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SCOTUS: Class Arbitration Upheld in Physician-Insurer Case

 |  By Margaret@example.com  
   June 12, 2013

Class arbitration has been upheld by the U.S. Supreme Court in a case involving a dispute over payments to physicians by a health plan.

In a unanimous decision, the U.S. Supreme Court Monday affirmed an arbitrator's ruling to permit class arbitration of a physician-insurer dispute even when the two parties had not expressly agreed to that procedure.

In the case, which dates back to 2003, John Sutter, a New Jersey pediatrician, contended that he and other physicians were underpaid by Oxford Health Plans, LLC.

According to court documents Dr. Sutter provided medical services to Oxford Health Plan members under a fee-for-service contract that "required binding arbitration of contractual disputes." alleging that Oxford failed to fully and promptly pay him, however, he filed a proposed class action in New Jersey Superior Court,

The New Jersey court sent the matter to arbitration The arbitrator concluded that class arbitration was authorized, and Oxford filed a motion in federal court to vacate the arbitrator's decision, claiming that he had "exceeded [his] powers." The U.S. District Court denied the motion, which the Third Circuit Court of Appeals affirmed.

As might be expected, the American Medical Association and the Medical Society of New Jersey, which submitted a brief amici curiae to the Supreme Court on behalf of Dr. Sutter, heralded the decision. "This important ruling allows thousands of physicians to use class arbitration against a health insurer that has underpaid them for more than a decade," said AMA President Jeremy A. Lazarus, MD, in a press statement. "Without this broad-scale arbitration, physicians would have no practical means of challenging a health insurer's unfair payment practices."

"It is a sad commentary that it took a decade for Dr. Sutter and other New Jersey physicians to exercise the dispute mechanism allowed by their contracts," said MSNJ General Counsel Melina Martinson in a statement.

"A timely class-arbitration would have allowed them to have their payment disputes resolved more expeditiously and cost-effectively. The decision is welcome news to physicians in New Jersey and all who are concerned with the reducing the cost of medicine in this country."

What remains to be seen is whether the Supreme Court's decision will give a boost to "the medical profession's efforts to address unfair corporate policies of large health insurers that are bad for patients and physicians," as contended by the AMA in a press statement.

In a blog posting providing analysis of the decision, Mayer-Brown, a Chicago-based law firm with an international practice in employment and benefits, termed the ruling as "narrowly written," and noting that the Supreme Court decision holds that courts lack authority under the Federal Arbitration Act "to vacate an arbitral award authorizing class arbitration when the arbitrator's decision is based on an arguable effort to construe the arbitration agreement and the parties had agreed that the arbitrator should decide whether the arbitration agreement allows class-wide arbitration. Under such limited circumstances, the Court held that the FAA's limited standard of review of arbitral awards precludes a court from correcting any mistakes in interpreting the agreement."

According to the Mayer-Brown post, a broader issue, which was not addressed in the Oxford complaint, was addressed in a footnote by the Court. "The Court commented that it 'would face a different issue' had Oxford Health Plans preserved the argument that the availability of class arbitration is a 'question of arbitratibility,' which is a gateway issue for courts, rather than arbitrators, to decide.

In writing the majority opinion, Justice Elena Kagan, wrote: "Nothing we say in this opinion should be taken to reflect any agreement with the arbitrator's contract interpretation, or any quarrel with Oxford's contrary reading. All we say is that convincing a court of an arbitrator's error—even his grave error—is not enough. So long as the arbitrator was 'arguably construing' the contract—which this one was—a court may not correct his mistakes. The potential for those mistakes is the price of agreeing to arbitration."

"As we have held before, we hold again: "It is the arbitrator's construction [of the contract] which was bargained for; and so far as the arbitrator's decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his."

"In sum, Oxford chose arbitration, and it must now live with that choice. Oxford agreed with Sutter that an arbitrator should determine what their contract meant, including whether its terms approved class arbitration. The arbitrator did what the parties requested: He provided an interpretation of the contract resolving that disputed issue. His interpretation went against Oxford, maybe mistakenly so. But still, Oxford does not get to rerun the matter in a court."

Efforts to get comments from America's Health Insurance Plans, the industry's advocacy and lobbying group, were unsuccessful.

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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