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Arbitration in Medicine

Bloomberg Businessweek January 11, 2021 pp49-51 “PICK ONE: YOUR DOCTOR OR YOUR RIGHTS “As private equity investors take over doctors’ offices, they’re popularizing a controversial legal practice: forcing patients to agree to binding arbitration before they receive care” by Heather Perlberg

Read the article for all detail and interesting backstories

Summary of Article

As running a profitable individual or small-group medical office has become increasingly difficult, due to rising costs for everything including the escalating cost of malpractice insurance and reduced payments from medical insurance payors, many physicians have opted out of ownership. Two common paths are; simply closing a practice and then becoming an employee with a hospital group having an outreach office group or joining a larger group, or if there’s a buyer selling their practice. Increasingly, even more so in the COVID-era, private equity firms like Lindsay Goldberg have been scooping up medical practices. After taking ownership these investors then systematically prune operations and ultimately sell to larger firms once the collection is financially optimized. Lindsay Goldberg sold “Women’s Care Enterprises”, the company covered in this Businessweek article, to “BC partners, an even larger investment firm based in London.”

Private equity firms bundle as many as hundreds of practices and achieve higher reimbursement using more sophisticated billing practices or negotiating better payment directly from medical insurance payors. Private equity augment higher payments with lower costs by aggressively consolidating back-office, reducing brick and mortar, striking lower costs for supplies, moving tasks to lower cost labor if within regulation and tackling legal expenses. Lindsay Goldberg’s key tactic to cut legal costs is not illegal but also not always binding. Lindsay Goldberg requires patients to settle any dispute solely by entering into binding arbitration. In case of claims of medical malpractice under binding-arbitration; the patient, and the physician-group, each select an arbitrator and then a third or neutral arbitrator participates in a private hearing and the payouts are typically limited compared to a trial by jury. This reduces costs of direct payouts when medical fault is found and reduces malpractice insurance premiums by as much as 20%. Arbitrators wanting to retain business are tacitly under pressure to placate medical firms. If truly injured by medical malpractice, a small payment can leave a patient and family without needed resource and if the physician is not at fault then they are left without being able to clear their record.

The key in this article is that such forced binding arbitration has been rejected by the Florida Supreme Court and the U.S. Supreme court refused to hear the case yet practices under Lindsay Goldberg continued to have new and existing patients sign such consent to binding arbitration. If patients refuse to sign the binding arbitration document they aren’t accepted as a patient into the practice. Many patients sign such agreements trusting that physicians would not harm them. Patients, and even some lawyers, are not aware that these agreements are not illegal but they are often non-binding depending on individual state law. In such states of residence, patients can pursue lawsuit or try voluntary arbitration and then move to lawsuit if they and their legal team deem that is the best path to alleviate damages from legitimate medical malpractice.

Jessie Harrell, the female lawyer who successfully argued the case against binding arbitration in Florida on behalf of client was hoping to be a patient in a Women’s Care Office, “has since found a new doctor who left Women’s Care and doesn’t use binding arbitration agreements.” Harrel is quoted “’There’s nothing inherently wrong with investors buying medical firms, as long as doctors can practice the way they always had…but “what seems like a business decision can affect patient care if it’s using this position of trust that doctors have to mislead patients to do something that’s not in their best interest.”

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