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Arbitration of Medical Malpractice Disputes: Part II
Unequal Bargaining Power and Duration of the Agreement
John Shufeldt, MD, JD, MBA, FACEP, FCLM, Chief Executive Officer, NextCare, Inc., Attending Physician/Vice Chair, Department of Emergency Medicine, St. Joseph's Hospital and Medical Center, Partner, Shufeldt Law Firm
Unequal Bargaining Power and the Duty of Explanation
In what context would a court determine that a patient was not on equal footing with a provider or institution and, therefore, in a position of weakness regarding his/her ability to effectively bargain?
In Tunkl, the defendant hospital asked all new or incoming patients to sign a document entitled, "Conditions of Admission." This document provided that the patient release the hospital from liability for negligent or wrongful acts. The court observed that the "would-be patient is in no position to reject the proffered agreement, to bargain with the hospital, or in lieu of agreement to find another hospital."1 The court held that the agreement was a contract of adhesion in which the weaker party lacked not only the opportunity to bargain but also any realistic opportunity to look elsewhere for a more favorable contract; the patient must either adhere to the standardized agreement or forego the needed service.2 In other words, a reasonable person would believe that his/her care was predicated upon the signing of an agreement and that he/she lost his/her right to hold the institution accountable for negligent acts.
In Wheeler, a patient who did not know of and was not advised of the existence of the arbitration provision in a hospital's standard printed admission form, which had all the characteristics of a contract of adhesion, was not bound by the agreement.3 Mr. Wheeler was admitted to the hospital for a cardiac catheterization to diagnose coronary artery disease. Following the test, Wheeler suffered a brain stem infarction that caused "locked-in syndrome" wherein he was only able to communicate with his eyes.
The Wheeler's filed an action against the hospital and the doctors who performed the procedure, seeking damages for the injuries sustained as a result of the defendants' alleged medical malpractice.4 The hospital filed for an order compelling the plaintiffs to arbitrate their claims.5 The petition purported that when Mr. Wheeler was admitted to the hospital, he signed a form entitled "Conditions of Admission" that included a paragraph entitled "Arbitration Option."6 The next paragraph provided that if the patient does not agree to the "Arbitration Option," he must either place his initials in the space provided on the form or, as an alternative, notify the hospital in writing within 30 days of his discharge of his election not to agree to arbitration. Mr. Wheeler failed to exercise his option not to agree to arbitration, neither by placing his initials in the space provided on the admission form nor by notifying the hospital within 30 days of his discharge; the hospital served a written demand for arbitration on all parties to the action.
In resolving the issue, the court began with the basic premise that arbitration is consensual in nature and that the fundamental assumption of arbitration is that it may be invoked "solely by reason of an exercise of choice by [all] parties."7 The court noted that there "is a strong judicial policy favoring arbitration, [however] there is just as strong a judicial concern regarding the weaker bargaining powers of consumers."8
The hospital did not dispute that its personnel never called the plaintiffs' attention to the arbitration clause, either before or after his hospitalization, or that the plaintiffs were not provided a copy of the "Conditions of Admission."9
Was the agreement enforceable? In Madden, the state retirement board, as agent for state employees, entered into an agreement to amend the group health care contract with Kaiser to provide that arbitration would be the sole method of adjudicating malpractice disputes.10 In light of Madden's emphasis on the strong policy favoring arbitration of medical malpractice claims, its pronouncement that arbitration is a "proper and usual" means of resolving such disputes, and its observation that arbitration does not constitute a limitation on the obligations or liabilities of the stronger party, it might be argued that an arbitration clause in a hospital admission form signed by a patient should be enforceable even though the patient was unaware of the provision or its consequences.11 The court in Wheeler opined, "Madden does not compel that conclusion in this case."12 The court distinguished Madden by reasoning that "the contract between Mr. Wheeler and the hospital was not arrived at after arduous bargaining between parties of equal strength."13 The agreement was signed without any discussion with the hospital admitting personnel and, moreover, the patient did not receive a copy of it.14 The court opined that under these facts, the agreement is closer to the adhesion contract found in Tunkl than it is to the negotiated contract in Madden.15 It noted: "As we said at the outset, arbitration is consensual in nature; there must be an agreement to arbitrate 'openly and fairly' entered into."16 Resolving the ambiguities in favor of the patient, the "Arbitration Option" should not, according to the court, extend to malpractice claims against "any doctor of medicine" without some explanation to the patient at the time he/she signed the admission form of the intended scope of the arbitration provision. The evidence is uncontradicted that no such explanation was given to Mr. Wheeler.17 Although Mr. Wheeler's care was not predicated upon signing the arbitration agreement, the court determined that he was not aware of the consequences of his signing the agreement and that the hospital's personnel did nothing to enlighten him about the rights he was giving up.
Explanation and Timing of Signature. Does the clinic or hospital staff owe a special duty to the patient to explain what the arbitration agreement means and does the timing of the signature on the form help the court determine whether the contract is unconscionable?
Adequate notice and information. In Broemmer, the Arizona Supreme Court refused to enforce a contract to arbitrate because it was presented to the patient as a condition of treatment, contained no explicit waiver of the right to jury trial, and provided that any arbitrator must be an obstetrician-gynecologist.18 Broemmer, a high school graduate and without insurance, was age 21, unmarried, and 16 or 17 weeks pregnant. She was escorted into an adjoining room and asked to complete three forms, one of which was the agreement to arbitrate that was at issue in this case.19 The agreement to arbitrate included language which stated, "any dispute aris[ing] between the parties as a result of the fees and/or services" would be settled by binding arbitration and that "any arbitrators appointed by the AAA (American Arbitration Association) shall be licensed medical doctors who specialize in obstetrics/gynecology."20 Broemmer completed the forms and clinic staff made no attempt to explain the agreement to her before or after signing it. They also neither had a policy requiring them to explain it, nor did they provide her with copies of the forms.21
Observing that under statutes in other states, agreements were subject to requirements designed to insure adequate notice and information to the patient (such as being set forth on a separate sheet of paper and using boldface type) the court opined that the agreement did not insure that the patient knew she was surrendering her right to litigate a malpractice claim before a jury.22 The court also noted that since the form was given to the patient only a few hours before surgery, it did not afford her reasonable time to reflect on whether she should have revoked the contract after it was executed.23
Broemmer returned the next morning for the pregnancy termination procedure, during which she suffered a punctured uterus that required medical treatment. She filed a malpractice complaint approximately one and one-half years after the medical procedure. By the time litigation commenced, she could not recall signing the agreement to arbitrate. The defendants moved to dismiss, contending that the trial court lacked subject matter jurisdiction because arbitration was required. In opposition, Broemmer submitted affidavits that were uncontested. The trial court considered the affidavits, apparently treated the motion to dismiss as one for summary judgment, and granted summary judgment to the defendants.
On appeal, the appellate court held that the arbitration agreement was a contract of adhesion but that it was not beyond the plaintiff's reasonable expectations and was, therefore, not unconscionable.24 However, the Arizona Supreme Court overturned and looked beyond the adhesive characteristics of the agreement. The court determined that although the contract was adhesive, that alone did not render it unenforceable. Generally speaking, there are two judicially imposed restrictions on the enforcement of adhesion contracts or provisions thereof.25 The first is that such a contract or provision that does not fall within the reasonable expectations of the weaker or "adhering" party will not be enforced against him.26 The second — a theory of equity pertinent to all contracts generally — is that a contract or provision, even if consistent with the rational expectations of the parties, will be denied enforcement if, considered in its context, it is overly oppressive or "unconscionable."27 The court held that it was beyond Broemmer's reasonable expectations because of her emotional state and the failure to explain to her that the agreement required all disputes, including malpractice disputes, to be heard only by a licensed obstetrician-gynecologist acting as an arbitrator.28 The court did not evaluate whether the agreement was in fact unconscionable since it determined that it would be unreasonable to enforce such a critical, unnegotiated, and unexplained term against the plaintiff.29
Rules to consider. Three distinct rules can be elicited from the aforementioned cases. Patients or their representatives have to be aware of what they are signing. They also have to be educated so that they have the ability to make a clear choice regarding the rights they are agreeing to waive. Lastly, providers cannot immunize themselves from negligence claims by the use of an arbitration agreement.
Duration of the Agreement
Does arbitration need to be re-signed if the parties do not have an ongoing relationship? In an action by a patient against a physician for professional negligence, the trial court determined that the arbitration agreement signed by the patient three years previously did not govern the 1993 treatment that gave rise to the suit because there was not sufficient evidence to support the trial court's finding that there was a continuing physician-patient relationship and, therefore, no expectation of future medical transactions between them.30
In Cochran, the plaintiff was referred to an orthopedic surgeon for consultation concerning pain in his left ankle stemming from a previous fracture. Prior to treatment, Mr. Cochran signed an arbitration agreement. Dr. Rubens diagnosed Cochran as suffering from posttraumatic degenerative joint disease, discussed the potential need for surgery, but opted to give him an injection of an anti-inflammatory steroid and for follow-up in two weeks. Cochran felt the injection was not helpful; however, he did not want surgery and did not return for his appointment. Cochran's next visit to Dr. Rubens, which ultimately culminated in surgery, was three years later.
Cochran and his wife filed an action in June 1994 alleging Rubens was negligent during Cochran's ankle surgery. Rubens moved to compel arbitration based on the July 1990 arbitration agreement. The court ultimately found the 1990 arbitration agreement was not effective when Rubens performed the surgery in 1993.
In denying Rubens' petition to compel arbitration, the court impliedly found there was no reasonable expectation of future transactions between the parties after Cochran's 1990 visit to Rubens and, therefore, there was no open-book account between them when Cochran returned to Rubens for evaluation and treatment in 1993.
From this we can determine that if the care is sporadic, not continuous, and, most importantly, that the parties do not expect to have an ongoing relationship, then the agreement, to be effective, must be renegotiated.
What is the rule when a patient returns to his/her provider for the type of care or treatment that brought them to the provider in the first place?31 The Gross court focused on whether there was an ongoing physician-patient relationship because the existence of such a relationship meant the parties expected possible future transactions between them; therefore, the later surgery was a "subsequent open-book account transaction for medical services for which the contract was signed."32
In Gross, the plaintiff and his spouse filed suit alleging that their primary care physician did not diagnose cancer. Gross believed the arbitration agreement was not binding inasmuch as it was only intended to encompass those situations where Gross, "in the course of an ongoing doctor-patient relationship, sought treatment for a condition of the type which initially brought him ... to physician's office."33 The court disagreed, opining that "there was simply no objective evidence from which a reasonable person could conclude either of the parties viewed their relationship as having terminated."34
The Gross court focused on whether there was an ongoing physician-patient relationship because the existence of such a relationship meant the parties expected possible future transactions between them; therefore, the later surgery was a "subsequent open-book account transaction for medical services for which the arbitration agreement was signed."35
The court reasoned that whether a book account is open or closed is a question of fact. It noted, "while an 'open' book account has been defined as '[a]n account with one or more items unsettled,' it also includes an account with dealings still continuing."36 By contrast, a "closed" account is, according to Black's Law Dictionary, one "to which no further additions can be made on either side ..." Thus, it is clear that the "open" or "closed" nature of a book account turns not on the account balance per se, but on the parties' expectations of possible future transactions between them.37
Therefore, it seems logical to conclude that an arbitration agreement, once signed by the parties, covers future care so long as both parties have expectations of an on-going relationship. Without such expectation, an agreement would have to be signed contemporaneously with each patient visit.
Given some of the recent rulings by the Supreme Court, arbitration in the health care arena has become more commonplace. Most states recognize arbitration as a solution that will help relieve crowed court dockets. Also, many providers and hospital systems use arbitration as a method to control risk. Consequently, many hospitals and providers present their patients with arbitration agreements at the initial visit.
Conditions for a valid agreement. Today, there is a strong presumption in favor of arbitration; however, for an agreement to be valid, certain conditions must be met. The agreement can be a contact of adhesion and still be valid provided the patient's treatment is not contingent upon his/her signing the arbitration agreement. Moreover, the patients must be informed, in clear language, what the arbitration agreement means and what effect it has on the patient's ability to litigate. The provider's staff should be available to answer questions and should proactively discuss the terms of the agreement with the patient. The agreement cannot attempt to immunize the provider from negligence claims. The patient should be given a written copy of the agreement to take with them and should not be made to sign during stressful situations. The patient should be given the opportunity to rescind the agreement within 30 days. For every new patient or new treatment plan, the patient should sign a new arbitration agreement. Third parties also may be bound by an arbitration agreement under five distinct theories.
The use of arbitration agreements in the emergency department is problematic at best. Patients can neither be forced to sign nor can their care be contingent upon signing an agreement. However, as arbitration becomes more and more commonplace, providers and institutions must be proactive in educating their patients and the public on the benefits of arbitration for both parties inasmuch as arbitration may offer significant assistance provided that both parties entered into the agreement knowingly and with full disclosure.
1. Tunkl v. Regents of University of California, 60 Cal.2d 92, at 93
3. Wheeler v. St. Joseph Hospital, et al., 63 Cal. App. 3d 345 (App. Dist. 4th 1976)
4. Id. at 349
5. Id. at 350
7. Id. at 355
9. Wheeler at 361
10. Madden v. Kaiser Foundation Hospitals, 17 Cal.3d 699, (state retirement board, as agent for state employees, entered into an agreement to amend the group health care contract with Kaiser to provide that arbitration would be the sole method of adjudicating malpractice disputes).
12. Id. at 365
13. Id. at 366
15. Id. at 376
16. Id. at 366
18. Broemmer v. Abortion Servs. of Phoenix, Ltd., 173 Ariz. 148, 149 (Ariz. 1992)
19. Id. at 149
20. Id. at 149
21. Id. at 150
22. Id. at 155
30. Cochran v. Rubens, 42 Cal. App. 4th 481 (App. Dist. 4th 1996)
31. Gross v. Recabaren, 206 Cal. App. 3d 771 (App. Dist. 2nd 1988)
32. Id. at 778
33. Id. at 777