Arbitration Clauses in Managed Care Contracts

Contract Clause of the Month: Managed care contracts can be a jungle of legal language, and physicians who do not carefully pick their way through the various clauses can be in for a nasty surprise. In this new monthly feature of Texas Medicine , the TMA Office of General Counsel identifies some of the contract clauses of which physicians should be aware. 

 Many of the more recent managed care contracts include arbitration clauses. Be wary of clauses in which you agree to not go to court or to regulatory agencies, or even to your own attorney or medical association when a problem develops, such as not being paid promptly and in accordance with the contract. If the company you are contracting with does not fairly and promptly resolve it to your satisfaction, you may be limited in your options to challenge the matter and limited in your recovery. 

Check out these clauses extracted from an Aetna contract.

Dispute Resolution/Arbitration

10.2.1 Dispute Resolution. Company shall provide an internal mechanism whereby Physician may raise issues, concerns, controversies or claims regarding the obligations of the parties under this Agreement. Physician shall exhaust this internal dispute resolution mechanism for any contractual disputes prior to submitting a complaint to any regulatory agency or instituting any arbitration or other permitted legal proceeding. Discussions and negotiations held specifically pursuant to this Section 10.2.1 shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. …

10.2.2 Arbitration. Any controversy or claim arising out of or relating to this Agreement or the breach, termination, or validity thereof, except for temporary, preliminary, or permanent injunctive relief or any other form of equitable relief, shall be settled by binding arbitration administered by the American Arbitration Association ("AAA") and conducted by a sole arbitrator in accordance with AAA's Commercial Arbitration Rules ("Rules… . Except as may be required by law or to the extent necessary in connection with a judicial challenge or enforcement of an award, neither a party nor the arbitrator may disclose the existence, content, record or results of arbitration… . Depositions for discovery purposes shall not be permitted. The arbitrator may award only monetary relief and is not empowered to award damages other than compensatory damages 

11.3 Liability.   Company's liability, if any, for damages to Physician for any cause whatsoever arising out of or related to this Agreement, and regardless of the form of the action, shall be limited to Physician's actual damages. In no event shall the amount of such damages exceed all amounts due to the Physician by Company under this Agreement. Company shall not be liable to Physician for any indirect, incident, punitive, exemplary, special or consequential damages of any kind whatsoever sustained as a result of a breach of this Agreement or any action, inaction, alleged tortuous conduct, or delay by Company related thereto.

Note a Few Key Points

Note also that Aetna is not bound by any limits on damages when it has a dispute with a physician, nor is it bound to follow your or its dispute resolution process.

You might wonder, can they really do that? Is this provision really enforceable? A challenge to these clauses may be successful but there is a better and cheaper way: negotiate the clauses out of the contract so that you can save the time and expense of a legal challenge to the clause later.

Back Issues of Contract Clause of the Month