The Consumer Affairs ADR Initiative
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Introduction
Alternative Dispute Resolution (ADR) offers parties to a dispute the options of mediation and arbitration as means for resolving the dispute. Mediation is a voluntary process that uses a trained neutral—a skilled negotiator who has no stake in the outcome of the dispute—to help the parties voluntarily resolve their differences. Arbitration is the use of a trained or expert neutral—a judge who is knowledgeable in the subject matter that surrounds the dispute—who hears each party present its case and then renders a decision.
The Consumer Affairs ADR Initiative would provide dispute resolution options to consumers and businesses through the Office of Consumer Affairs and Business Regulation (OCABR) and through the nine agencies that come under its aegis. To accomplish this, the office would hire a director of ADR, whose principal responsibility would be to oversee the construction of ADR options in these arenas. The first phase of the initiative and the bulk of this proposal would focus on three major areas: consumer complaints against physicians at the Board of Registration in Medicine; Lemon Law disputes within the OCABR; and consumer complaints regarding treatment and care at a Boston-area HMO. Once the proposed programs for these three fields are in place, the OCABR envisions the replication and expansion of ADR to its remaining agencies.
The Problem
Imagine this: A four-year-old girl suffers an eye injury and is taken to see a physician. The doctor is a woman at the top of her profession, working at a topnotch hospital. As hard as she tries, the physician cannot control the little girl’s behavior. The child, accompanied by her young parents, refuses to stay still and allow the physician to treat her injury, which requires a delicate procedure. Even the girl’s parents fail to calm her down. It is clear that everyone is losing their patience because of the frightened girl. Suddenly, a slap. The little girl starts crying and quiets down. Her parents are momentarily shocked and silent. The physician stands still, dismayed, refusing to believe she has just slapped a four-year-old patient. Before she can explain what has happened, the parents take the girl and rush out, promising that this will not end quietly. They consider their options, realize that going to court is too costly and risky, and decide to file a complaint with the Board of Registration in Medicine.
Dispute Resolution at the Board of Registration in Medicine
The Board of Registration in Medicine (the Board) is one of nine agencies that are overseen by the Massachusetts Office of Consumer Affairs and Business Regulation.1] The Board licenses all physicians in the Commonwealth, and when complaints against physicians arise, the Board investigates and attempts to resolve them. If the Board finds merit to the complaint, it may take sanctions against the physician up to and including the revocation of the physician’s license. In the case of the slapping physician, the Board could take one of two paths: dismiss the case or discipline the physician. Dismissing the case, perhaps for lack of evidence, is likely to upset the complainants and appear to exonerate the physician. Disciplining the physician through a negotiated agreement or a trial hearing might take a long time and consume many scarce resources. Variants of this model can be found in each of the nine OCABR agencies.
There are several problems with this paradigm of administrative law: it is costly to administer, it is slow to resolve disputes, it is frustrating to the parties involved, it almost always involves the aggravation and expense of lawyers, and the results it provides are often not satisfying to the consumer and licensee alike, regardless of who prevails. Because these processes were put in place 50 or even 100 years ago, their designers never anticipated the volume of complaints that today’s agencies are called upon to handle. The system that would be required to administer this system as it was originally envisioned to work—including the requisite number of clerks, investigators, staff attorneys, and administrative law judges—is vastly more expensive than what today’s taxpayers will bear.
Disputes between patients and physicians can often have grave ramifications. A patient’s health—even survival—could be on the line, as could a physician’s reputation and livelihood. Resolving these disputes through a system in which the individuals communicate only through their representatives, intensifies the adversarial nature of the dispute and further polarizes the disputing parties.
The traditional dispute resolution process is rooted in the need to establish blame whenever a medical error is committed. Pointing the finger at the guilty party, however, does not help to correct past mistakes, nor does it satisfy a complainant whose concern is to prevent others from suffering from the same error. Furthermore, responsibility for an error frequently extends beyond the physician. In such cases neither the physician nor the complainant are likely to find satisfaction or achieve closure.
The Board receives approximately 700 complaints against physicians per year. Each complaint is reviewed and classified under one of five categories, which is subject to change at each stage of the investigation process. Category 1 (C1) is the lowest and C5 the highest in terms of disciplinary potential. C1s are not opened and docketed, but are kept on an internal database and dismissed with a letter to the complainant, explaining that the complaint did not have enough substance to require further action. These complaints are anonymous, frivolous, vague, or do not fall within the Board’s jurisdiction.
Any case classified as C2 or higher requires a physician’s response. The physician’s response and the original complaint are reviewed together in order to establish a coherent account of the case and determine whether disciplinary action is necessary. If a case has no disciplinary potential, if there have not been multiple prior complaints against the physician, and if there is no possibility that this case would result in a departure from Board precedence, it is classified as C2. Examples of C2 complaints are billing disputes and minor professional misconduct, such as rudeness or excessive delay in the waiting room. C2 cases are referred by the Board staff to the Complaint Committee on a list for approval to dismiss. After approval, the complainant and the physician are informed in writing of the dismissal.
If a complaint shows probability that a physician has violated the law or the standard of practice, but there may not be enough evidence to go to an adjudicatory proceeding, the case is classified as C3. These cases are referred to a Board member after staff review. Cases dismissed by the Board member go to the Complaint Committee for final approval, after which the complainant and physician are notified in writing. If the reviewing Board member determines that there may be a more serious infraction, a C3 complaint may be re-categorized as a C4 complaint. Complaints that allege substandard medical care are now routed to the Clinical Care Unit for clinical review of records. These cases are written up for a new subcommittee of the Board—the Clinical Care Committee (CCC)—to be screened. The CCC decides whether the case should be dismissed or should be worked up for possible discipline. A C4 complaint is one that requires more rigorous scrutiny because the complaint shows a significant probability that a serious violation of the law or standard of practice exists.
Any dismissed case C3 or higher may be accompanied by a Letter of Advice, a Letter of Concern, or a Letter of Warning from the Complaint Committee. The Letter of Concern or Warning may not include conditions set by the Board, but may include a warning that further complaints may result in disciplinary action. A Letter of Advice is sent to a physician in cases in which the Complaint Committee feels that future errors can be avoided if the physician follows the written advice.
The most serious category of cases is C5, for which the Complaint Committee would recommend a full Board review of the complaint. Three criteria may be used to determine that a particular complaint is a C5:
1) the complaint involves issues of violation of the law or regulation or substandard practice, 2) the case evidence presents factual or legal issues that will likely result in disciplinary action, 3) the physician’s practice poses a threat to patients’ health and safety. These cases go through full Board consideration. If the Board dismisses the case, the two parties are informed in writing. If, however, the Board decides to take action, it will issue a Statement of Allegations.
If the Board determines a need to issue a Statement of Allegations (i.e., files formal charges against a physician), the case may be resolved in two manners: First, a Consent Order may resolve the case prior to the issuance of the Statement of Allegations. Second, the Statement may be issued, and the complaint is then referred for hearing before an administrative magistrate at the Division of Administrative Law Appeals (DALA).
Consent Order
A Consent Order takes place when the Board and the physician against whom the complaint was filed agree on the charges and the sanction. One of the advantages of a Consent Order is that it saves the time of entering a full hearing at DALA. Saving time and money is an incentive for both the Board and the physician to enter a Consent Order. Depending on the severity of the case, a Consent Order may include one or more of the following sanctions: admonishment, censure, reprimand, fine, public service, education and training, license restriction, probation, suspension, or revocation of the physician’s license.
Referral to DALA
When the Board issues a Statement of Allegations without a Consent Order, the case is referred to DALA for a hearing. The purpose of the hearing is to determine the facts of the case. Once the facts of the case are determined, the administrative magistrate sends a recommended decision to the Board for consideration. The recommended decision includes a summary of findings and conclusions of law, which are reviewed by the Board for final approval. The Board may accept the recommendations, amend them, or send them back to DALA for further hearing. Once the Board approves a decision, it becomes final. At any point during the DALA hearing a Consent Order may be negotiated between the Board and the physician.
In cases in which the Board feels that the physician’s continued practice poses an immediate and serious threat to public health, safety, and welfare, it may issue a Summary Suspension, which suspends a physician’s license prior to the hearing. The physician has the right to a hearing regarding the decision of a Summary Suspension.
Evaluation
The strength of the Board’s traditional disciplinary process lies in the effort invested to obtain a full account of the facts pertaining to each case and following it with a fair judgment. The entire process is thorough, both in terms of investigation and decision making. At the same time, the process does have its drawbacks for some cases, which may be unnecessarily resource-intensive.
Complainant and Physician Satisfaction
By the time a complaint is filed, a person has already been through emotional distress as a result of an unpleasant experience with a physician. Whether right or wrong, the complainant is anxious to understand what has happened and how that situation could be avoided in the future. For the most part, the traditional process may not provide the needed sense of closure, mainly because the complainant does not play a role in the resolution process. Aside from the Voluntary Mediation Program (see below) and the letters of notification, the complainant is not aware of the progress made with his or her case during the investigation phase.
The physician, like the complainant, is concerned about the problem that has arisen. Anxious to clear the record and protect her or his career, the physician needs to understand the facts that led to the problem and the way to go about correcting it or preventing it from happening again. In cases of fatal errors, the physician may be as haunted and shocked by the incident as the complainant. The impact on the physician is tremendous and may lead to doubt about his or her abilities as a doctor. Physicians in this situation need a resolution process that addresses their need for understanding and for closure as well.
The traditional process used by the Board, however, often fails to do so. Some stages of the resolution process are geared toward correction. The Letter of Advice and Letter of Concern try to point out a current or potential problem and suggest a form of correction. However, when complaints reach a C4 and especially C5 status, the focus of the process shifts to establishing accountability. By the time a case goes to DALA for hearings, the physician is replaced by his or her lawyer and the complainant virtually disappears, which further deteriorates the communication between all parties. Such a process is suitable for cases where physicians refuse to acknowledge any problems, but not for cases in which the physician is also troubled by the complaint. For the latter, it is important to keep the physician inside the process and allow him or her to be part of the resolution.
Resources
Time and money are two resources that are not abundant at any state agency. Processing complaints, particularly those that reach C4 and C5 status, requires much of both resources. A case that goes to DALA can take more than a year to resolve, during which time the Board has to pay a prosecutor and the physician has to bear the cost of legal counsel. C4 and C5 complaints may bounce between the Complaint Committee and the Board, or between DALA and the Board, taking a long time to be resolved. Because these particular cases demand so much of the Board’s resources, other cases receive less attention and are sometimes dismissed with a letter due to lack of resources. There is, therefore, a need for a dispute resolution mechanism that would handle cases in a more timely and less costly fashion.
Proposed Solution: Mediation
Mediation is a speedy and relatively inexpensive mechanism for resolving disputes without entering into legal proceedings. It gives the disputing parties an opportunity to discuss the case with the help of a neutral facilitator and reach a mutually agreeable settlement. Mediation allows both parties to avoid the win-lose situations of arbitration or trial, which is a great incentive especially when the stakes are high.
The Board of Registration in Medicine established a Voluntary Mediation Program a few years ago for cases involving serious communication problems between physicians and complainants, but where clinical care was deemed adequate. It is used to maintain and enhance physician-patient relationships that are tainted by incidents of misunderstanding. Mediation through the Voluntary Mediation Program is conducted by a neutral third party. The process is timely and confidential, two features that may provide an incentive for both the physician and the patient. Still, only a handful of cases have been sent to mediation since the birth of the program. Their successful resolution, however, should be the impetus for exploring the benefits of mediation.
Cases Suitable for Mediation
The proposed mediation program focuses largely on cases in categories 4 and 5, that is, the most serious complaints. Certain C3 cases of poor communication and substandard care should also be considered. These C3 cases fit two broad categories: an articulate and frustrated complainant continues to tie up Board resources because the dismissal offers no satisfaction, or the Board would not discipline the physician but some negligence seems clear. Offering these complainants and doctors mediation would serve an educational function and save resources either currently or down the road (when the physician’s negligence might be repeated and call for discipline).
One of the main reasons for focusing on these types of cases is that they demand the most resources from the Board. Sending these cases to mediation would not only alleviate some of the Board’s burden, but it would also allow the Board to shift resources to cases that either do not get enough attention due to lack of time and money or that have to go to DALA and demand the most attention. Not all C3, C4, and C5 complaints should be mediated. Rather, each case should be evaluated by the Complaint Committee or by the Board with some set of criteria in order to determine whether or not it is appropriate for mediation. One important criterion is that all parties be reasonable and of stable mental condition. Mediation is a rational process and requires all parties to behave rationally as well.
Who Mediates?
The mediator must be a neutral third party who can assist both parties in reaching a resolution. In Lemon Law disputes, for example, mediators need to be familiar with the law but do not have to be expert mechanics in order to resolve a dispute. Medical disputes, however, do require some expertise. A skilled mediator is one that is not only neutral, but can also understand the complexity of the issue at hand as well as both parties’ point of view. These two characteristics, neutrality and expertise, present a dilemma. Using physicians as mediators may be perceived as being biased against complainants. On the other hand, any mediator who is not a physician may not be qualified to understand the case, and would therefore be unable to assist the two parties.
One solution to this dilemma is found at the Center for Health Care Negotiation, Inc., an independent, nonprofit dispute resolution organization. The Center uses a mediator and a co-mediator in each medical dispute. The panel of mediators includes physicians, other clinicians, and others familiar with health care issues. The mediator is the main facilitator, while the co-mediator is a physician who can assist in understanding the facts of the case. The Center is the proposed mediator for disputes before the Board. It combines the need for neutrality by being an outside party with the need for clinical expertise.
Which Parties Should Participate in Mediation?
Normally the three parties involved in mediation are the two disputants and the facilitator. In the case of patient-physician disputes, however, the Board is also part of the process. The Board represents its interests in licensing only qualified physicians, thereby protecting the health, safety, and welfare of the people of Massachusetts. Its presence in the resolution process is crucial, both in terms of the decision’s validity and the representation of the public concern for proper medical practice by physicians.
In order for mediation to be successful, it is important to define the parties and their roles in the mediation process. The definition for each party may change from case to case, depending on the need to engage each party. The complainant may be involved in mediation at several levels. At the highest level, the complainant is directly involved in discussion throughout the process. This may be helpful in cases in which a physician explanation or apology to the complainant is part of the settlement. In other cases, the complainant may be present at the mediation, but not as an active participant. In these cases, the Board will be the active party. Overall, the degree of complainant participation falls as the need to represent the public interest grows. Finally, certain mediation may not include the complainant at all. In cases in which the complainant is not involved in mediation, the Board may represent not only its own interests, but also those of the complainant, much like an attorney represents a client.
By including the complainant in the resolution process, the Board provides the complainant with greater satisfaction with the results. Complainants will be able to understand the problem, the physician’s error, or the misunderstanding, thereby obtaining the much needed sense of closure.
Another important question in defining the parties’ roles is, who should represent the Board in mediation? The Board should choose a representative that would have the authority to make decisions, given specific guidelines. It is important that the settlement not be subject to further review and evaluation, for the resolution process must be kept clear and efficient. The Board representative, therefore, may be a Board staff person or prosecutor, a trusted physician, or even a Board member.
Finally, the use of attorneys as party representatives in mediation is an important issue to consider. While the parties may feel more secure with legal counsel beside them, the presence of lawyers is likely to intimidate the parties. In particular, the physician’s attorney might be concerned about revealing too much information. The potential unwillingness to discuss matters openly might damage communication between the parties and ultimately become a barrier to effective mediation. Still, parties do feel they need legal representation in mediation because of the possibility that the case will go to court. The solution lies in the confidentiality of mediation. If all parties contractually agree that any information disclosed during mediation cannot be used in court, then the need for attorneys is diminished, if not eliminated.
What is Public?
Confidentiality is a key incentive for physicians who enter mediation and do not wish to see their record tainted. At the same time, the common notion is that the public has a right to know the physician’s complaint history. The balance between these values is determined in the mediation process. The main question is one of priorities. Is it more important for the public to know everything about a physician’s history, or is it more important to ensure that physicians correct their errors and improve their practice? A physician is more likely to agree to sanctions knowing that the probation, treatment, or training will be kept confidential. That physician may agree to more training, more education, and perhaps probation or monitoring. In the end, he (or she) is a better physician—better than he would have been had he resisted tougher sanctions for fear of poor public record. If, on the other hand, any disciplinary action is kept in a public record, the physician is more likely to oppose discipline, trying to avoid a potential stain on her or his record.
The tradeoff between confidentiality and publicity again points to the necessary shift from establishing blame to preventing future errors. Ultimately, confidentiality may serve to protect public health by improving the quality of medical care. If quality of care is the top priority, then the price, in some circumstances, may be public disclosure.
Who Pays for Mediation?
An average mediation session at the Center for Health Care Negotiation costs approximately $400. This is by no means a negligible sum, but paying it could save a lot of money and time. The question remains, who should pay for mediation? As with the issue of confidentiality, payment may be negotiated. One option is that the physician pay the entire mediation fee, conditional upon reaching a settlement. The condition reduces the stakes for physicians, who can enter mediation with a ‘money back guarantee’ in case of no resolution. The reason for having the physician pay for mediation is not to pre-assign blame. Rather, paying for mediation is more likely to be within the physician’s financial ability than within the complainant’s. Another option is to split the fee, not necessarily in half, between the Board and the physician. Most physicians in these cases will be facing potential DALA hearings, which translate into high fees for lawyers and lost time. Paying for mediation and reaching a resolution fairly quickly will be money well spent.
The proposed mediation program addresses certain flaws in the traditional disciplinary process—in particular, lack of complainant and physician satisfaction with the process, inefficient use of scarce resources, and its adversarial nature. Mediation converts the adversarial posture to a joint effort to reach a settlement that is satisfactory, not only to the disputing parties, but also for the public.
Costs and Benefits
Mediation helps to conserve scarce resources and shift them to where they are most needed. Understanding how much is saved requires a detailed cost/benefit analysis of the current process and the changes that mediation brings about. The following analysis takes one potential complaint and provides the estimated cost of treating it using three different resolution processes: consent order, DALA hearing, and mediation. The starting point is the Complaint Committee’s review of the investigation. We assume that any case that reaches this point requires approximately the same resources (i.e., investigation, review, and overhead). From the point that the Complaint Committee decides to discipline a case, however, the resources that go into the resolution process differ tremendously depending on the method of discipline. The following analysis illustrates the relative resource efficiency of mediation over the traditional processes.
|
Estimated Cost to the Board |
|||
|
Action Description |
Person |
Estimated Time |
Cost |
| Memo from prosecutor to Complaint Committee (CC)a | Prosecutor |
4 hours |
$ 104 |
| Review CC memo | Investigator |
1 hour |
18 |
| Review by Litigation Department | Program Manager |
20 minutes |
9 |
| Photocopy, mail memo to Board | Paralegal |
1 hour |
18 |
| Board reviewb | 2 Board members |
30 minutes |
75 |
| Scheduling CC hearing | prosecutor & investigator |
20 minutes |
15 |
| Board sets parameters | Board members |
1 hour |
525 |
| Letter to physician’s party | Counsel |
15 minutes |
6 |
| Negotiation | Prosecutor |
20 hours |
519 |
| Reviewing and approving consent order | 4 staff persons from Legal Unit |
2 hours |
177 |
| Cover memo, copy, send to Board | Paralegal |
2 hours |
37 |
| Board review and approval | Board members |
1 hour |
525 |
| Overheadc |
33.4 hours |
3,407 |
|
| Total Cost to the Board |
33.4 hours |
$5,435 |
|
|
Estimated Cost to Physician |
|||
| Description of action | Person |
Estimated Time |
Cost |
| Negotiation with BOARD | Attorney |
20 hours |
$3000d |
| Communication with attorney | Physician |
10 hours |
750e |
| Total Cost to Physician |
30 hours |
$ 3,750 |
|
|
Total Estimated Cost of Consent Order Case |
||
|
Time |
Cost |
|
| Cost to BOARD |
33.4 |
$5,435 |
| Cost to Physician |
30 hours |
$3,750 |
| Total Cost |
63.4 hours |
$ 9,185 |
Source: Interviews with Board personnel.
aCost of personnel time is calculated by dividing the weekly wage by 40 hours, multiplying by the corresponding time, and rounding off to the nearest dollar. In cases where wages differ across within the same position, an average is used. Source: Board budget for fiscal year 1997.
bOf the seven Board members, five are physicians and two are attorneys. We assume an average annual salary of $150,000 for each member. The corresponding cost is the opportunity cost—time lost from the members’ jobs—of serving as a Board member.
cOverhead/administrative costs for fiscal year 1997 total $422,339 and include rent, utilities, maintenance, postage, printing, and office supplies. Board personnel indicates that complaint resolution takes approximately 50 percent of Board’s resources. The overhead cost for the cases in this proposal is calculated by taking 50 percent of the total annual figure, dividing it by 52 weeks to obtain a weekly figure, then by 40 to obtain an hourly figure ($102). The hourly figure is multiplied by the hours it takes the Board to resolve a case in order to obtain the overhead cost per case.
dCost of legal counsel is estimated at $150 per hour.
e We assume the physician works 40 hours per week, 50 weeks a year, and earns $150,000 annually.
It is important to note that these figures represent a relatively straightforward case, that is, the facts of the case and their legal implications are clear, and negotiation between the Board and the physician does not linger. The case would be one of average difficulty. Tougher cases take much more time and money. For instance, there is a case that is currently being handled by the Board that has been open for more than a year.2 The facts of the case and legal issues are unclear, and the Board is still in disagreement over what to do next. This case has consumed over 1000 hours of a prosecutor’s time and about 500 hours of an investigator’s time. It has been through more than five Board hearings and through countless hours of negotiation. In terms of human resources and productivity, the Board practically loses the prosecutor for the entire duration of the case. Such a difficult case requires more of the physician’s time as well, and its cost may well exceed the above figures.
Table 2. Estimated Cost of Resolving a Complaint through DALA
|
Estimated Cost to the Board |
|||
| Action Description | Person |
Estimated Time |
Cost |
| Board review, issue Statement of Allegations | Board members |
30 minutes |
$ 263 |
| Preparation for pretrial hearing | Prosecutor |
2 hours |
52 |
| Trial preparation | Prosecutor |
80 hoursa |
2,072 |
| Trial preparation | Paralegal |
80 hours |
1,486 |
| Trial time | Prosecutor |
40 hoursb |
1,037 |
| Testimony | Expert witnesses |
16 hoursc |
2,400 |
| DALA issues recommended decision, Board prosecutor files findings of facts | Prosecutor |
20 hours |
519 |
| Draft a memo to the Board | Prosecutor |
4 hours |
104 |
| Hearing at Board | Board and prosecutor |
30 minutes |
276 |
| Review by Legal Unit | Head of Unit |
2 hours |
67 |
| Overhead |
189 hoursd |
19,278 |
|
| Total Cost to the Board |
245 hours |
$27,554 |
|
|
Estimated Cost to Physician |
|||
| Action Description | Person |
Time |
Cost |
| Trial hearing | Defense attorney |
40 hours |
$6,000 |
| Trial hearing | Physician |
40 hours |
3,000 |
| Trial preparatione | Defense attorney |
40 hours |
6,000 |
| Total Cost to Physician |
120 hours |
$15,000 |
|
|
Total Estimated Cost of DALA Case |
||
|
Time |
Cost |
|
| Cost to the Board |
245 hours |
$27,554 |
| Cost to Physician |
120 hours |
$15,000 |
| Total Cost |
365 hours |
$42,554 |
Source: Interviews with Board personnel.
aIt is estimated that every hour of trial time requires two hours of preparation by the prosecutor.
bA full week of trial (40 hours) may spread over a period of over a year.
cIn this scenario, we assume two days (16 hours) of expert testimony, which is on the low side.
dOverhead time does not include trial time.
eWe assume that every hour of trial time requires one hour of preparation by the defense attorney.
This particular DALA case is one of average difficulty, which does not require extensive trial time. In addition, this case assumes that the Board approves the recommended decision by DALA. If, however, the Board does not approve of the recommended decision, the case may be sent for further hearings, which could double or triple the above figures. Moreover, this case uses only eight hours of expert testimony. If this were a substandard care case involving several patients, the required testimonies by experts would far exceed this number. Another cost of a DALA hearing is that, even though the actual trial hearing takes a week in total, it is spread over a period of more than a year. Because it is difficult for the Board’s prosecutors to focus on other aspects of their work while engaged in a DALA trial, there is an added cost of lower productivity.
Table 3. Estimated Cost of Resolving a Complaint through Mediation
|
Estimated Cost to the Board |
|||
| Action Description | Person |
Time |
Cost |
| Coordinating mediation session | Consumer Protection Unit, Program Manager |
8 hours |
$190 |
| Board review, determine goals | Board & mediation representativea |
30 minutes |
289 |
| Preparation for mediation | Board representative |
4 hours |
104 |
| Mediation session | Board representative |
2 hours |
52 |
| Memo to the Board | Board representative |
4 hours |
104 |
| Board review | Board members |
30 minutes |
263 |
| Overhead |
19 |
1,938 |
|
| Total Cost to the Board |
19 |
$2,940 |
|
|
Estimated Cost to Physician |
|||
| Action Description | Person |
Time |
Cost |
| Administrative (preparation) | Physician |
1 hour |
$75 |
| Mediation fee | Physician |
2 hoursb |
400 |
| Mediation session | Physician |
2 hours |
150 |
| Preparation for mediation | Attorneyc |
4 hours |
600 |
| Mediation session | Attorney |
2 hours |
300 |
| Total Cost to Physician |
11 hours |
$1,525 |
|
|
Total Estimated Cost of Mediation |
||
|
Time |
Cost |
|
| Cost to the Board |
19 |
$2,940 |
| Cost to physician |
11 |
$1,525 |
| Total Cost |
30 |
$4,465 |
Note: The question of who pays for the mediation session is negotiable. This case assumes the physician pays the entire amount of the session.
aThis case assumes that the Board representative at mediation is a prosecutor.
bSince we are suggesting a case of average difficulty, we are using an average length of mediation.
cAn attorney is optional for mediation. Without legal counsel, a physician is expected to pay $625.
Table 4. Comparing the Three Conflict Resolution Processes
| Type of Process |
Time for Board |
Cost to Board |
Time for Physician |
Cost to Physician |
Total Time |
Total Cost |
| Mediation |
19 hours |
$2,940 |
11 hours |
$1,525 |
30 hours |
$4,465 |
| Consent Order |
33.4 hours |
$5,435 |
30 hours |
$3,750 |
63.4 hours |
$9,185 |
| DALA |
245 hours |
$27,554 |
120 hours |
$15,000 |
365 hours |
$42,554 |
The total estimated time and cost of mediation is less than one-half the cost of a Consent Order and approximately one tenth the cost of a hearing at DALA. Such a difference in cost points to the potential gain in productivity and efficiency for the Board as well as for the physician.
Additional Benefits from Mediation
The benefit to complainants comes with no additional cost. Using mediation would allow the complainant to play a part in the dispute resolution, thereby increasing satisfaction with the process. This benefit can be measured with the help of surveys. A survey could be given to complainants who have gone through the regular process and to those who have used mediation. One is likely to find that complainants who used mediation are much more satisfied with the process than those who received a written notification of the decision. This new process should benefit approximately 100 complainants in the first year.
A more global, albeit intangible, benefit of this mediation program is its implications for the field of dispute resolution in medicine. Using mediation to resolve medical disputes shows a willingness to shift from establishing blame to trying to prevent future problems from occurring. Thus far, issues of malpractice, negligent care, and other patient-physician problems have been handled by trying to find the guilty party. In many of these cases, however, the guilty party is not simply the physician, and trying to distribute responsibility and blame results in frustration and further agony. Shifting to preventive dispute resolution, that is, attempting to prevent problems from recurring, is a much needed change. Mediation can be a catalyst for systemic change—the long-run benefit is incalculable.
***
ADR in Practice: Lemon Law Mediation and Arbitration Program
The Massachusetts New and Leased Lemon Law and Used Vehicle Warranty Law protect consumers who have purchased what is essentially a ‘lemon.’ A consumer whose vehicle meets the Lemon Law standards is entitled to a refund in return for the vehicle. Not surprisingly, car dealers and manufacturers sometimes refuse to grant refunds, arguing that the vehicle does not qualify to be a ‘lemon.’ When such disputes arise, the resolution can take one of three forms. First, the consumer and the dealer or manufacturer can negotiate a settlement. Second, if settling is impossible, the consumer may pursue legal action against the dealer or manufacturer. Finally, a third option for dispute resolution is arbitration.
Until recently, arbitration had been conducted by the American Arbitration Association (AAA). A consumer who was denied a refund could submit an application for arbitration with AAA, which could then be approved or denied. An approved application would be assigned a hearing date for arbitration, at which time both the consumer and the dealer or manufacturer would present their case to a neutral arbitrator. The arbitrator would make a legally binding decision, which could be appealed only on grounds of technical or calculation errors.
The Problem
Arbitration under AAA offered consumers a viable alternative to court. Lawyers and court procedures take time and money, two resources that most consumers do not have in plenty. By choosing arbitration over formal court proceedings, consumers were able to save time and money and avoid the hassle and distress of going through legal procedures.
The downside of the program, however, was the application fee, which ranged from $275 to $325. A consumer whose application was rejected was refunded the application fee minus a $50 processing fee. It is worth noting that arbitrators worked pro bono and that the application fee was used to cover administrative costs.
Relative to the cost of hiring a lawyer, the application fee is reasonable. However, in itself the fee imposes a substantial burden on many consumers. A consumer who bought a $15,000 new car is likely to have monthly finance payments on the car as well as insurance fees. Another $325 for arbitration is not an easy fee to handle. And what about the consumer who bought a $1,000 used vehicle? Many consumers simply do not have the extra money. Having to pay the application fee with the risk of losing $50 in case of rejection is a deterrent for many consumers.
Another drawback to arbitration is the win-lose situation it creates. The nature of arbitration does not leave room for negotiation between the disputing parties. While there are cases that are withdrawn from arbitration as a result of settlements, the overall lack of communication between the disputing parties prior to arbitration prevents them from reaching a mutually agreeable solution to their dispute. The fact that some cases have been withdrawn due to settlements suggests that, given the opportunity, disputing parties would take advantage of the direct communication offered by other forms of dispute resolution, namely mediation.
Proposed Solution: Mediation and Arbitration under the OCABR
Given the opportunity to improve the alternative dispute resolution mechanism in Lemon Law complaints, the Office of Consumer Affairs and Business Regulation set out to create a program that would be more consumer friendly and that would foster communication between the disputing parties.
The OCABR decided to take the Lemon Law arbitration program in-house, eliminate the application fee, and create a program that is free for all consumers. The new dispute resolution program, as proposed by the OCABR, has two main parts. Part one is voluntary mediation, which attempts to help both parties reach a settlement. Part two is arbitration, in which each party presents its case to an arbitrator, who then makes a legally binding decision.
Even though mediation is the first step of the program, the OCABR must secure the consumer’s right to arbitration prior to scheduling a mediation session. Once an application is approved, the OCABR assigns an arbitrator and a hearing date to the case and notifies all parties. This step provides the consumer with a guarantee that, even if mediation fails, the case will still go through arbitration. Along with the notice of acceptance, the OCABR invites both parties to take advantage of the mediation process.
Mediation uses a trained neutral—a skilled negotiator who has no stake in the outcome of the dispute—as a facilitator to help the parties to resolve their differences voluntarily. Mediation takes place only if both parties agree to participate. The purpose of mediation is not to determine whether or not a Lemon Law has been violated. Mediation is designed to be non-adversarial and to help parties reach an agreement swiftly and inexpensively. Most importantly, mediation allows both parties to avoid the risk of a win-lose situation and obtain a mutually satisfactory outcome.
At the mediation session, the facilitator meets with both parties to the dispute. Each party presents its view of the dispute without interruption from the second party. After the initial presentations, the mediator works with both parties in an attempt to reach an agreement. Either party may ask to caucus—meet individually with the mediator—at any point during the discussion period. The caucus gives the party an opportunity to discuss sensitive points in privacy with the mediator. The contents of the caucus are confidential unless the party agrees to have the mediator bring it to the group discussion. If mediation is successful and an agreement is reached, the mediator summarizes the terms for review and approval. When the agreement is executed, the case is withdrawn due to a settlement and no further action is taken by the OCABR.
If the dispute cannot be settled through mediation, if one or both parties does not uphold the agreement, or if mediation does not take place, the consumer maintains the right to arbitration at the assigned date. The OCABR uses a process very similar to the one previously used by AAA. An expert neutral—a judge who is knowledgeable in the subject matter that surrounds the dispute—hears each party present its case and then renders a legally binding decision that cannot be appealed.3 Either party may bring witnesses or present other evidence, all subject to the arbitrator’s approval. In order to preserve neutrality and fairness to both parties, the arbitrator and mediator are never the same person. Though adjudicatory in nature, arbitration is less formal than a courtroom hearing or administrative public hearing. The arbitration process is mandatory, and failure to attend results in immediate loss by default.
Who Mediates, Who Arbitrates?
Lemon Law mediators have had both educational and practical training and experience in mediation. The OCABR uses mediators who demonstrate a temperament and personal background needed to administer and control a mediation session. Some qualified mediators have experience in mediating cases similar to Lemon Law disputes, and are, therefore, very familiar with the process. Others are certified mediators who have worked in other types of disputes.4
When choosing its arbitrators, the OCABR examines several factors. Potential arbitrators are expected to be familiar with the standards employed by the courts with regard to the Lemon Law and the Used Vehicle Warranty Law. In addition, the OCABR looks for arbitrators with previous experience in arbitration or other hearing administration, as well as professional experience that demonstrates their capacity to administer, manage, and control an evidentiary proceeding. The vast majority of the OCABR arbitrators are attorneys. Many of the individuals chosen are arbitrators from AAA with specific experience in Lemon Law arbitration or lawyers with previous experience in issues surrounding Lemon Laws.
All mediators and arbitrators go through the OCABR’s training in order to prepare for Lemon Law cases in particular. The training session includes lectures and discussion with representatives from the Massachusetts Auto Dealers Association, General Motors, the Used Auto Dealers Association, and the Massachusetts Public Interest Research Group. The session provides trainees with an encompassing view of Lemon Law disputes. In addition, an experienced arbitrator discusses the particulars of Lemon Law arbitration, and trainees are provided with sample cases and decisions for review. Arbitrators and mediators who wish to build up their confidence may also attend actual hearings and mediation sessions.
Obstacles
The main obstacle to this and other alternative dispute resolution programs is people’s unwillingness to forego the traditional due process of law. Consumer protection groups and civil rights groups tend to object strongly to a program that would seem to deny a person the right to due process. The counterclaim is that mediation and arbitration are both voluntary programs. Consumers have the right to use the traditional legal system if they wish to do so. Mediation, arbitration, and other forms of creative dispute resolution provide efficient alternatives. Still, resistance and lack of support from consumer groups is an obstacle to the expansion of ADR.
Another obstacle to the Lemon Law Program is an overwhelming lack of consumer education throughout the Commonwealth. Many consumers do not know their rights under the Lemon Law and Used Vehicle Warranty Law. As a result, they never realize they have some recourse to take or realize it too late. The OCABR has receive an increasing number of applications for mediation and arbitration that did not meet the deadline. Upon questioning these applicants, the OCABR realized that the prime reason for delays was lack of knowledge. The OCABR would be able to overcome this obstacle by expanding its educational programs, particularly beyond the greater Boston area.
Assessment for Replication
The Lemon Law Mediation and Arbitration Program can be replicated in any other state that has clear Lemon Laws. The program does not require excessive funds and can be administered by the state Office of Consumer Affairs. Other states could use the existing format of the program, or adjust it to fit their own laws and circumstances.5 The basic components of the program, that is, mediation followed by arbitration, would remain the same and would not be difficult to replicate.
Replication of the program is not only possible, but also necessary. The OCABR in Massachusetts receives phone calls from frustrated consumers who bought defective vehicles in nearby states, mainly New Hampshire and Connecticut. Unfortunately, the OCABR is unable to help these consumers, who are not protected by Massachusetts laws and are, therefore, ineligible to use our dispute resolution program. This points to the necessary expansion and replication of the mediation and arbitration program.
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ADR at HMOs: The Role of an Ombudsman
The past few years have given rise to public demand for some state regulation of HMOs. Consumers need to feel that they are not alone when it comes to insurance disputes. While suggestions have been made to establish new state agencies to regulate HMOs, these proposed offices would not necessarily address the particular needs of Massachusetts consumers, and as with any other creation of a new state agency, there is the risk of adding yet another layer of bureaucracy. The proposed ombudsman program would allow the OCABR to meet consumers’ needs without creating a new state agency and without burdening taxpayers.
The proposal for an ADR ombudsman focuses on Harvard Pilgrim Health Care (HPHC), but can be easily replicated to any other HMO. The use of ADR mechanisms at HPHC is presently advanced and effective. The proposed addition to the process is for an outside organization, such as the Center for Health Care Negotiation or the Massachusetts Medical Society, to play the role of an ombudsman and provide a seal of approval for the existing system.
Alternative Dispute Resolution at HPHC
Complaints by HPHC members range from billing disputes to denied care. When a consumer files a complaint, it is assigned to an official responder who handles all correspondence from beginning to end. The complaint is immediately acknowledged, then reviewed. The complainant receives a written notification of the decision. If the complainant is not satisfied with the outcome, he or she may appeal to HPHC. The appeal goes to a second review by a new person. A decision is rendered, and the consumer is notified in writing. If the complaint is rejected for a second time, the complainant may not appeal again. The entire process takes no more than 30 days, and if any delays occur, the consumer is notified by the official responder on a weekly basis.
When a complaint and/or an appeal are denied internally by HPHC, the complainant still has one more avenue to pursue. Dissatisfied consumers may pursue arbitration with the American Arbitration Association (AAA). Arbitration provides the consumer with a resolution process that is outside of HPHC and is administered by a neutral and experienced third party. Arbitration is the final step in the dispute resolution process. A complainant who loses in arbitration may not appeal the decision.
The existing dispute resolution mechanism at HPHC is timely, thorough, and effective. Adding more components to the actual process is unnecessary. It attempts to use internal resources as much as possible to satisfy consumers’ complaints and uses a neutral third party to resolve complaints that cannot be handled internally. At the same time, a consumer might perceive HPHC to be acting as both judge and jury in evaluating complaints and rendering decisions. HPHC, however, has taken care of that problem by providing a final step that incorporates a third party and attempts to resolve the dispute through arbitration. Through the use of alternative dispute resolution, HPHC is making a vital effort to accommodate its members’ complaints.
There is, however, a need to validate HMOs’ dispute resolution programs, to assure consumers that they are in good hands. Heavy regulation of HMOs, particularly in the field of alternative dispute resolution, might deter HMOs from innovating and establishing creative means to resolve insurance disputes. An effective regulatory change would allow HMOs to develop independently and still address the public need for a fair and efficient dispute resolution process.
The Ombudsman Program
The goal of an ombudsman is to provide a seal of approval and an assurance to the public that the existing system meets certain standards. In the case of HMO dispute resolution programs, a seal of approval will mean that the mechanism offered by the HMO meets particular standards of efficiency and fairness to the complainant. There are several reasons for encouraging an ombudsman program: First, consumers will feel better about using the dispute resolution system provided by the HMO given that it has been deemed fair and efficient by an impartial third party. Second, consumers who may have problems with the existing system may contact the ombudsman and express concern that the dispute resolution process does not meet their expectations. The ombudsman would then look into the complaint and verify that the HMO is following the necessary procedures and meeting the set standards of fairness. The ombudsman’s role, therefore, is twofold. It is an assurance to the public and a measure to keep HMOs in line with established standards.
Obstacles
A potential obstacle to a successful ombudsman program is resistance by HMOs that may feel threatened by the third party. Fear of the ombudsman program, however, is needless. The ombudsman program is not intended to dictate rules but rather to provide a model of dispute resolution that HMOs can adopt in order to treat complaints efficiently. HMOs should interpret this program not as a threat but as an opportunity to innovate and to enhance their relations with consumers. HMOs that choose to adopt new dispute resolution mechanisms or improve their existing systems are likely to find themselves ahead of those that do not.
Assessment for Replication
While the program will be started with HPHC, replicating it across the state would not be difficult. Once the standards of fairness are established, any HMO could join the program by creating an alternative dispute resolution mechanism that meets those standards. For example, Tufts Healthcare has recently developed a dispute resolution system very similar to that of HPHC. Given that this system would meet the standards of fairness, Tufts Healthcare could also join the ombudsman program.
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ADR: Obstacles, Opportunities, and Replication
We live in an era in which the courts are burdened by a multitude of lawsuits and legal proceedings. Conventional legal paths are lengthy, expensive, and do not guarantee satisfaction to consumers. There is a pressing need for change and improvement. More people are looking to avoid the courts and find alternative means to settling their disputes. The opportunity to implement mechanisms of alternative dispute resolution exists and should be seized.
The OCABR’s plan is to implement the above programs of alternative dispute resolution in the upcoming months,6 and then replicate them throughout the nine agencies it oversees in Massachusetts. The mediation program at the Board, for example, can be replicated in the Division of Registration, which also licenses professionals, including nurses and pharmacists. The remaining agencies can modify the different dispute resolution programs to fit their goals and needs. The OCABR envisions the expansion of alternative dispute resolution to all types of consumer disputes throughout the state, ranging from home improvement disagreements to insurance debates, from credit problems to serious medical disputes. Ultimately, these alternative dispute resolution programs could be replicated throughout the United States.
About the Authors
Michael Duffy is the director of the Office of Consumer Affairs and Business Regulation for the Commonwealth of Massachusetts and the former chairman and commissioner of the Massachusetts Commissions Against Discrimination.
Boaz Yavnai is a graduate student at and served as intern at OCABR during the summer of 1997.
Endnotes
- The other eight agencies are the Division of Banks, Division of Insurance, Alcohol and Beverage Control Commission, Department of Public Utilities, Cable TV Commission, State Racing Commission, Division of Standards, and the Division of Registration.
- Since the case is still open, its facts cannot be disclosed.
- The arbitrator’s decision can only be appealed on grounds of technical errors, calculation errors, or fraud.
- Certified mediators have completed one of several mediation training sessions/programs that are offered, for instance, by the Harvard Law School or the University of Massachusetts.
- The state of New York, for example, due to its large size and quantity of complaints, mediates disputes only through the use of written correspondence.
- The Lemon Law ADR program was launched on July 1, 1997.
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