AAA Announces New Healthcare Payor-Provider Arbitration Rules

     Arbitration has been getting a bum rap lately. Many complain that arbitration has become litigation by another name, with its only advantage being the opportunity of the parties to select the arbitrator. The advantages of speed and lower cost have largely gone by the wayside, or so it would seem. Thomas Stipanowich, writing a guest post at the Disputing blog, recently analyzed this development quite well. Essentially, he argues that all stakeholders in the arbitration game, i.e., parties and in-house counsel, outside counsel, arbitrators and arbitration service providers, bear some responsibility for the shortcomings of arbitration today.

     Professor Stipanowich suggests that all stakeholders will achieve the advantages of arbitration when they cease to treat it like litigation. In the case of arbitration service providers, he urges them to reject a “one size fits all” approach, and to focus on assisting parties and their counsel in crafting an arbitration process that best suits their dispute.

     The American Arbitration Association (“AAA”) clearly took this theme to heart in issuing its new Healthcare Payor Provider Arbitration Rules, effective January 31, 2011. These new rules will be available in AAA arbitrations between healthcare payors (e.g., insurers, HMOs) and healthcare providers (e.g., hospitals, doctors) if the parties agree to their use, or in the future, if parties specifically include reference to these rules in their contracts. Among the highlights of these new rules are features that should serve to restore the traditional advantages of arbitration over litigation.

1. The rules permit all claims and counterclaims between a payor and a provider to be combined in a single arbitration, even if they involve different contracts and different patients.

2. The rules provide for three different types of proceedings or “tracks” which may be used by agreement of the parties, regardless of the amount in controversy: desk/telephonic track; regular track; or complex track. Absent the parties\’ agreement, the regular track will be the default selection. Each of these tracks mandates procedural characteristics that are detailed in the rules.

3. The rules require the AAA to establish and maintain a national healthcare roster of arbitrators, and from that roster, the AAA has designated a subset of arbitrators with expertise in payor-provider disputes.

4. Regardless of the amount in controversy, the rules provide for the arbitration to be conducted by one arbitrator, unless both parties agree upon a panel of three.

5. The rules mandate that a preliminary conference be held regardless of the track selected. The arbitrator is given authority to resolve preliminary issues at that conference, including many that are common to payor-provider disputes.

6. The rules limit the number of depositions permitted by each party according to the track selected: desk/telephonic – 0; regular – 1; and complex – 2.

7. The rules prohibit dissemination or publication of the arbitration award (except as necessary for its enforcement) unless both parties agree in writing.

8. The rules provide that the arbitration award will have no precedential, res judicata or collateral estoppel effect, unless both parties agree in writing.

     Without question, arbitrations conducted under these rules should be faster, less expensive and more efficient than litigation of the same claims. Of course, as Professor Stipanowich points out, the other players in the game will have to do their part as well. The arbitrators on the AAA national healthcare roster for payor-provider cases (myself included) understand what these rules are intended to accomplish. As parties and outside counsel become familiar with these new rules, their use should go a long way towards reestablishing arbitration as the preferred means of resolving payor-provider disputes.

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