Issues in Drafting Arbitration Clauses for Healthcare Contracts Referencing the AAA Commercial Rules or the Healthcare Payor-Provider Rules

By Kosnitzky, Michael | Dispute Resolution Journal, May-July 2012 | Go to article overview
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Issues in Drafting Arbitration Clauses for Healthcare Contracts Referencing the AAA Commercial Rules or the Healthcare Payor-Provider Rules


Kosnitzky, Michael, Dispute Resolution Journal


What parties to commercial healthcare contracts need to know about drafting an arbitration clause for a commercial healthcare contract, including the differences between the AAA Commercial Arbitration Rules and the AAA Healthcare Arbitration Payor-Provider Rules, whether the parties qualify to use the payor-provider rules, and how to tailor the arbitration clause by modifying or adding to the AAA rules.

This is a how-to guide to drafting arbitration clauses for commercial healthcare contracts using American Arbitration Association (AAA) administration under AAA rules, and the AAA standard arbitration clause with suggested modifications and additions.1 Although there are nontraditional methods of arbitration that parties could consider,2 and which may be utilized in lieu of, or incorporated into, the AAA's rules, this article will focus on arbitration under the AAA Commercial Arbitration Rules and the AAA Healthcare Payor-Provider Arbitration Rules, either of which could be used in a healthcare contract.3 The AAA's newer rules-the payor-provider rules-were specifically designed for claim payment disputes between "healthcare payors" (e.g., insurance companies, health maintenance organizations, healthcare plans and the like) and "healthcare providers" (e.g., doctors, medical practices, dentists, nurses, medical laboratories, and others who provide healthcare services). Parties who do not qualify as payors and providers must use the commercial rules, while those who do qualify can choose between the commercial rules and the payor-provider rules. For parties who do qualify as payors and providers, the payor-provider rules are likely to be the frontrunner since they were prepared by the AAA with the input of the AAA Healthcare Dispute Resolution Advisory Coun - cil, on which I serve, along with representatives of hospitals, doctors, HMOs and insurers, and they were designed to allow payors and providers to arbitrate while "containing transaction costs, reducing time spent on resolution of each claim and potentially preserving ongoing business relationships." 4

The goals of efficient dispute resolution at lower cost may be especially important to pro - viders and payors in the current sluggish economy. So may the flexibility of the payor-provider rules. An example of this flexibility is the aggregation of claims provision, which allows a pro - vider to aggregate reimbursement claims involving multiple patients or multiple dates of service. Some of the major differences between the commercial and payor-provider rules are highlighted in the sidebar on page 47. (A more detailed comparison of the two sets of rules can be found in a chart, "Payor-Provider Rules vs. Com mer cial Rules: At a Glance," on the AAA Web site at www.adr.org.)

As important as the AAA rules themselves is the ability of the parties to deviate from the rules. Both the commercial rules and the payorprovider rules expressly state that the parties may vary the rules by written agreement.5 Once the arbitrator is appointed, his or her consent is required for a rule change, so the best approach is to tailor the rules in the arbitration clause, which eliminates the need for any consent.

There is one difference between the commercial rules and payor-provider rules when it comes to modification of the rules. The AAA and the arbitrator may make the right to vary the payorprovider rules "subject to additional fees by the AAA or the arbitrator."6 The AAA and/or the arbitrator may be more inclined to impose additional fees if the parties change the rules in a way that would make the arbitration more complex.

The balance of this article discusses how key provisions in the commercial rules and the payorprovider rules operate. It also indicates some of the ways parties might want to modify them and suggests additional clauses that the parties might want to consider adding to their arbitration clause.

Summary of Operative Provisions

AAA Healthcare Payor-Provider Arbitration Rules

The payor-provider rules, unlike the commercial rules, provide for three distinct electable "tracks.

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