Magazine article Dispute Resolution Journal

Arbitration's Key Role in Resolving Employment-Related Health Care Disputes

Magazine article Dispute Resolution Journal

Arbitration's Key Role in Resolving Employment-Related Health Care Disputes

Article excerpt

As the saying goes, "what's old is new again." The adage is particularly apropos to employment relationships in the health care industry. In the 1990s, the acquisition of medical practices and the employment and management of physicians was all the rage. That is, until several high profile deals went bust and employers began divesting acquired physician practices, terminating employed physicians, and abandoning the physician practice management business altogether at alarming rates.2

Now, fueled by declines in physician reimbursement, increases in practice costs, and new laws fostering new alignment strategies, the acquisition of medical practices and employment of physicians has experienced an extraordinary rebirth. As they did before, these employment relationships and arrangements will likely lead to disagreements and disputes between the parties. This article explores the unique role alternative dispute resolution (ADR), and arbitration in particular, is expected to play in the resolution of inevitable employment disputes in the health care industry.


What differs from the 1990s is the advent of new health care laws, rules and regulations, principally the Patient Protection and Affordable Care Act (ACA), which will impact traditional employment relationships.3 These laws have fostered new types of arrangements between doctors and hospitals and between providers of health care services and the payers for those services. The implementation of accountable care organizations (ACOs) and federal health insurance exchanges, for example, are resulting in novel relationships by and among the various key players in connection with the delivery of and payment for health care services.

The rationale for new physician acquisition strategies implemented by hospitals and health systems has been succinctly articulated as follows:

Systems across the country have been rapidly buying physician groups to expand their referral networks and prepare for a not-too-distant future where they will have to manage the health of their patient populations and be held financially accountable for meeting cost and outcomes goals. The hope is that stronger physician alignment will leave systems better positioned to meet the demands of payers, particularly as more health plans move to narrow networks. In addition, some systems are launching their own managed- care plans and are using physicians to offer a broader and more attractive network. The systems also hope that during the current transition from fee-for-service to outcomes-based payment, employed physicians will essentially serve as loss leaders.3 4

One industry observer has noted that "[t]oday, roughly 25 percent of all specialty physicians who see patients at hospitals are employed-a sizeable increase from the 5 percent of specialists who were hospital-employed in 2000."5

From the physicians' perspective, employment by hospitals, corporate health care providers, practice management companies or payers can result in stability and greater earning power in a hospital- based setting than in private practice. In sum "[p]hysicians are seeking the stability of employment, while hospitals are seeking to align with physicians in response to healthcare reform, which is promoting the use of ACOs, bundled payments and other physician- aligned and integrated delivery mechanisms."6


It goes without saying that the environment in which health care providers and payers operate is exceedingly sophisticated and complex. This was true long before the implementation of the ACA, ACOs, federal health exchanges, and narrow and tiered networks. Given the complexity and sensitivity of many health care industry relationships, arbitration has become an increasingly favored means of dispute resolution.7

In January 2011, for example, the American Arbitration Association implemented a new set of arbitration rules specifically designed and tailored to resolve disputes between providers of health care services and payers for these services, known as the "Healthcare Payor Provider Arbitration Rules. …

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