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Update on the Use and Effectiveness of Arbitration and Mediation in Healthcare Cases

By Katherine Benesch
March 2006
Pennsylvania Bar Institute's Health Law Institute

Introduction

Arbitration and mediation have become more and more popular as a means to resolve disputes between healthcare providers, payors, managed care plans and other companies in the healthcare industry. In long term care, consumer complaints are often filed in arbitration or mediation only. Alternative dispute resolution has gained widespread acceptance as a means to resolve both simple and complex problems. Recently, arbitrators in Chicago rejected a health plan's claims in a contentious antitrust dispute, in which the plan had argued that providers violated state and federal antitrust laws in their negotiation of contracts. In re Arbitration between United Healthcare of Illinois, Inc. and Advocate Health Care Network, AAA, No. 51 195 Y 01990 03, Nov. 18, 2005.

Many cases never get to court because the parties are governed by a contract that mandates binding arbitration. This is particularly true with managed care and other payor agreements. While some cases are filed in state or federal court, and diverted to ADR, many providers and payors never see a courtroom. On the other hand, healthcare consumers are going to court much more frequently over the validity of mandatory arbitration clauses in contracts for health services. This is occurring both in long term care and in managed health plan agreements.

The courts themselves are using alternate dispute resolution mechanisms with increasing frequency. Federal courts all over the country have adopted a wide variety of ADR processes. The federal courts in almost every state in the United States use some form of ADR program. Florida, Pennsylvania and New Jersey have the most active court-based programs in the country. In the Eastern District of Pennsylvania, Local Rule 53.2 governing arbitration is entitled, "Arbitration-The Speedy Civil Trial". Local Rule 53.2.1, the mediation rule, is entitled, "Court-Annexed Mediation (Early Settlement Conference). In New Jersey, the rules governing arbitration and mediation through the federal courts can be found in the L. Civ. R. 201.1 for arbitration and L. Civ. R. 301.1 for mediation. Healthcare cases filed in state or federal court, however, may be resolved by ADR neutrals experienced in healthcare through dispute resolution services that are not based in the courts. Where an agreement to arbitrate is contained in a written contract signed by both parties, and one party seeks adjudication by the court, most federal courts used to return disputes to arbitration for resolution. See, Brandon, Jones, Sandall, Zeide v. Medpartners, 312 F.3d 1349 (11th Cir. 2002).

Most state arbitration statutes are patterned on the Uniform Arbitration Act. Pennsylvania has an extensive statutory scheme for the arbitration of disputes, which it has titled the Uniform Arbitration Act. 42 Pa. C.S.A. § 7301 et seq. The statute covers arbitration of uninsured motorist claims, collective bargaining and labor relations disputes, public contracts, insurance contracts, issues involving state government employees and others. Under 42 Pa. C.S.A. § 7303, a written agreement to subject any existing or future controversy to arbitration is "valid, enforceable and irrevocable." Where a written agreement requires arbitration before a particular tribunal, ?, the court will not interfere and will construe the matter to be vested within the discretion of the arbitrators. Elkins v. Suplee, 371 Pa. Super. 570,538 A.2d 883 (1988). Where a party to a written contractual arbitration provision refuses to submit the matter to arbitration, the court must order the party to use the arbitration procedure to resolve the dispute. McGinley v. Allstate Ins. Co., 352 Pa. Super. 139, 507 A.2d 420 (1986).

In Pennsylvania, Act 68 governs complaints, grievances and appeals by enrollees in managed care plans, and provider disputes with managed care organizations. Alternate mechanisms for dispute resolution may be set forth in a contract between the managed care plan and a health care provider, if the contract is voluntarily entered into by the parties and is approved by the Department of Health. 40 P.S. § 991.2162(f). These alternate mechanisms may be either "informal dispute resolution" or ADR processes. 28 Pa. Code § 9.711 (2003) Informal dispute resolution systems may be set up to resolve denials based on procedural errors as well as administrative denials involving the level or type of health care service provided. 28 Pa. Code § 9.711(a)(1). ADR systems must be impartial and must be final and binding on both the plan and the health care provider. 28 Pa. Code §§9.711(b)(1)(i) and (b)(3). The ADR process could cover many different types of disputes between managed health plans and healthcare providers.

In New Jersey, the court-based ADR programs involving contract and personal injury actions are governed by the New Jersey Alternate Procedure for Dispute Resolution Act, N.J.S.A. 2A:23A-1 et esq. and the New Jersey Arbitration Act, N.J.S.A. 2A:24-1 et seq. New Jersey Court Rules on the Complimentary Dispute Resolution (CDR) Program are found at R. 1:40-1 et seq. The CDR Program rules set forth the court's definitions of various ADR procedures, the rules under which the court-based programs will function, as well as qualifications for arbitrators and mediators who may serve on the court-based roster.

For resolution of specific types of healthcare issues, a number of New Jersey statutes and regulations contain provisions authorizing some type of ADR and/or hearing process. The Health Care Carrier Accountability Act, N.J.S.A. 2A:53A-30, for example, authorizes the court, with the plaintiff's consent, to employ ADR methods, including, but not limited to, mediation and binding and non-binding arbitration in place of a hearing. N.J.S.A. 2A:53A-35. The hearing under this statute is to determine the liability of an organized delivery system or carrier resulting from negligence in the denial or delay of the approval of medically necessary covered services. N.J.S.A. 2A:53A-33(a). Other examples include hearings for provider terminations from a health maintenance organization, N.J.A.C. 8:38-3.6, and the complaint and appeal system for members of HMOs established at N.J.A.C. 8:38-3.7.

Healthcare disputes of all types and for all amounts of money increasingly are being resolved through ADR. Most large healthcare disputes, however, are not arbitrated or mediated through the court process, even if the case has already been filed in state or federal court. Rather, the parties seek the ADR services of healthcare lawyers trained and experienced in arbitration and mediation. The reason for this is that the issues in a large reimbursement, managed care or healthcare contract dispute are often so convoluted that they are not easily understood by lawyers or judges who are not knowledgeable in the types of factual issues involved. Further, mediation in healthcare often is successful where the mediator assists the parties in reaching a creative solution to the legal problems. This cannot be done without knowledge of the operations, functioning and federal and state regulation of the providers and entities within the healthcare industry.

Effectiveness and Limitations of Different Types of ADR Procedures

In general, the most commonly used processes for ADR are as follows:

1. Binding Arbitration - The dispute is presented to and decided by one neutral arbitrator or a panel of three arbitrators. In the event that a panel is used, the arbitrators may be selected in a variety of ways. Often, each party selects its own, non-neutral, arbitrator, and a third, neutral, arbitrator is chosen by the other two. In the alternative, the parties are given a list of names to choose from, and each party selects the names of individuals it wants to use as an arbitrator. Sometimes, as in more complex cases, all members of the arbitration panel are chosen for their expertise in the field of law and experience with the ADR process. By court rule in New Jersey, an arbitrator may render a specific award. R. 1:40-2(a)(1). The same is true in Pennsylvania under 42 Pa.C.S.A. § 7310.
2. Mediation - The parties and their lawyers meet with an impartial mediator or panel of mediators, who are all neutral. Mediators are authorized to facilitate the resolution of issues in dispute. They do not, however, make decisions for the parties, or impose their own judgments to resolve the case. Mediators meet with all parties in a dispute, and use a variety of techniques to help the parties reach a solution. Usually, mediation sessions are private and confidential. (See discussion below.)
3. Mediation/Arbitration - After initial mediation, any unresolved issues are decided through arbitration. Sometimes, this process can be productive after a mediation with an unsuccessful outcome. The neutral may assist the parties to develop an efficient discovery plan, and/or to assess the strengths and weaknesses of their cases. Often, after an unsuccessful mediation, the parties choose different people to act as the neutrals in the case. Sometimes, however, the parties will continue to use the same person as an arbitrator, who had previously served as a mediator.
4. Early Neutral Evaluation - At an early stage in litigation, counsel and their clients meet with a neutral, who assists them in identifying and analyzing the factual and legal issues in the case. The neutral may assist the parties to develop an efficient discovery plan, and/or to assess the strengths and weaknesses of their cases. This process has been particularly helpful in medical malpractice cases, where the position of counsel may be bolstered with his/her client through a detailed evaluation of the client's position by a neutral third party.
5. Mini Trial - Advocates present a shortened version of their cases to the opposing parties, their lawyers and a qualified neutral. The purpose of the mini-trial is to refine the disputed issues and to assist settlement discussions. The neutral makes a non-binding decision, articulating his/her reasoning, and may then assist the parties by mediating the settlement negotiations.

Other methods of ADR include non-binding arbitration, private judging, fact-finding/special referee and voluntary settlement conferences. These processes are applied less frequently, however in healthcare matters.

Types of Healthcare Cases Resolved Successfully through ADR

ADR is particularly well-suited to the resolution of healthcare disputes, and its procedures are being used frequently by large healthcare companies and institutions, as well as individual providers. As noted above, ADR processes may be mandated by statute, as well as by state and federal courts. Other organizations are known for their voluntary dispute resolution services for healthcare problems. And, while most healthcare disputes are not settled through the court process, judges do suggest that complex healthcare matters may be resolved more easily through the mediation process. The American Arbitration Association ("AAA"), JAMS and the American Health Lawyers Association ("AHLA") Alternate Dispute Resolution Service are three of the most widely known services, which provide lists of qualified individuals who act as arbitrators and/or mediators to decide healthcare cases.

The types of healthcare issues decided successfully through an ADR process include:

1. Managed care contract disputes between providers, payors and consumers, involving contract interpretation and/or reimbursement issues;
2. Disputes involving disease management and other managed care administrative issues;
3. Employment contract disputes between physicians and their employers;
4. Covenants not to compete involving physician employees or contractors;
5. Medical staff and peer review disputes;
6. Shareholder disputes within physician practices;
7. Disputes involving healthcare joint ventures;
8. Contract disputes within medical practices;
9. Contract disputes involving vendors to healthcare facilities;
10. Disputes involving the dissolution of medical practices;
11. Disputes involving medical staff departments;
12. Disputes involving management services agreements;
13. Disputes between and among healthcare providers, government agencies and communities;
14. Contested guardianship disputes;
15. Medical necessity disputes.; and
16. Long term care quality of care and billing issues.

In addition to those matters listed above, medical malpractice cases increasingly are being handled in ADR forums. See, Carl Oxholm, III, "A Whole New Ball Game," The Pennsylvania Lawyer 24 (May-June, 2005).

What Rules Apply

The rules that apply depend on the forum and/or the ADR service through which the dispute is being resolved. Cases referred from federal or state court must be arbitrated or mediated under the rules of the particular court, statute and/or service in which the case is filed. For example, cases administered by the AAA are governed by the AAA Commercial Arbitration Rules and Mediation Procedures. As noted above, both New Jersey and Pennsylvania have statutes and rules of court that govern arbitration and mediation. These rules may not apply to the subject matter of the case at hand. If a contract specifies which state law will be applied, however, the state law governing the arbitration and/or mediation process may be used in the absence of specific rules set forth by the private ADR service.

While the Federal District Court for the District of New Jersey and the Federal District Courts in the Eastern, Middle and Western Districts of Pennsylvania all have their own local rules (as do all federal districts), cases in the federal system may be governed by the Federal Arbitration Act. 9 U.S.C. § 1 et seq. (2001). The FAA reflects a "liberal federal policy favoring arbitration agreements" and "creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate." "As a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp. v Mercury Constr. Co., 460 U.S. 1, 103 S. Ct. 927 (1983), quoted in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S. Ct. 346 (1985).

The FAA has been held to apply equally in federal and state courts and to preempt contrary state law. Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 115 S. Ct. 834 (1995). In a dispute involving HMOs, however, state insurance law, and not the FAA, may control where the health plan arbitration clause does not comply with state law. See, Smith v. Pacificare Behavioral Health of California, Inc., 93 Cal. App.4th 139, 113 Cal Rptr.2d 140 (2001).

In general, strict rules of evidence do not apply in ADR, and every ADR service has its own rules that must be followed. Thus, for example, the AAA and the AHLA each have their own rules for arbitration and mediation, including rules for expedited process. Often, evidentiary disputes are resolved pursuant to an ADR clause in the contract, which sets forth the rules to be followed.

One of the reasons for ADR is to loosen the strictures imposed by a more formal court process. ADR has the advantage of allowing the parties to work with the arbitrator and/or mediator to develop a process (within the rules) that they are comfortable with and that will lend itself to a resolution of the issues in dispute. In many cases, the expedited nature of the process does lead to settlement more quickly than would occur in a case making its way through the court system.

Availability of Discovery

As with other ADR rules, availability of discovery depends on the forum and/or the ADR service in which the case is found. Discovery is limited under the Federal Arbitration Act. Pennsylvania state law allows discovery in arbitration under 42 Pa.C.S.A. § 7309. Under New Jersey state law, N.J.S.A. 2A:23A-10 specifically allows discovery. For an excellent review of this subject under New Jersey law, see the article by Murry D. Brochin entitled, "Pre-Hearing Discovery for Arbitration", 212 New Jersey Lawyer 21 (Dec. 2001). In cases referred by state court judges to the CDR program in New Jersey, the mediation referral order will indicate the amount of time allowed for the case, but the discovery period in court will not be stayed.

In cases where state procedural law does not necessarily apply, the right to and extent of discovery allowed may be left up to the discretion of the arbitrator or mediator and/or arrived at in consultation with the parties. A typical description of the extent of discovery available is found in the AHLA Rules of Procedure for Arbitration:

4.02 Discovery

The arbitrator may allow the parties to conduct such discovery as the arbitrator believes necessary or proper to assure a full and fair presentation of the disputed issues by the parties without unnecessary or undue delay or expense to the parties.

Thus, discovery in arbitration and mediation may well be what the parties can agree to with the dispute resolver. As one commentator has pointed out, much less time is devoted to discovery in an ADR process than is usually taken up by discovery disputes before a court of law. Nonetheless, the absence of discovery in arbitration or mediation, "...results in the hearing having to occur, because cases are much more likely to settle when the parties fully understand each others' documents and witness testimony." Frank P. Fedor, "An Arbitration Primer for Providers", Healthcare Financial Management 46 (Nov. 2002). In this author's experience, however, this has not been the case. Discovery is available in arbitration, and the disputes are more easily resolved through a procedure where both of the parties have agreed to be bound. In mediation, documents and information are exchanged between parties who have agreed voluntarily to attempt to resolve the dispute. This document and information exchange may resemble formal discovery less than in the arbitration procedure, but it can accomplish the same purpose.

Use of Experts in Arbitration

Very often the subject of arbitration or mediation in a healthcare case involves convoluted contractual relationships between the parties and technical calculations of costs and charges. As in litigation, experts may be used by the parties in two ways: 1) as consultants to counsel, who do not appear in the case, but may assist counsel behind the scenes to resolve technical issues; and/or 2) as experts in the case to present testimony or information on administrative relationships and/or calculations of costs, charges or damages.

Neutral experts may be hired, however, to advise the arbitrator in analysis of technical claims made under the agreements in dispute. If this is done, all parties to the proceeding should review the qualifications of the expert proposed by the arbitrator, and should be asked to give their approval to the individual who will be hired to work with the arbitrator. It is only after all parties to the proceeding have approved the individual that such an expert should be hired.

The role of an expert to advise the arbitrator must be carefully circumscribed. While the expert may sit in on all of the arbitration hearing sessions to listen to the evidence, this person should not be allowed to participate in the arbitration itself. The reason for this is that an expert may raise issues, which the parties have not brought into the case or thought of themselves. This should not be allowed to occur, as a neutral expert should not be assisting anyone but the arbitrator.

An accountant, who is an expert in managed care financing and reimbursement methodologies, can be most helpful in assisting the arbitrator develop a method to analyze allegations involving whether or not appropriate reimbursement was made pursuant to the contract. This is particularly true where there are complex reimbursement formulas and/or questions about how costs and expenses were arrived at and accounted for. Also, there may be accounting regulations that should be applied to analysis of contract issues. Thus, accountants knowledgeable in hospital or managed care financing can provide invaluable assistance in analysis of the claims made in complicated reimbursement cases.

Applicability of HIPAA to Arbitration/Mediation

HIPAA has been raised as a defense and/or an excuse to prevent arbitration in a healthcare case from moving forward. This line of reasoning holds that to proceed with the arbitration process, where patient records are part of the evidence in the case, violates the confidentiality of patients' individually identifiable health information protected by HIPAA.

This argument, however, ignores the explicit exception to HIPAA nondisclosure for protected health information during the course of litigation or administrative proceedings. Under 45 C.F.R.§ 164.512(e), a covered entity may disclose protected health information in the course of any judicial or administrative proceeding in response to an order of court or administrative tribunal or in response to a subpoena, discovery request or other lawful process if "satisfactory assurance" or a "qualified protective order" is obtained by the party seeking the information. This author has found no cases on the issue of whether this exception applies to arbitration or mediation proceedings. Nonetheless, at least one commentator has noted that, "while it seems unlikely that HHS would take the position that the litigation exception does not apply to alternate dispute resolution procedures, this issue has not yet been formally addressed." Scott D. Stein, What Litigators Need to Know About HIPAA, 36 J. Health Law 433 (Summer 2003).In addition, a covered entity may use or disclose protected health information for payment purposes. 45 C.F.R.§164.502(a)(1)(ii) . Thus, production of protected health information in any arbitration or mediation in which payment is the issue may not present a HIPAA problem. As noted by this author in a recent arbitration, it was not the intent of the HIPAA statute and regulations to prevent administrative adjudication from taking place in matters where protected health information is a crucial part of the evidence.

Even if it were held that the HIPAA exception does not apply to arbitration or mediation, as these are not strictly litigation, this problem can be resolved in several different ways. First, it may be possible to redact from any patient records any individual identifying information (i.e. to de-identify the patient in the material used as evidence in the case). Second, it may be possible to aggregate the material from patient records, so that no individual identifying information is used in the case. This is another method of de-identifying, so that confidential information would not be revealed, even if other information from the records is used in the case.

Effect of ADR on Lawsuits Already Filed

Often the court order referring a case to mediation will set forth the amount of time the parties and the mediator have to resolve the case. If it is not settled within this time period, the case will revert to the regular litigation process. Under the New Jersey Acts, the court will stay the action for as long as it takes to resolve the case in ADR, as provided by the terms of the parties' contract, unless the party seeking a stay is already in default. N.J.S.A.2A:23A-8 and N.J.S.A. 2A:24-4.

For cases filed in United States District Court, the time allowed for ADR will depend on the specific judge to whom the case is assigned. The federal judge will stay the proceedings in federal court to allow the ADR process to take place. This time limit placed on the case by the judge does, in fact, encourage the parties to resolve the case before it must be returned to court.

Litigation over Agreements to Arbitrate

Agreements to arbitrate contained as part of a larger contract must meet the same standards applied to any contractual agreement between the parties. Thus, agreements requiring a party to arbitrate and give up broader rights to litigate in court or secure damages may not be upheld if they are found to be contracts of adhesion or violative of rights secured by a party under state statute. In Prieto v. Healthcare and Retirement Corp. of America, Fl. Dist. Ct. App., No.3D03-3244, Dec. 21,2005, a Florida appeals court ruled that the circumstances surrounding the manner in which the plaintiff was required to sign an arbitration provision before her father was admitted to a nursing home were procedurally and substantively unconscionable. The agreement denied the patient rights to which he was entitled under the Florida statutes, namely non-economic damages, punitive damages and attorneys' fees, as well as access to discovery to prove statutory violations.

Similarly, a California appellate court held that an arbitration clause located three paragraphs before the final signature line on a health plan enrollment form, and written in the same font and size as every other paragraph in the agreement was unenforceable under California state law. Robertson v. Health Net of California, Inc., Cal. Ct. App., No. A106879, filed Aug. 31, 2005, certified for publication Sept. 28, 2005. Under California Health and Safety Code Section 1361.1, arbitration clauses in health plans must be "prominently displayed" and located "immediately before" the subscriber's signature line. Nonetheless, a different California appeals court found that there was no authority in the federal or state constitution to uphold plaintiffs' claim that an insured has a constitutional right to choose between arbitration and a jury trial in the context of a group health insurance plan. Rather, the appeals court held that under the Knox-Keene Health Care Service Plan Act of 1975, the legislature specifically approved arbitration as a forum for resolution of disputes under health care service contracts, thus authorizing the waiver of a jury trial in these cases. Viola v. California Dept. of Managed Health Care, Cal. Ct. App. B174455, Oct. 11, 2005.

See also, Vicksburg Partners, L.P. v. Stephens, No. 2004- CA-01345-SCT (Miss. Sept. 22, 2005), where the Mississippi Supreme Court found that the agreement to arbitrate in the admissions agreement for a nursing home was a contract of adhesion, but was not unconscionable in that the patient who signed was competent, had knowingly executed the document with his daughter present and was given a choice about whether or not to sign.

In an interesting malpractice case, the Texas appeals court found that the trial court had wrongfully denied a chiropractor's request for arbitration. In this case, the chiropractor had been sued by his patient for gross negligence in the failure to take x-rays, failure to properly evaluate and the performance of improper chiropractic treatment. The chiropractor presented a valid arbitration clause in the contract with his patient, and the plaintiff's claims were within the scope of the agreement. The Federal Arbitration Act was found to govern the written arbitration clause, as the transaction between chiropractor and patient was found to involve interstate commerce. Once a valid arbitration clause is presented, the court must compel arbitration, as long as the claims made are covered under the arbitration clause. Kroupa v. Casey, No. 01-05-00224-CV (Tex. App. Dec. 8, 2005).

Advantages/Disadvantages of Arbitration and Mediation

1. Arbitration - Arbitration has the advantage that the arbitrator or panel may make a decision in the case, issue an award and enter that award in the court docket. This, of course, depends on the rules of the ADR forum. If the case is not in court, a binding arbitration decision should resolve the matter more quickly than if the case were to be completed through litigation. In cases where the parties want to resolve the dispute, but are hostile towards one another and cannot agree on the process, an arbitrator may make decisions that the parties will follow to continue the case towards a resolution. Often in binding arbitration, the case will be settled prior to the arbitration hearing because the parties want to save money, and do not want to pay the arbitrator, panel or counsel to complete the hearing process. Decisions can be made in a more flexible procedure and setting, which is private and confidential to the parties.
   
   In many types of healthcare cases, arbitration is successful because the parties want a decision quickly, and do not want to spend the time and money in court. Further, many healthcare contract disputes involve providers and/or insurers who want to continue to do business with one another after the case. Thus, they do not want to engage in the hostile and adversarial nature of the litigation process, which could result in a loss of their ability to conduct business together in the longer term.
   
   Publicity is another factor. Private arbitration and mediation are not subject to the public and histrionic nature of a courtroom proceeding. Thus, many defendants prefer to have their cases resolved in an ADR forum, and settled through a confidential settlement document, which may not be available to anyone but the parties themselves. In cases where there may be more than one plaintiff or complainant with a similar complaint, the private nature of the ADR process also lessens the precedential value of a settlement. This is particularly important in cases involving employment matters, medical malpractice cases and/or staff privilege issues.
2. Mediation - Mediation has been called a "settlement device", which maximizes the probability of early resolution of the dispute. Mediation also offers the parties the advantage of preserving business relationships. While mediation has a number of advantages, it is not binding and requires the willingness of the parties to reach a solution. If one party desires to draw out the process, and/or is unwilling to compromise, mediation will not be successful. Thus, the mediation process will only resolve the dispute, where the parties want to do so. The mediator cannot compel participation or impose a settlement.
   
   Mediation is not appropriate in the following circumstances: 1) there is a significant imbalance of power between the parties; 2) settlement is not realistically possible; 3) the dispute involves issues of bad faith or party credibility is an issue; or 4) where a binding precedent is desired.
   
   In mediation, however, the parties are able to control the process much more than in litigation and/or in arbitration. The parties can control how the process will be conducted and are able to manage how the case proceeds and how long it will last. Most important, the parties may select the mediators. In complex healthcare disputes, mediation can be more productive than litigation, if the mediators are knowledgeable in healthcare regulatory matters and experienced with use of the mediation process.

A note on cost in both arbitration and mediation is that while many people believe that ADR is less costly than litigation, recent studies have confirmed that this is not always the case. Particularly in small cases, the cost of ADR may be equivalent to that of litigation.

How to Select a Healthcare Arbitrator/Mediator

It is important to select the right mediator or panel of mediators for the case. As noted throughout this paper, a healthcare mediator must have knowledge of the federal and state regulatory systems for the particular type of health issue, which is the subject of the case. In cases involving managed care and reimbursement, it is essential that at least one mediator understands the financing mechanisms for managed care and the types of risk-sharing and insurance features that are used in the industry.

It is important that the mediator understands the mediation process and how to use it to achieve results. Being a successful mediator requires the ability to help people settle their differences. The essential qualities for a good mediator include: the ability to listen and creativity in problem-solving. Patience and even-handedness are also most important. Successful mediators have been described as intelligent, articulate, creative, patient and persistent.

Serving as a facilitator is very different from acting as a decision-maker. As one author has pointed out, "Do not assume that retired judges necessarily have any special expertise, either. The experience of having served on the bench may help the mediator only by providing some basis for the value he or she assigns to the case in his or her discussions with the parties." Louise A. LaMothe, "Choosing Who and What", Chapter 4 in Atlas, Huber and Trachte-Huber, Eds., Alternate Dispute Resolution: The Litigator's Handbook (ABA Section of Litigation 2000).

Confidentiality/Ethics

1. Confidentiality of the ADR Process - All types of ADR procedures are confidential, and disclosures made by a party cannot be introduced as evidence is any subsequent or other proceeding. By court rules in New Jersey, a mediator cannot be called or subpoenaed as a witness in a subsequent proceeding. Rule 1:40-4(c). By statute in Pennsylvania, all mediation communications and documents are confidential, may not be compelled through discovery or admitted as evidence in any action or proceeding. 42 Pa.C.S. § 5949.
   
   In private ADR processes, all arbitrators and mediators must keep confidential any communication from a party that the neutral has not been specifically authorized to convey to another. Assuring the parties that confidentiality will be maintained is critical to the success of the mediation. The parties must have a level of comfort that what they say to the mediator will not be disclosed to the other side, unless the mediator is expressly authorized to do so. Confidential communications help the mediator to create options necessary to reaching a negotiated agreement between the parties. Confidentiality also augments the privacy feature of the mediation process. Where the parties wish to keep the result of the mediation private, communications which took place during the mediation session must be kept confidential.
   
   There are several exceptions to the rule of strict and absolute confidentiality. These exceptions arise from established and evolving laws that impose conflicting duties on arbitrators and/or mediators. Examples include: 1) when a crime occurs during the course of the proceeding; 2) when the mediator learns of a past crime committed by one of the parties; 3) when law or public policy mandates disclosure; 4) when action is required to prevent threatened physical harm; and 5) when one of the parties brings an action against the mediator alleging misconduct.
2. Ethical Guidelines for the ADR Neutral - There are many ethical issues that arise prior to and during the course of an ADR proceeding. First and foremost, an arbitrator or mediator must be impartial, have no conflict of interest and disclose prior to commencement of the proceeding any relationship that he or she had previously with any of the parties. For example, a lawyer cannot serve as an arbitrator while he simultaneously represents one of the parties in another matter unrelated to the arbitration hearing. Donegal Ins. Co. v. Longo, 415 Pa. Super. 628, 610 A.2d 466 (1992). As the arbitration or mediation process progresses, the neutral may have feelings which lean toward one side of the case or the other. Nonetheless, the neutral must appear at all times to be impartial, and must, in fact, remain impartial in his/her ability to assist in the mediation or render an arbitration decision.

In 1994, the American Bar Association Section on Dispute Resolution, the American Arbitration Association and the Society for Professionals in Dispute Resolution jointly published Model Standards of Conduct for Mediators. Also, several states, including Georgia, Texas and Florida, have adopted ethical standards or standards of professional conduct for dispute resolution. Standards of conduct have been proposed in other states. Recently the American Bar Association Section on Litigation published an important document entitled, "Ethical Guidelines for Settlement Negotiations". While these guidelines do not specifically refer to ADR procedures, this author has found them to be most helpful in the context of arbitration and mediation.

This article first appeared as part of the seminar materials for the Health Law Institute, #2006-4170, copyright Pennsylvania Bar Institute. It may not be further reproduced without the express permission of PBI.