GUEST-POST | Who Pays the Hospital-Medical Staff Standing Neutral?

By Richard J. Webb, Esq.

This is a follow-up to a four part series of posts at the Healthcare Neutral ADR Blog on the hospital-medical staff standing neutral. See Part I, Part II, Part III, and Part IV. This concept requires a hospital and its organized medical staff to select a neutral expert in advance of any dispute, who will stand ready to assist the parties as problems arise, with the aim of resolving conflicts quickly and efficiently. It is modeled on the use of the standing neutral in the construction industry, where it is has worked well for many years.

One question the four-part series did not address is a very practical and important one: who should pay for the standing neutral’s services?

Every situation will be somewhat unique, and there can be no hard and fast rule in this regard. However, a few general principles do apply:

1. The appearance of neutrality and the “buy in” of the parties are best achieved by having the standing neutral’s fees divided equally between the parties.
2. If the medical staff lacks the financial resources to equally fund the standing neutral, the hospital can fund a greater share of the costs, provided all parties understand the neutral will not thereby owe any greater allegiance to the hospital. This can be done to satisfy the hospital’s obligation to have an effective dispute resolution mechanism in place.
3. Certain disputes will involve individual physicians as the primary parties, with interests equal to or greater than those of the medical staff as a whole. In such cases, it may be appropriate for the individual physicians involved to pay a portion of the standing neutral’s fees.

A review of some likely scenarios can illustrate how this would work.

Once a hospital and its medical staff agree to the concept, and select an individual to serve as their standing neutral, that person will need to become reasonably familiar with the medical staff bylaws and policies, and the hospital – medical staff landscape. From there, the standing neutral would agree to remain readily available to field questions as they arise. The cost of these services of general application might be split equally between the hospital and the medical staff.

If a conflict arises over a question of governance – for example, a proposed change in the medical staff bylaws, it may be fair to expect the hospital to absorb the standing neutral’s costs in resolving that dispute. These costs are no different than the other legal and consulting fees routinely paid by hospitals to establish and maintain their governance structures. The same can be said for conflicts arising from proposed changes to hospital policies (e.g. on-call coverage) having a general effect on members of the medical staff.

Similarly, conflicts between individual practitioners and the medical executive committee (and/or the hospital) over a denial, suspension or revocation of medical staff privileges should be handled as part of the hospital’s ongoing costs of maintaining a medical staff. Most hospitals’ medical staff bylaws already provide for a hearing officer (or similar role) to preside over fair hearings conducted in such cases – at the hospital’s expense. The standing neutral would simply augment this practice.

Should a conflict arise involving the economic interests of one group of physicians and only incidentally affecting the medical staff at large, it may be appropriate to request that the financially interested physicians contribute towards the resolution of their dispute. A refusal to do so may simply mean that the standing neutral’s services are not provided in that instance, and the conflict will be resolved through other means.

The interests of individual physicians may combine on a larger scale to create adversity with the hospital. Although not necessarily a “dispute,” the formation and operation of an Accountable Care Organization (“ACO”), managed care network or “gainsharing” program will create potential conflicts between the hospital and the medical staff. In these circumstances, the physicians will usually have sufficient capital invested and anticipated revenue to justify payment of an equal share of the standing neutral’s fees (even if they are advanced by the hospital).

In the end, the payment of the standing neutral will not be an insurmountable problem so long as the value flowing from the engagement outweighs the costs of the alternative. That alternative could be a failure to reach agreement, protracted and costly litigation, or a damaged long-term relationship. To the extent that anything other than an equal split of fees is used, the standing neutral should make every effort to demonstrate his or her impartiality at all times.

Richard J. Webb writes the Healthcare Neutral Blog. Mr. Webb is a graduate of Yale University (B.A., cum laude, 1975) and the Duke University School of Law (J.D. 1978). His additional alternative dispute resolution training currently amounts to 177 hours of classroom time, including 60 hours of advanced mediation courses at the Straus Institute for Dispute Resolution at Pepperdine University in Malibu, California. He has received a peer review rating of AV from Martindale-Hubbell, and has been recognized as a New Jersey SuperLawyer in the field of healthcare law.