her ability to obtain licenses and other staff privileges. This situation may be compared to a driver with multiple speeding tickets and other violations who has to pay higher premiums due to this. Another major problem is the distrust in the system. It is a relatively new concept and still evolving. The main problem arising is that it forces parties to an internal, inconsistent form of mandatory and non-binding ADR that frustrated the parties. They found it to be ineffective and time wasting.

However, this trend is changing and the success of existing ADR models is promising. ADR provides the potential to promote disclosures among the parties, improves the patient’s safety, and reduces cost. ADR in the healthcare industry presents a great promise for the future.

 

Yug Sinha is a first year law student at Symbiosis Law School, Pune. His research interests include Constitutional Law, International Law, and Public Policy.

 

Suggested citation: Yug Sinha, Arbitration in the Indian Healthcare Industry, JURIST – Student Commentary, May 17, 2020, https://www.jurist.org/commentary/2020/05/yug-sinha-healthcare-arbitration/


This article was prepared for publication by Tim Zubizarreta, JURIST’s Managing Editor. Please direct any questions or comments to him at commentary@jurist.org


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