Arbitration resolves billing disputes without costly litigation

February 1, 2007

With Administrative costs accounting for as much as 40% of all healthcare dollars spent, many states are seeking new and innovative ways to eliminate bureaucracy and red tape. One area receiving more attention is the resolution of billing disputes between providers and payers. In 2006, New Jersey and California implemented arbitration programs to resolve the growing aggregation of healthcare payment disputes.

WITH ADMINISTRATIVE costs accounting for as much as 40% of all healthcare dollars spent, many states are seeking new and innovative ways to eliminate bureaucracy and red tape. One area receiving more attention is the resolution of billing disputes between providers and payers. In 2006, New Jersey and California implemented arbitration programs to resolve the growing aggregation of healthcare payment disputes.

Because of its benefits over litigation, arbitration should be considered by healthcare organizations in states that have not yet instituted alternative dispute resolution (ADR) programs. In addition to its cost-saving and procedural benefits, administered arbitration allows providers and payers to avoid acrimonious and time-consuming litigation.

STREAMLINE ADMINISTRATION

Healthcare billing disputes are numerous and typically involve relatively small sums of money. For example, from 2004 to 2005, California health plans reported nearly 400,000 disputes where the sole issue was payment of claims, and the average claim resolved by the Department of Managed Care was approximately $300.

Because the healthcare billing process results in a large number of low-dollar claims, it is important to minimize administrative costs and streamline administrative processes for maximum efficiency. Electronic case filing, management and delivery of the award allows for a simplified process, reduced cost and increased efficiency.

LEGAL STANDARDS IN ARBITRATION

Parties in a billing dispute are operating under a healthcare services contract drafted in the context of governing law. In order to uphold the expectations of the parties the dispute should be resolved using the same legal standards. Arbitrators should decide a claim using all relevant laws. An independent arbitrator must uphold the legal rights of the contracting parties.

EXPERT ARBITRATORS

As in litigation, a workable arbitration system demands decision makers who can navigate and ultimately resolve complex technical disputes. Healthcare billing disputes typically include both medical coding and complex contractual issues. As a result, an effective arbitrator must be knowledgeable about both the law and about medical coding and treatment protocols.

REASONABLE COSTS

One of the primary benefits of an alternative dispute resolution system is the lower cost when compared with traditional litigation methods. In order for arbitration to remain a desirable option, the arbitration system must maintain reasonable fees and low administrative costs.

Ultimately, shorter case duration is the main driver of arbitration's cost advantage. If a particular arbitration was to take as long as court litigation, there would be a danger that arbitration costs could approach court costs because of fees paid to arbitrators, experts and attorneys. To control costs, especially where the amount in dispute is relatively modest, the arbitration process will need to provide a sufficient, but limited, timeframe for the dispute to be resolved.

FLEXIBLE, APPROPRIATE HEARINGS

Because health claims disputes vary in complexity, not all arbitrations require the same level of structure or formality. While smaller claims can sometimes be resolved based upon the findings of documentary hearings, some complex claims may warrant in-person hearings for presentation of evidence and testimony. Anyone considering arbitration for a health claims dispute is encouraged to use a procedural framework that will match the type of hearing to the dispute's level of complexity.

AVAILABILITY OF ALL LEGAL REMEDIES

Although healthcare payment disputes typically involve compensatory monetary awards, in arbitration, just as with litigation, parties also may be entitled to other forms of relief. Equitable relief should be made available for parties seeking declaratory judgments or in the event a party is requesting the other party to do or stop doing something through specific performance or injunctive relief. All forms of legal and equitable relief must be available so parties can be compensated adequately for their claims, fees and costs.