Employing Arbitration in the Healthcare Space
By: Patrick Welsh, HonorHealth
Binding arbitration is a valuable tool for health law attorneys. In the world of complicated and expensive healthcare disputes, arbitration is a faster, cheaper alternative. That’s hardly news. Every lawyer knows the benefits of arbitration. The proceedings are confidential; the turnaround time on decisions is faster; the discovery is truncated; and the arbitrator, if the parties so wish, has significant experience in health law. Yet, I’m often struck by how reluctant my fellow attorneys are to introduce arbitration agreements to their transactional work.
“I’ve done a few arbitrations,” a friend told me last month. “It’s one thing to argue the arbitration agreement, and another to write it. I’ve seen good-looking agreements fall apart. It covered contracts, not torts. The arbitrator didn’t have the right to decide her own jurisdiction. It violated public policy.” Then he added, “I don’t want to be the lawyer who wrote a bad agreement.” Unfortunately, his hesitancy is shared by many. There are a lot of benefits to arbitrating a healthcare dispute,[1] especially the difficult and sensitive ones, but this post is not about that. Articles on that topic could fill a small library, and I have no desire to add to the pile. The purpose of this post is simple: a brief, high-impact primer about employing arbitration agreements in healthcare transactions in Arizona. Let’s dive in.
There are many arbitration venues out there, but in the healthcare space, I find the most commonly relied-upon are the American Health Law Association (“AHLA”), the American Arbitration Association (the “AAA”), and the Judicial Arbitration Association and Mediation Services (“JAMS”). Some benefits of using AHLA are its focus on healthcare disputes and its roster of arbitrators and mediators have resumes which reflect significant industry experience. Each arbitration body has its own set of rules, and as you’ll see further down in this post, those rules matter. A lot.[2] Familiarize yourself with the rules to best select the tribunal.
Arizona has three arbitration laws that may apply to a dispute: the Federal Arbitration Act (the “FAA”);[3] the Arizona Uniform Arbitration Act (the “UAA”);[4] which applies only to a limited subset of disputes;[5] and the Arizona Revised Uniform Arbitration Act (the “RUAA”).[6] In the absence of a choice of law provision in the arbitration agreement, the FAA is likely to preempt the RUAA and apply to the dispute.[7] Review the sources of law, both the statutes and their case law, to decide whether the FAA, the UAA, or the RUAA is best.
You may want to include a statement of purpose and a declaration of the intentions of the parties at the start of your arbitration agreement, informing the reader why the parties agreed to arbitrate a future dispute. The statement of purpose helps guide arbitrators in their decision-making, helping them to render an award that best reflects the reason the parties entered into the contract.[8]
Many arbitration bodies have contract clause generators on their website, but be aware that a boilerplate definition of “dispute” may not be personalized to your client’s needs. A bad definition or infelicitous wording can create questions about whether a controversy is arbitrable or not. Determining whether to include claims arising from statute, tort, contract, or other sources is essential to drafting a clear and effective definition of a “dispute.”[9] Specificity in the definition of “dispute” will help avoid unnecessary legal battles down the road.
I want to take a moment to discuss appraisals, a great way to quickly and fairly decide fair market value in negotiations. For example, when an old medical campus lease is expiring and the tenant and landlord want to enter into a new lease, the parties may have their own opinion about what dollar amount per square foot constitutes fair market value. The parties are amicable (they want the deal to move forward, after all), but they just can’t see eye-to-eye. A friendly agreement to arbitrate through appraisal (such as each party hiring an appraiser, each of whom then selects a third appraiser to act as arbitrator) can bring the deal over the finish line while complying with the requirements of 42 U.S.C. § 1395nn (the “Stark Law”) and 42 U.S.C. § 1320a-7b (the “Anti-Kickback Statute”). Even better, in situations where you are dealing with a party who is unfamiliar with the relevant healthcare exceptions and safe harbors, the appraisal mechanism can be crafted to explicitly state what factors the appraiser may or may not consider in his or her determination, eliminating the risk of the appraiser inappropriately considering the value or volume of referrals or other business generated.
You may select the number of arbitrators who will serve. Broadly speaking, many arbitration groups utilize three arbitrators to decide a dispute.[10] How many arbitrators you want is up to you, but being silent on the issue could be a costly mistake. As a 2012 study of large complex cases by the AAA found, “when a panel of three arbitrators was used, the cost of the case was five times as high as the cost where a sole arbitrator decided the matter.”[11] More arbitrators mean more money spent by your client, resulting in overkill for simple cases.
A court, not an arbitrator, will generally decide whether an issue is arbitrable and whether the arbitrator has jurisdiction unless the parties have agreed otherwise.[12] Additionally, whether the arbitrator is permitted to decide questions of arbitrability or jurisdiction hinges on the arbitration law chosen for the agreement.[13] If the arbitration agreement adopts the FAA, the UAA, or the RUAA, the parties must consult the applicable law to determine whether they may delegate the authority to the arbitrator and, if so, how to do so clearly and unmistakably.
Arbitration typically has limited discovery and an abbreviated timeline. The scope and schedule of discovery, as well as the arbitrator’s enforcement powers, come down to the applicable arbitration law and procedural rules. The RUAA is attractive for complex transactions between two or more large healthcare companies because it allows the parties to conduct discovery “as the arbitrator decides is appropriate in the circumstances”[14] and authorizes the arbitrator to issue subpoenas and protective orders.[15] Similarly, the AAA’s Commercial Rules are attractive where the drafter anticipates large and complex claims[16] as the procedural rules allow for expanded discovery.[17]
Where a contract contains an agreement to arbitrate, the agreement will probably loop in that contract’s attachments (exhibits, schedules, riders, etc.) unless a provision limits the agreement’s breadth to exclude those documents. Avoid surprises down the line. For example, a contract which incorporates a work agreement for improvements to a building might force the parties to arbitrate, and not litigate, a construction dispute. Did your client intend to arbitrate construction matters when they signed?
As we near the end of this post, I want to discuss the role of mediation. I frequently encounter contracts which require the parties to attempt to mediate their dispute, or to otherwise engage in good-faith discussions, prior to arbitration or litigation. Consider carefully whether mandatory mediation is truly in your client’s best interest. It’s nice to think that everyone is a benevolent actor, unlikely to operate in bad faith, but experience teaches us otherwise. Defendants can abuse mediation to draw out costs and buy time. There are many ways to mollify the harshness of abusive stall tactics. For example, you can limit mediation to a certain number of days or give the parties recourse if an opponent fails to respond within an amount of time (such as a right to skip to arbitration). Think carefully about whether to agree to mandatory mediation and consider adding a safety net in case the opposing party later attempts to abuse mediation.
Fans of arbitration often tout that groups like the AAA and AHLA have mechanisms to install provisional remedies to preserve the status quo during a proceeding.[18] That may be true, but the downside is the difficulty of making that remedy meaningful during an emergency. To illustrate, imagine a party files with the AAA an application for an interim remedy on an emergency basis. Even if he or she successfully obtains an emergency award from the emergency arbitrator, the party must file an application with the superior court to confirm the award and reduce it to a judgment. In the meantime, the adversary will oppose the application, will move to vacate the award, and will request oral argument. Perhaps the process is cheaper than an application for a temporary restraining order, but is it faster? Is it better? All questions for you to answer when you decide how your arbitration agreement handles emergencies.
One of the most interesting facets of arbitration is the freedom to construct alternative arbitration arrangements to suit a client’s needs. The most popular alternative is probably “baseball” arbitration, more formally known as final-offer arbitration, a process where each party proposes a monetary award to the arbitrator and the arbitrator selects one award at the end of the hearing. Importantly, the arbitrator is not permitted to alter the award. Baseball arbitration is a great way to reach a client’s desired outcome while keeping expectations reasonable but, realistically speaking, is suitable only where the dispute concerns monetary damages. Other common arbitration alternatives include last-offer arbitration, “night baseball,” high-low arbitration, and incentive arbitration, any of which might maximize value for your healthcare client given the circumstances.
Healthcare disputes tend to be large and complicated, and where you anticipate a high-complexity dispute, there exist a few final techniques to consider. A mandatory early neutral case conference, where the parties present their case for a non-binding assessment by a subject-matter expert, can help friendly opponents evaluate their position. A mini-trial is a non-binding hearing where both sides present a truncated version of their case; the mini-trial is useful in disputes likely to get bogged down in complex factual patterns, such as reimbursement and underpayment disputes, because the parties get a sneak peek at the likelihood of success without paying for a full-blown hearing.
A lot of ink has been spilled over the years on arbitrations in the healthcare space. Hopefully this post gives you some food for thought and encourages a few of you to introduce arbitration to your contracts.
[1] See, e.g., Katherine Benesch, Why ADR and Not Litigation for Healthcare Disputes?, 66 (3) Disp. Resol. J. 1 (Aug.-Oct. 2011); Diana Kruze and Christopher C. Sabis, “Effectively Deploying Alternative Dispute Resolution Processes in Health Care”, lecture at the Am. Health L. Ass’n Annual Meeting (June 28, 2025); Elizabeth Rolph, et al., Arbitration Agreements in Health Care: Myths and Reality, 60 L. & Contemp. Probs. 153, 155–56 (1997).
[2] For example, the Arizona Supreme Court held in Bolo Corp. v. Homes & Son Const. Co., that where a plaintiff elects to litigate a dispute “in lieu of the arbitration tribunal, and ask[s] the court for exactly the same type of relief (i.e. damages), which an arbitrator is empowered to grant,” the plaintiff has waived the right to arbitration. 105 Ariz. 343, 347 (1970). The rules of the AAA conflict: “No judicial proceeding by a party relating to the subject matter of the arbitration shall be deemed a waiver of the party’s right to arbitrate.” AAA, Commercial Arbitration Rules and Mediation Procedures, R-54(a) (Sept. 1, 2022), https://www.adr.org/media/lwanubnp/2025_commercialrules_web.pdf. While subsequent case law has distinguished the role Bolo Corp. plays, this underscores the importance of reviewing both laws and rules prior to execution of the arbitration agreement.
[3] 9 U.S.C. § 1, et seq.
[4] A.R.S. § 12-1501, et seq.
[5] See id. § 12-3003(B)–(C).
[6] Id. § 12-3001, et seq.
[7] See Brennan v. Opus Bank, 796 F.3d 1125, 1129 (9th Cir. 2015); Doctor’s Assoc., Inc. v. Casarotto, 517 U.S. 681, 687 (1996); see also 4 Am. Jur. 2d Alternative Dispute Resolution § 27 (1995).
[8] For example, where a statement of purpose says that a dispute may reveal sensitive or embarrassing information and that the parties intend that arbitration be confidential, an arbitrator’s award may be rendered in such a way as to better protect the privacy of the parties. See Kruze and Sabis, “Effectively Deploying Alternative Dispute Resolution Processes in Health Care”, supra, at n. 1.
[9] For further discussion on how the definition of “dispute” is essential to any arbitration clause, see Mark E. Lassiter, What Every Business Transaction Lawyer Should Know About Drafting Arbitration Clauses in Contracts, Ariz. State Bar (March 25, 2025).
[10] Not always the case. For instance, in the AAA’s rules for domestic commercial disputes, if the parties fail to agree upon the number of arbitrators, the dispute “shall be heard and determined by one arbitrator, unless the AAA, in its discretion, directs that three arbitrators be appointed.” AAA, Commercial Arbitration Rules, R-17, supra, at n. 2.
[11] Katherine Benesche, How to Save Time and Cost in Health Care Arbitration: Can it Really be Less Expensive Than Litigation?, 69 (3) Disp. Resol. J. 1, 2 (2014).
[12] See, e.g., A.R.S. § 12-3006(B) (“The court shall decide whether . . . a controversy is subject to an agreement to arbitrate.”); First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (applying the FAA) (holding a court holds “the primary power” to decide arbitrability of the arbitrator, and petitioner failed to show the parties clearly agreed otherwise); AAA, Commercial Arbitration Rules, R-7(a), supra, at n. 2 (“The arbitrator shall have the power to rule on his or her own jurisdiction . . . .”); AHLA, Rules of Procedure for Commercial Arbitration, 3.1 (Feb. 6, 2025) (“[T]he arbitrator, once appointed, shall have the power to determine his or her jurisdiction and any issues of arbitrability.”).
[13] For example, the UAA provides that where an opposing party denies the existence of an arbitration agreement, “the court shall proceed summarily to the determination of the issue so raised.” A.R.S. § 12-1502(A).
[14] Id. § 12-3017(C).
[15] Id. § 12-3017(D)-(E).
[16] A claim of $1,000,000 or more. AAA, Commercial Arbitration Rules, R-1(c), supra, at n. 2.
[17] See id. at p. 9 (summarizing).
[18] See id. at R-38–39; AHLA, Rules of Procedure, 5.2(b), supra, at n. 11.The RUAA provides that an arbitrator may issue orders for interim remedies to preserve the “effectiveness” of the proceeding. A.R.S. § 12-3008(B)(1).