‘If a doctor has treated a gentleman with a lancet of bronze and caused the gentleman to die … one shall cut off his hands.’ – Code of Hammurabi, 1772 BC.
While dismemberment as a method of disciplining errant physicians has (thankfully) been confined to the ensanguined chapters of history books, the costs to health-care providers facing malpractice claims remain considerable in today’s culture of litigation. The essential role of health-care providers – including but not restricted to surgeons, operating theatre nurses and hospital administrators, result in unnecessary costs suffered by the industry to have repercussions on access to health care for the wider society.
The Australian Medical Association (‘AMA’) recently described public hospitals as overburdened and underfunded, and of there being ‘no substantial progress’ despite funding increases instituted by the Commonwealth government over the two years preceding the National Health Reform Agreement. This paper argues that medical malpractice dispute resolution in Australia, premised on tort-based litigation, is responsible for a financial inefficacy that has contributed significantly to the economic predicament faced by public hospitals and other health-care providers.
These contentions are prefaced with an examination of the health-care industry’s inclination to the almost categorically settlement of malpractice claims. It is argued that such a pro-settlement stance adds unnecessary financial burden to hospitals, while simultaneously fostering the practice of defensive medicine, which paradoxically leads to increased malpractice claims. This lends itself to a vicious cycle injurious to the industry, the quality of health care available to the public, and patients suffering from actual negligence and in need of just compensation.
This paper concludes that specialist arbitration tribunals, as a primary model of medical malpractice dispute resolution, should be considered for implementation as a matter of public policy. It is contended that an arbitration-based national commission would work alongside professional regulatory bodies like the Australian Health Practitioner Regulation Agency (‘AHPRA’), and would provide a more efficient and fair civil dispute resolution platform. In this context, medical arbitration’s ostensible qualities of speed, efficiency and confidentiality would be weighed up against its detriments, as evinced by its implementation in other countries.
TRENDS IN MEDICAL MALPRACTICE CLAIMS
A Increasing Claims and Settlement Rates
Statistics released by the Medical Indemnity National Collection (‘MINC’) demonstrate the substantial increase in public healthcare medical malpractice claims from 2006 to 2011, as illustrated in Figure 1.1. However, only a meager 3.8% of all 1,496 claims were resolved by court adjudication in 2010-1. In the same year, 93.2% of claims were settled by the health-care provider through their insurers, with the patient-disputant receiving some form of monetary compensation to waive the right to further legal action.
This prodigious rate of pre-trial settlement in medical malpractice claims outstrips the rate of settlement generally evident across all categories of civil disputes, which has been described to be ‘usually between 50% and 85%’. It is noteworthy that 50% to 85% already signifies a relatively high civil dispute settlement rate, a development which has been attributed to the eager adoption of negotiation-based alternate dispute resolution methods.
B Examining Settlement Size
Explicit settlement amounts have not been made publicly available by the health-provider insurance industry. Instead, various ranges have been released for 2010-1,. Using the average dollar figure in the settlement ranges provided, with the ‘$500,000 or more’ range conservatively estimated to be its lowest limit of $500,000, it is deduced that some $48.6 million was used in settling public sector medical malpractice claims over a single year. It is important to emphasise that this figure does not include any data from health-care providers in Western Australia, nor from the private health sector Australia-wide.
THE COST OF EXCESSIVE SETTLEMENT
‘…[S]ettlement is a capitulation to the conditions of mass society and should be neither encouraged nor praised’. – Owen Fiss, 1984. 
The extraordinarily high rate of settlement associated with medical malpractice claims may be attributed to a variety of factors which will be examined in Chapter IV. Arguably, in its aversion to litigation, the industry’s focus in resolving claims is not on just settlement, but just on settlement. It is contended that the health industry’s injudicious issuing of settlement offers creates a fiscal burden which has repercussions on the health-care providers themselves, the general populace, and severely injured claimants who have suffered actual negligence.
A Public Hospitals – Overburdened and Underfunded
‘… [T]he Australian Medical Association believes that it is unacceptable for any government to reduce funding to public hospitals, as it will only further reduce the capacity of the system to meet demand’. – Dr Hambleton, AMA President, 2013.
Australia public health care has been given a dire assessment by the AMA in their recent annual report. Central to the AMA’s concerns is the funding shortfalls that have resulted in a deficiency in service delivery. While not rising to the hysteria of the ‘insurance crisis’ in the 1990s, it is contended that the expensive insurance purchased by the health-sector, largely used to cover the settlements of medical malpractice claims, contribute to the current economic predicament of the public health industry.
Financially unsustainable public hospitals may be forced to seek additional funding from the State or risk downgrading care services, or in extreme cases, be subject to ‘opportunistic federalism’ – where ownership is transferred to the Commonwealth, as in the case of Mersey Hospital in Tasmania. The pro-settlement stance of the health industry may motivate some patients to file vexatious or frivolous claims. Overburdened hospitals are unable to investigate each claim thoroughly, and generally follow actuarial and legal advice in issuing payouts to avoid the ostensibly more costly process of litigation.
B The Taxpayer
Ominously, the AMA’s report comes to a grim conclusion that ‘unless governments improve public holiday capacity, patient safety will be put further at risk’. Funds from tax-payers cannot be justifiably used to facilitate the paying off of medical malpractice claims with little discretion as to the merit of each individual claim. The conservative estimate of $48.6 million per year spent on settling disputes can be put to better use by providing more beds in hospitals for example, with shortfalls in hospital capacity described as the most ‘serious cause of reduction to patient safety’.
C The Genuine Claimant
Patients with a genuine claim and who have suffered extensive injuries face an uphill challenge in achieving an equitable amount of compensation, perversely attributable to the pro-settlement stance taken by hospitals. Indiscreet settlement offers result in a smaller pool of funds available for compensating claimants who have suffered significant losses. Often shouldering debilitating medical conditions that require urgent and costly treatment, such individuals are left in an unenviable quandary. Should they accept a settlement that is evidently diminutive in light of their significant injuries? Or ought they commence medical malpractice litigation that is likely to be protracted, emotionally draining, and requiring of heavy financial investment before one eventually receives compensation?
Arguably, the difficulty faced by such claimants in attaining adequate compensation is accentuated by the Australian tort reforms via the Civil Liability Acts. While beyond the scope and intent of this paper, it has been propounded by jurists and academics that the controversial direction of tort reform in Australia has made it significantly more difficult for plaintiffs to recover just compensation through litigation.
REASONS FOR THE INDUSTRY’S PRO-SETTLEMENT POSTURE
‘Civil litigation is anything but civil’ – Michael Orfield, 2008.
Legal practitioners representing the industry recognise the palpable benefits of settling medical malpractice disputes prior to litigation in order to circumvent a contested hearing. The demerits of malpractice litigation are two-fold; firstly, the expensive and often protracted nature of medical litigation trials, and secondly, the adverse publicity associated with public adjudication.
A Delays and Costs
The complexity of medical litigation, which often involves judges wading through a perplexity of differing medical opinions, coupled with the extensive docket lists associated with public courts in Australia, result in substantial delays before a typical medical malpractice trial is resolved. The costly miasma of Australian civil procedure with its associated rights of multiple appeals often leads to protracted litigation. Significant resources are expended on investigations, the procuring of legal counsel and expert witnesses, as well as on mandatory filing fees. Such expenses erode any compensation eventually awarded to the non-losing party, even with the possibility of cost orders.
B Adverse Publicity
Beyond immediate pecuniary concerns, the public nature of litigation may irreparably damage the practitioner’s reputation due to repeated exposure in the media. In Dixon v Dr Andrew Foote, Dr Foote was ruled by the ACT Supreme Court to have fallen below the requisite standard of care in his management of the plaintiff. Dr Foote is the president of the National Association of Specialist Gynaecologists and Obstetricians, a position of significant professional esteem, and as of this time of writing remains a medical specialist qualified to practice. Current searches of his name on popular search engines prominently display multiple articles with adverse media comment, including some published prior to the decision of the court.
MEDICAL ARBITRATION IN AUSTRALIA
In recognition of the significant social costs incurred by the industry’s pro-settlement reflex to tort-based litigation, it is argued that arbitration as a primary means of medical malpractice dispute resolution should be considered. Based on studies of government-supported medical malpractice arbitration platforms in other jurisdictions, this chapter seeks to examine how medical arbitration would work in Australia. Facilitating a shift from litigation to arbitration is the timely enactment of the Commercial Arbitration Acts (‘CAAs’) by State parliaments over the last two years, intended to foster arbitration as a legitimate platform of settling domestic commercial disputes.
A Arbitration Agreements
Pursuant to section 7, in order to effect the jurisdiction of an arbitral tribunal, the patient and the physician must voluntarily submit any dispute or potential dispute for arbitration. Such consent should be embodied within a written contract between the patient and the health-care provider, pursuant to s7(3). Essential constituents of such an arbitration agreement would be the institutional rules of arbitration that would apply, for example the rules of the Australian Centre for International Commercial Arbitration (‘ACICA’). The parties may also indicate the number and expertise of the arbitrators appointed. Arbitrators can be appointed by the institution as agreed upon by the parties in their arbitration agreement, for example the ACICA. The agreement may stipulate that beyond the basic principles of ‘independence and impartiality’, all arbitrators must also be qualified physicians.
B Arbitration Proceedings
In the event of a dispute, the disputants would then be prima facie bound to proceed to private arbitration, should either party wish formal adjudication. Under s8, courts will not have jurisdiction over disputes with valid arbitration agreements. As practiced by the National Commission of Medical Arbitration in Mexico, should the arbitration tribunal find that there has been professional misconduct; a report recommending sanctions can then be made to relevant regulatory bodies; such as the AHPRA in Australia.
Pursuant to rule 43, parties engaged in arbitration under the sanctions of the ACICA would, to the extent permitted by the law of Australia, waive their right to appeal decisions to any court of Australia. As established by the High Court, there generally is only a right to judicial review where there has been a violation of ‘natural justice’ in the arbitral process.
ARBITRATION VERSUS LITIGATION
The primary criticism of medical litigation relate to the substantial costs incurred in a protracted medical malpractice dispute before the courts. Arbitration purports to reduce such costs primarily through the autonomy afforded to the parties in deciding on dispute resolution procedures independent of the rigidity of Australian civil procedure. The key benefits and ostensible detriments of arbitration as a primary medical dispute resolution platform will be compared with the current system of tort-based litigation.
A Timeliness and Cost Efficiency
With specialist medical knowledge as a pre-requisite to an arbitrator’s appointment, the parties need not spend tedious and costly sessions educating adjudicators on fundamental medical issues in dispute, which may be required for judges in litigation. To further limit the duration of the arbitration and associated costs, the parties can also consent in the arbitration agreement to only allow evidence from a limited number of expert witnesses. The finality of arbitral awards also ensures that the dispute resolution process would not be prolonged by costly appeals.
The strict principles of confidentiality afforded to arbitration proceedings ensure that disputants may enjoy continued privacy. Such discretion is often not proffered by the courts to parties engaged in civil litigation. Additionally, the confidentiality of arbitration proceedings may increase the quality of evidence tendered. A ‘conspiracy of silence’ has been described to envelope many medical malpractice litigation proceedings, where experts of a particular field are reluctant to tender evidence against a fellow physician due to the fear of subsequent professional isolation. The privacy associated with arbitration proceedings may negate such concerns.
Any recommendation for the development of institutionalised medical arbitration must be sensitive to any possible degradation to the quality of civil justice afforded to disputants. Patients may be cynical of the impartiality of non-judicial, medically-trained arbitrators, and be suspicious of the ‘closed-door’ nature of arbitration. A response to such criticism of arbitration is the institutional mandating of arbitrators to publicly release reasoned decisions with details redacted as required to preserve confidentiality.
Additionally, patients may misunderstand arbitration clauses, or try to void them on the basis of non est factum. The Nevada Supreme Court held that a medical malpractice arbitration contract may be unenforceable where the weaker party was not alerted to the agreement’s practical consequences. Such claims may lead to substantial satellite litigation, with arbitration paradoxically leading to an increased duration required for dispute resolution, as exemplified by the infamous scenario of Cole v Gebauer, where court proceedings relating to an arbitration exceeded 10 years. It is important that health-care administrators are educated to accurately represent the effect of arbitration agreements in interacting with patients.
The dire fiscal situation faced by the public health sector justifies a fundamental shift in perspective on the management of the industry’s expenses. Supported by the ACICA, a public funded medical arbitration commission would negate the health industry’s costly pro-settlement stance; a condition arguably symptomatic of the failings of tortious litigation. Following the success of similar platforms in other countries, further research should be undertaken on the viability of medical arbitration to break the cycle of defensive medicine and curb escalating health care costs in Australia.
This article may be cited as follows: Samuel Seow and Paul Tan, “The Potential of Medical Malpractice Arbitration: An Australian Perspective”, International Arbitration Asia (23 December 2014) <http://www.internationalarbitrationasia.com/articles/medical-arbitration-in-civil-malpractice-claims-an-australian-perspective/>.
 J M Powis Smith, Origin & History of Hebew Law, (Chicago Press, 1931) 10.
 Mello MM, Studdert DM, Brennan TA, ‘The new medical malpractice crisis’ (2003) 348 National English Journal of Medicine 2281-4.
 Philip G Peters, ‘The Fairness of Malpractice Settlements’ (2007) 30 Health and Medicine 30-1.
 Australian Institute of Health and Welfare, Australia’s medical indemnity claims 2010-1, Canberra.
 Law Reform Victoria Commission, Civil Justice Review Report, 2010, Victoria, 213.
 1-<10,000; 10,000-<30,000; 30,000-<50,000; 50,000-<100,000; 100,000-<250,000; 250,000-<500,000; 500,00 or more; Australian Institute of Health and Welfare above n 8.
 Owen Fiss, Against Settlement (1984) 93(6) Yale Law Journal 1073.
 Bolded for emphasis; Australian Institute of Health and Welfare above n 8, 1-2.
 Ibid 1-3.
 B J Preston, ‘Conciliation in the Lawn and Environment Court of NSW: History, nature and Benefits’
(Speech to ACDC Training Program for members of the Land and Environment court of NSW on s 34 conferences in the Land and Environment Court, Sydney, 3 August 2007) 23.
 Select Committee on the Reform of the Australian Federation, Commonwealth of Australia, Australia’s Federation: an agenda for reform (2011) 13-14 [1.48].
 Andrew Lu, Unnecessary Surgery and Issues of Credit, 12 Australian Health Law Bulletin 94.
 Australian Institute of Health and Welfare above n 8, 3.
 Australian Institute of Health and Welfare above n 8, 6.
 Lu, above n 23.
 For example; Civil Liability Act 2002 (NSW).
 Rob Davis, The Tort Reform Crisis (2002) 23(3) University of New South Wales Law Journal 865.
 Michael Orfield, ‘What is Civil Litigation’ Safer Law, 2008.
 Lu, above n 23.
 Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175,  (Gummow, Hayne, Crennan, Kiefel and Bell JJ); J Burnside, ‘The Practice of Law: Justice or Just a Job?’ (2005) 8(2) Newcastle Law Review 1, 2.
 R Sackville, ‘From Access to Justice to Managing Justice: The Transformation of the Judicial Role’ (2002) 12 Journal of Judicial Administration 5, 13.
  ACTSC 101.
 Carlos Tena-Tamayo, Julio Sotelo, Malpractice in Mexico: Arbitration not Litigation, (2005) 331(7514) British Medical Journal 448.
 For example: Commercial Arbitration Act 2013 (QLD).
 Section 9 ACICA Rules.
 Commercial Arbitration Act 2013 (QLD).
 Carlos Tena-Tamayo, above n 41.
 ACICA Rules.
 Westport v Gordian Runoff  HCA 37.
 Carlos Tena-Tamayo, above n 41.
 Sundaresh Menon, ‘International Arbitration: The Coming of a New Age for Asia (and Elsewhere), (Speech delivered at the opening plenary session International Arbitration Committee, Singapore, 10 June 2012).
 William G. Wixted, M.D., Patrick M. Flanagan 693 P.2d 1259 (Nev. 1985).
  WASC 9