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).
Attorney – McDowell Mountain Law
Description McDowell Mountain Law, a boutique healthcare transactional firm with a national practice, is seeking a skilled health care transactional attorney to join its practice. We seek candidates with a…
After Mulready: States May Need to Pass the Baton on Pharmacy Benefit Manager Reform
Loretta Amankwah Kyei, J.D. Candidate – ASU Sandra Day O’Connor College of Law
In 2020, the U.S Supreme Court’s decision in Rutledge v. Pharmaceutical Care Management Association (PCMA) narrowed the scope of preemption under the Employee Retirement Income Security Act of 1974 (ERISA), opening the door for states to regulate pharmacy benefit managers (PBMs) contracting with employer health plans.[[1]]
In Rutledge, Arkansas’ Act 900 required PBMs to cover pharmacies’ actual costs for prescription drugs.[[2]] The Court ruled that state regulations affecting only the cost of benefits do not improperly interfere with ERISA plans, and are thus not preempted.[[3]] However, it cautioned that state laws dictating how benefit plans must be structured or managed—such as setting required benefits or coverage rules—are preempted by ERISA.[[4]]
Many saw Rutledge as a sign that states could take stronger action on PBMs.[[5]] When U.S. insurers began integrating prescription drug coverage into their plans in the 1960s, PBMs emerged to help set reimbursement rates, process claims, and pay pharmacies.[[6]] Initially created to lower costs, PBMs have since become dominant market players whose pricing and rebate practices often drive up drug costs and limit patient access to affordable medications.[[7]] These dynamics fuel state efforts to increase oversight of PBM operations and protect consumers.[[8]]
However, the Tenth Circuit’s Pharmaceutical Care Management Association v. Mulready decision on August 15, 2023, which struck down several provisions of Oklahoma’s PBM reform law as preempted by ERISA, reaffirmed that ERISA continues to limit how far states can go in regulating PBMs tied to employer-sponsored health plans.[[9]]
This setback comes at a time when PBM practices are facing increased scrutiny. In January 2025, the Federal Trade Commission (FTC) released its second interim staff report, Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated PBMs, exposing the extent of PBM-driven market manipulation.[[10]] FTC’s report documented long-standing practices affecting millions of Americans, revealing that the three largest PBMs imposed markups of more than 100% on specialty generic drugs, including treatment for cancer, heart disease, and HIV.[[11]]
The Mulready Decision and its Consequences
While Rutledge appeared to allow broader state oversight of PBMs, the Tenth Circuit Court of Appeal’s decision in Mulready effectively closed the door. Oklahoma’s 2019 Patient’s Right to Pharmacy Choice Act aimed to monitor how PBMs contract with pharmacies and ensure patients could access their pharmacies of choice.[[12]] The Tenth Circuit obliterated several key provisions of Oklahoma’s Act under ERISA preemption. These included provisions:
The court found that the provisions improperly affected how ERISA plans are managed by controlling the structure of their pharmacy networks.[[13]]
By contrast, the U.S. Court of Appeals for the Eighth Circuit reached an opposite conclusion in Pharmaceutical Care Management Association v. Wehbi.[[14]] Decided on November 17, 2021, the court held that North Dakota’s PBM regulations were not preempted by ERISA (while also finding that multiple provisions were preempted by federal Medicare laws).[[15]] North Dakota’s law sought to protect independent pharmacies from restrictive PBM practices by prohibiting fees on claims processing, allowing pharmacies to mail prescriptions to patients, and preventing PBMs from imposing accreditation standards that exceed state licensing requirements.[[16]]
Applying the Rutledge standard, the Eighth Circuit held that none of the challenged provisions had an impermissible “connection with” or “reference to” ERISA plans.[[17]] The court emphasized that the North Dakota laws regulated PBMs, third-party administrators, rather than ERISA plans directly, thus avoiding interference with plan administration or structure.[[18]] This interpretation, in line with Rutledge’s reasoning, clarifies that state PBM regulations addressing pricing and contracting practices generally fall outside ERISA’s preemptive scope.
Despite the Eighth Circuit’s divergent view in Wehbi, the Tenth Circuit’s Mulready decision had far-reaching effects. More than 30 states already enacted PBM reform statutes with provisions similar to those invalidated in Mulready.[[19]]
In June 2025, Iowa passed Senate File 383, a move likely shaped by Wehbi. Iowa’s law required that PBMs let patients choose any in-network pharmacies they prefer.[[20]] It also prohibited PBMs from paying independent pharmacies less than their own affiliated pharmacies for the same drug and required payments to match national averages.[[21]] PBMs must pay pharmacists a set fee for dispensing prescriptions, allow all pharmacies in a region to join their networks, and pass along all manufacturer rebates to health plan clients.[[22]]
Shortly after passage, the Iowa Association of Business and Industry sued to block its enforcement, arguing that several provisions were preempted by ERISA.[[23]] On July 21, 2025—one day before the law was set to take effect—a federal judge agreed, holding that the provisions banning payment discrimination and requiring fixed dispensing fees were preempted.[[24]] The United States District Court for the Southern District of Iowa Central Division issued an injunction, which has been appealed to the Eighth Circuit.[[25]]
The scope of the Iowa court’s ruling, however, was limited. The injunction applies only to the plaintiffs in the case and their members or contractors, leaving open the question of broader applicability. In October 2025, Wellmark Blue Cross Blue Shield, Iowa’s largest health insurer, filed a separate lawsuit against the Iowa Insurance Commissioner, arguing that the injunction should be extended to parties not involved in the original action.[[26]]
PBM Reform Efforts Beyond ERISA Plans
In 2025, states are advancing four major PBM reform strategies designed to sidestep ERISA challenges by: (1) delinking PBM compensation from drug prices, (2) requiring PBMs to pass drug rebates on to consumers, (3) imposing fiduciary duties to health carriers, and (4) prohibiting PBM ownership of pharmacies.
Delinking is the most comprehensive of these reforms. It mandates flat-fee compensation models rather than rebate-based payments. Colorado’s HB-1094, the first law of its kind, implements delinking measures and is set to take effect in 2027.[[27]]
Rebate pass-through laws, like Utah’s H.B. 257, require health insurers to ensure that PBMs either pass manufacturer rebates directly to consumers at the point of sale or use them to reduce premiums.[[28]] Utah H.B. 257 applied only to insured plans contracting with a PBM, not to self-insured plans, which would entail complexities.
Fiduciary duty provisions are also emerging as a new regulatory tool. These laws ensure PBMs act as fiduciaries to the health carriers they serve, aligning their financial interests with plan sponsors and patients. In 2024, Maine and Vermont enacted fiduciary duty requirements,[[29]–[30]] followed by North Carolina in 2025.[[31]]
Lastly, states are focusing on ownership restrictions to address PBM consolidation. Arkansas is the first state to prohibit PBMs from owning pharmacies, a provision removed from similar bills in Indiana and Louisiana.[[32]] However, Arkansas’s Act 624 faces challenges from four PBMs and PCMA, which alleged it violated the federal dormant Commerce Clause because it appears to overtly discriminate against the plaintiffs as out-of-state companies.[[33]]
Federal PBM Reform
On July 10, 2025, Representative Earl. L . “Buddy” Carter (R-GA) and 11 bipartisan cosponsors introduced the PBM Reform Act in Congress, a comprehensive legislative proposal aimed at curbing PBM practices that inflate drug prices and limit transparency to consumers.[[34]] Key provisions of the PBM Reform Act include:
If enacted, the PBM Reform Act would significantly shift regulatory authority from states to the federal government. While states have made significant strides in PBM reform, Congress seems poised to impose new PBM accountability requirements within ERISA’s framework (instead of around it).
PBM Reforms in 2025
Although Congress has failed to advance bipartisan PBM reform legislation to date, momentum has not stalled.[[36]] The PBM Reform Act reflects sustained bipartisan interest in increasing transparency and accountability. In light of continued ERISA preemption of state reform efforts, federal action may be the only path forward towards meaningful, uniform oversight of PBMs.
Given the opportunity the Supreme Court may be compelled to address the circuit split and resolve uncertainty it created in denying certiorari in Mulready in June 2025.[[37]] A definitive ruling could clarify the scope of state authority under ERISA in furtherance of state led PBM reforms. For now, judicial and federal developments must be closely monitored. Despite ongoing ambiguities, PBMs have begun to self-regulate in response to mounting scrutiny. On October 27, 2025, Cigna Group announced it will eliminate prescription drug rebates in its commercial health plans beginning in 2027, replacing them with upfront discounts at the pharmacy counter.[[38]] With bipartisan agreement on the need for greater scrutiny, PBM reforms appear poised to enter a new era of accountability.
Acknowledgement: Reviewed and edited in part by Joel L. Michaels, Adjunct Professor of Law, ASU Sandra Day O’Connor College of Law.
[1] Rutledge v. Pharm. Care Mgmt. Ass’n, 592 U.S. 80 (2020)
[2] 2015 Ark. Acts 900
[3] Rutledge v. Pharm. Care Mgmt. Ass’n, 592 U.S. 80 (2020)
[4] Id.
[5] In Major Victory for States, Supreme Court Clears the Way for State Health Reform, National Academy For State Health Policy (Dec. 15, 2020), https://nashp.org/ [https://perma.cc/7U23-QZN6].
[6] What are PBMs and what do they do?, American Medical Association (Aug. 7, 2025), https://www.ama-assn.org/ [https://perma.cc/H38T-JS77].
[7] Id.
[8] Id.
[9] Pharm. Care Mgmt. Ass’n v. Mulready, 78 F.4th 1183 (10th Cir. 2023)
[10] Fed. Trade Comm’n, Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers (2025), https://www.ftc.gov/system/files/ftc_gov/pdf/PBM-6b-Second-Interim-Staff-Report.pdf
[11] Id.
[12] Okla. Stat. tit. 36, § 6958
[13] Pharm. Care Mgmt. Ass’n v. Mulready, 78 F.4th 1183 (10th Cir. 2023)
[14] Pharm. Care Mgmt. Ass’n v. Wehbi, 18 F.4th 956 (8th Cir. 2021)
[15] Id.
[16] N.D. Cent. Code § 19-02.1-16.2
[17] Pharm. Care Mgmt. Ass’n v. Wehbi, 18 F.4th 956 (8th Cir. 2021)
[18] Id.
[19] 2025 State Legislation to Lower Prescription Drug Costs, National Academy For State Health Policy (Aug. 8, 2025), https://nashp.org/ [https://perma.cc/LN8Q-CFP9].
[20] 2025 Ia. SF 647
[21] Id.
[22] Id.
[23] Iowa Ass’n of Bus. & Indus. v. Ommen, No. 4:25cv211-SMR-WPK, 2025 LX 484328 (S.D. Iowa July 21, 2025)
[24] Id.
[25] Clark Kauffman, Wellmark sues to block enforcement of new law on pharmacy benefit managers, Iowa Capital Dispatch (Oct. 16, 2025), https://iowacapitaldispatch.com/2025/10/16/wellmark-sues-to-block-enforcement-of-new-law-on-pharmacy-benefit-managers/
[26] Id.
[27] 2025 Bill Text CO H.B. 1094
[28] 2025 Bill Text UT H.B. 257
[29] Me. Rev. Stat. tit. 24-A, § 4350
[30] Vt. Stat. Ann. tit. 18, § 9472
[31] 2025 Bill Text NC S.B. 479
[32] 2025 Bill Text AR H.B. 1150
[33] Express Scripts, Inc. v. Richmond, No. 4:25-CV-00520-BSM, 2025 LX 229886 (E.D. Ark. July 28, 2025)
[34] 2025 H.R. 4317; 119 H.R. 4317
[35] Id.
[36] Sophie Gardner & Kelly Hooper, Can Congress revive PBM reform?, Politico (Sep. 8, 2025) https://www.politico.com/newsletters/politico-pulse/2025/09/08/can-congress-revive-pbm-reform-00549936
[37] Lauren Clason, PBM State Fights Will Live On After High Court’s Petition Denial, Bloomberg Law (July 17, 2025) https://news.bloomberglaw.com/daily-labor-report/pbm-state-fights-will-live-on-after-high-courts-petition-denial
[38] Noah Tong, What Express Scripts’ drug rebate phase-out means for PBMs, Modern Healthcare (Oct. 29, 2025) https://www.modernhealthcare.com/insurance/mh-express-scripts-commercial-rebate-phase-out-pbms/?utm_id=gfta-ur-251029&share-code=EWRTS6MKTBCH7PTTQHTJFEPUIE&user_id=5641123&customer_secondary_source=aac_articleGifting
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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).
Deputy General Counsel – AHCCCS
Deputy General Counsel 535791 PHOENIX REMOTE OPTIONS VARIOUS-STATEWIDE AHCCCS Full-time AHCCCS Arizona Health Care Cost Containment SystemAccountability, Community, Innovation, Leadership, Passion, Quality, Respect, Courage, TeamworkThe Arizona Health Care Cost Containment…
Federal Judge Vacates HIPAA Reproductive Health Privacy Rule: What Regulated Entities Should Know
Amita Sanghvi, Coppersmith Brockelman, PLC
On June 18, 2025, a federal judge in Texas vacated the “HIPAA Privacy Rule to Support Reproductive Health Care Privacy,” (the 2024 Rule)[1] leaving in place only the provisions updating Notices of Privacy Practices (NPPs) for 42 USC 290dd-2 and 42 CFR Part 2 (collectively, “Part 2”) substance use disorder (SUD) treatment records. This decision in Purl v. HHS,[2] applies nationwide, and lifts the additional compliance requirements for handling reproductive health-related protected health information (PHI) under the 2024 Rule.
Background and Ruling
The 2024 Rule established new categorical prohibitions on the use or disclosure of PHI related to reproductive health care. These prohibitions specifically prevented regulated entities from disclosing PHI to impose criminal, civil, or administrative liability on individuals for seeking, obtaining, providing, or facilitating lawful reproductive health care. . The court found that:
The court vacated the rule, with nationwide effect, under the Administrative Procedure Act (APA). HHS did not appeal the decision, but a group of proposed intervenors, appealing the court’s denial of their motion to intervene, has filed a protective notice of appeal. HHS faces similar lawsuits challenging the 2024 Rule, including a lawsuit from the state of Texas, which is also filed in the Northern District of Texas, one from the state of Missouri and a suit by 14 states, led by the state of Tennessee. In the Missouri case, the parties have requested a stay until the appellate proceedings in Purl are resolved. This stay has been granted in the Texas case. While HHS has not formally withdrawn the rule, since it did not appeal it is bound by the national vacatur decision and as a result the 2024 changes are unenforceable.
Status of National Vacatur
In a separate, and unrelated case, on June 27, 2025, the Supreme Court of the United States (SCOTUS) limited the ability of federal judges to issue nationwide injunctions in Trump v. CASA.[3] The 6-3 majority held that federal courts lack statutory authority under the Judiciary Act of 1789 to issue injunctions against executive branch policies that apply to individuals who are not parties to the case.[4] However, SCOTUS clarified that they did not resolve “the distinct question [as to] whether the APA authorizes federal courts to vacate agency action.”[5] Because the holding in Purl was based on this APA authority with respect to agency action, the CASA limitation on nationwide injunctions does not apply to this case. Nevertheless, SCOTUS has cast doubt on a court’s reliance on the APA to vacate a rule nationwide. Thus, while the question remains open, it is an issue that likely will be litigated.[6]
What this Means for Regulated Entities
In the wake of the decision, regulated entities are relieved of significant compliance burdens and should proceed with the following compliance processes:
While the compliance burdens have lifted, entities may still be concerned about the privacy of sensitive information. HIPAA’s baseline privacy protections still apply, but navigating patient privacy and responding to law enforcement requests will now require careful review of both federal and state laws. Importantly, the HIPAA Privacy Rule never required disclosure of PHI to law enforcement; rather, the law allowed for the disclosure under specific conditions. If these conditions are not met, regulated entities would not be permitted under HIPAA to disclose PHI. Refusing to disclose PHI also does not violate the federal Information Blocking Rule (42 USC 300jj-52 and 45 CFR Part 172) when exceptions apply, such as the recently finalized Protecting Care Access exception for reproductive health care.[7]
Even where federal law may not require a disclosure, regulated entities will also need to account for state law requirements. For instance, Arizona requires health care providers to disclose medical records without the patient’s written authorization as otherwise required by law or when ordered by a court or tribunal of competent jurisdiction.[8] While state law may require certain disclosures, HIPAA preemption provisions and regulatory frameworks ensure that such disclosures comply with federal privacy standards. Thus, disclosures mandated by ARS 12-2294(A) fit within HIPAA’s scope insofar as they are legally required and compatible with HIPAA Privacy Rule’s requirements and safeguards. At the same time, Arizona has a shield law that prohibits state agencies from assisting in out-of-state investigations relating to reproductive health care and gender-affirming health care that would not be punishable under Arizona law.[9] Without the 2024 Rule, decisions about reproductive health related PHI disclosures will require case-by-case review, considering HIPAA, state law, and information blocking rules. Covered entities should evaluate any requests for PHI related to reproductive health care carefully, balancing patient privacy interests with legal obligations and potential risks in this evolving regulatory landscape.
[1] 89 Fed. Reg. 32976-01 (Apr. 26, 2024).
[2] N.D. Tex., 2:24-CV-228-Z, Jun. 18, 2025 (the “Decision”).
[3] 606 U.S. ___ (2025).
[4] Id.
[5] Id., note 10.
[6] In United States v. Texas, Justice Neil Gorsuch (joined by Justices Clarence Thomas and Barrett) suggested that universal vacatur under the APA may be incompatible with traditional equitable principles and Article III. See United States v. Texas, 599 U.S. 670 (Gorsuch, N. concurrence).
[7] 45 CFR § 171.206.
[8] ARS § 12-2294(A).
[9] Ariz. Exec. Order 2023-11, Protecting Reproductive Freedom and Healthcare in Arizona (June 22, 2023), available at: https:// azgovernor.gov/sites/default/files/executive_order_2023_11.pdf; Ariz. Exec. Order 2023-12, Ensuring Access to Medically Necessary Gender-Affirming Healthcare (June 27, 2023), available at https://azgovernor.gov/sites/default/files/executive_order_2023-12.pdf.
Chief Deputy General Counsel – AHCCCS
Job Summary: Under the direction of the Assistant Director/General Counsel, the Chief Deputy General Counsel will provide strategic legal counsel and business advice to the Agency and serve as leadership…
HHS’s Proposed Revisions to Strengthen the HIPAA Security Rule
Ian M. Stanford, Esq. and Miranda A. Preston, Esq.
Milligan Lawless, P.C.
For the first time in over a decade, the Department of Health and Human Services (HHS) Office for Civil Rights (OCR) has proposed an update to modify the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule (the “Security Rule”). OCR stated that its goal of the proposed rule[1] (the “Proposed Rule”) is to strengthen cybersecurity protections for electronic protected health information (ePHI) considering changes in the healthcare environment, a significant increase in breaches and cyberattacks, common deficiencies observed by OCR, and cybersecurity best practices.[2] OCR is concerned about the “rampant escalation” in the number of cyber security breaches that continues to climb each year.[3] For example, in 2024, a ransomware attack against Change Healthcare is estimated to have affected approximately 190 million people. If the Proposed Rule becomes effective, OCR estimates it will cost regulated entities $9 billion in the first year to implement, and $6 billion per year for years two through five for ongoing compliance activities. The public comment period closed on March 7, 2025, and OCR received around 4,745 comments.
Brief Background on the Security Rule
HIPAA is a federal statute enacted in 1996, amended by the Health Information Technology for Economic and Clinical Health (HITECH) Act in 2009. To implement HIPAA and HITECH, HHS issued a set of federal regulations comprised of three separate rules: the Privacy Rule, the Security Rule, and the Breach Notification Rule. This article focuses on the Security Rule. The Security Rule was first published in 2003 and revised in 2013. It establishes a national set of security standards to protect ePHI and is meant to serve as a floor to the security measures that regulated entities (i.e., “covered entities” and “business associates”) must implement. The Security Rule does so by specifying administrative, physical, and technical security requirements. Administrative safeguards are the policies and procedures that regulated entities must implement to prevent, detect, contain, and correct security violations. Technical safeguards relate to access controls, audit controls, software and other technology measures to protect ePHI. Physical safeguards relate to the physical measures, policies, and procedures to protect the physical premises where ePHI is stored.
Broad Changes in the Proposed Rule
The Proposed Rule maintains the previous framework of administrative, physical, and technical safeguards. However, it makes sweeping changes to the requirements imposed upon regulated entities. HHS published a fact sheet[4] that breaks down some of the sizeable changes proposed in the update to the Security Rule. Below are a few of the key changes in the Proposed Rule:
Looking Forward
The future of the Proposed Rule is unclear, and the Trump administration will likely decide whether the Proposed Rule moves forward. The Trump administration has already begun to act on its initiative to reduce federal regulations[6], which may mean the Proposed Rule will not be enacted into law. In the meantime, regulated entities should make themselves aware of the key components of the Proposed Rule and monitor any developments concerning the Proposed Rule.
[1] 90 Fed. Reg. 898 (Jan. 6, 2025).
[2] Id.
[3] Id. at 900.
[4] Health and Human Services, Office for Civil Rights, “HIPAA Security Rule Notice of Proposed Rulemaking to Strengthen Cybersecurity for Electronic Protected Health Information,” (2024) available at https://www.hhs.gov/hipaa/for-professionals/security/hipaa-security-rule-nprm/factsheet/index.html.
[5] Patch management involves identifying, testing, applying, and verifying patches (or software updates) to improve security and performance.
[6] See Presidential Memorandum, Regulatory Freeze Pending Review¸ 90 Fed. Reg 8249 (Jan. 28, 2025); Exec. Order 14192 “Unleashing Prosperity Through Deregulation,”90 Fed. Reg. 9065 (Feb. 6, 2025); and Exec. Order 14215, Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative, 90 Fed. Reg. 10583 (Feb. 25, 2025).