How Arbitration and Mediation Can Help Resolve Healthcare Disputes

Commercial and payor-provider healthcare disputes have grown in frequency and complexity over the past decade, driven by industry consolidation, evolving reimbursement practices and payment models, and legislation related to medical billing arbitration and medical claim resolution. Depending on the case, applicable laws and regulations, and jurisdiction, alternative dispute resolution (ADR) can be an efficient way to resolve a healthcare dispute. In this article, we’ll explore how ADR processes such as arbitration and mediation can typically help parties to a healthcare dispute resolve even the most complex cases faster and for less cost than traditional litigation.

What is Healthcare Arbitration and Mediation?

Healthcare arbitration and mediation refer to dispute resolution methods used in the healthcare industry. Arbitration is a formal process in which a neutral third party — the arbitrator — hears arguments and reviews evidence from each side and then issues a binding decision, the award. Although it shares some similarities with litigation, arbitration has fewer strict procedural formalities, is private, has limited grounds for appeal, and is generally a more efficient process. Mediation is another alternative to litigation that offers a more collaborative, less adversarial approach in which a neutral third party — the mediator — helps parties work towards a mutually agreeable solution, but doesn’t issue a binding decision.

For many commercial healthcare disputes, mediation and arbitration work in tandem. Parties typically first try to resolve the dispute through informal negotiation or internal resolution methods if the dispute involves parties in the same organization. If these methods fail, mediation is often seen as the next step. If the parties are unable to reach resolution through mediation, the dispute may escalate to arbitration or litigation. Even if the parties are involved in an arbitration or litigation case, they usually are able to mediate at any point in the process before the final judgment or award is issued. Mediation is often viewed as a preferable way to address a conflict, as there’s less uncertainty and the parties are in full control of how the dispute resolves.

How Arbitration Clauses Work in B2B Healthcare Disputes

Many healthcare organizations include ADR clauses in their contracts to provide a framework for dealing with disputes. The ADR clause may be a single paragraph or a detailed multi-page clause that describes the applicable rules and procedures associated with mediation and arbitration. As disputes are common in the healthcare industry, ADR clauses are typically discussed or negotiated between organizations before the contract is finalized.

Healthcare organizations can use Clausebuilder® or ClauseBuilder AI to easily draft customizable clauses for their business-to-business (B2B) contract.

Why Healthcare Parties Often Use ADR to Address Conflict

Parties to a B2B healthcare dispute often prefer to resolve their conflict through ADR methods such as negotiation, mediation, or arbitration. In B2B healthcare disputes, the parties involved often have interdependent relationships and may need to continue working together regardless of the outcome of the dispute. For example, a hospital or other patient care institution may have a conflict with an insurance company with which they have a contractual partnership. By using ADR methods like arbitration or mediation, the parties to a dispute often aim to preserve their ongoing business relationship. If the parties instead opt for litigation, the potentially lengthy and adversarial court battle can make working together more challenging.

Another reason parties to a commercial healthcare dispute often choose ADR is that ADR processes are typically less costly and more efficient than going to court. Healthcare parties also often prefer to work with a neutral who has specific subject matter expertise or experience handling healthcare disputes. Unlike litigation, where parties typically have little or no control over the judge assigned to their case, ADR often allows more flexibility in choosing the neutral. When parties file an ADR case with an administering organization such as the American Arbitration Association® (AAA®), they can typically provide input during the neutral selection process and find an arbitrator or mediator with the appropriate background.

Whether a healthcare dispute can be resolved through arbitration or mediation may depend on the type of conflict, relevant industry rules and regulations, the jurisdiction governing the dispute, and any applicable dispute resolution provision in the parties’ contract. In some cases, a dispute may require government intervention, federal litigation, or other specialized procedures.

How Does Payor-Provider Healthcare ADR Work?

Providers (such as hospitals) are often involved in disputes with payors (such as insurance companies). Payor-provider disputes are a common type of healthcare dispute handled through ADR processes. Because these disputes are common, payor-provider contracts often include detailed dispute resolution provisions that anticipate potential conflict. Different types of payor-provider cases include disputes over overpayment or underpayment of claims, claim denials, and billing or coding errors. In payor-provider disputes, it’s common that one case may involve numerous claims arising under the same provider agreement.

An ADR organization, such as the AAA, typically administers payor-provider cases. Soon after one of the parties files a demand for arbitration or request for mediation, the neutral selection process begins. The selection process may be specified in the ADR clause of the contract, or it may follow the specific rules of the administering organization. Payor-provider arbitration often utilizes a rank and strike method, in which the parties strike and rank arbitrator candidates from a provided list. In mediation procedures, the parties are encouraged to collaborate on selecting a mediator.

Payor-Provider Arbitration Procedures

Once arbitrator(s) are appointed to a case, they schedule a preliminary hearing to establish the framework and schedule for the proceedings. During the formal hearing, the parties present evidence and make their case, often with the help of legal counsel. Because many payor-provider disputes concern reimbursement obligations and contract interpretation, presented evidence often includes contracts, claims data, payment records, and billing documentation. After reviewing the arguments and evidence presented by each side, the arbitrator(s) issue an award.

The arbitration award is generally legally binding and may be enforced in court in the appropriate jurisdiction. In many cases, the parties resolve their dispute through settlement before the arbitrator issues an award. According to AAA data for healthcare cases closed in 2025, 78% of cases settled before an award was rendered.

The AAA regularly administers large and complex healthcare disputes, including those involving multiple parties. The AAA aims to move even the most complex healthcare cases through arbitration fairly and efficiently. For payor-provider disputes specifically, the AAA’s Healthcare Payor Provider Rules include procedures that allow related cases to be consolidated and multiple parties to be included in a single arbitration, when appropriate.

Payor-Provider Mediation Procedures

Although mediation follows a less formal framework than arbitration, it helps provide a structured, collaborative way for payors and providers to resolve conflict. While mediators do not issue binding awards or make decisions for the parties, they guide the process, encourage productive dialogue, and assist the parties in identifying areas of agreement. At the AAA, payor-provider healthcare mediation is administered in accordance with the AAA’s Commercial Mediation Procedures. There is no additional filing fee when parties to a pending arbitration agree to mediate their dispute through the AAA.

Which Payor-Provider Disputes Are Typically Handled Through Government Procedures?

Certain payor-provider disputes may follow a more formal procedural path and sometimes involve government enforcement processes. Arbitration over alleged violations of the No Surprises Act is typically handled through the Federal Independent Dispute Resolution (IDR) process administered by the federal government. Disputes involving government payors, such as Medicare/Medicaid reimbursements or enrollment, typically proceed through statutory administrative channels, including administrative appeals. It's important to note that the AAA and other private ADR administrators don't facilitate or participate in the Federal IDR program.

How Does Employment / Workplace Healthcare ADR Work?

Within healthcare organizations, employment disputes may involve termination, discrimination, harassment, employment terms, or working conditions. Healthcare-specific matters may also arise from executive and physician employment agreements, non-compete or other restrictive covenants, and physician compensation arrangements tied to relative value units (RVUs) or other performance measures.

These disputes generally proceed under the dispute resolution provision in the applicable employment agreement. For AAA-administered disputes, the parties’ arbitration agreement must comply with the AAA’s Employment Due Process Protocol, which is designed to provide for fairness, neutrality, and transparency in the dispute resolution process. The AAA has established rules that govern employment and workplace cases, and these rules also typically apply to employment disputes within the healthcare industry. Consult the AAA Employment/Workplace Arbitration Rules and Mediation Procedures to learn more about how employment arbitration and mediation procedures work.

How Does Healthcare ADR Work for Corporate Transactions?

Healthcare corporate transaction disputes can arise from mergers, acquisitions, and joint ventures within the healthcare industry. These disputes may involve disagreements over post-closing obligations, valuation issues, or alleged breaches of representations and warranties. These disputes generally proceed under the dispute resolution provision in the governing transaction agreement. The parties may also mutually agree to mediation or arbitration after a dispute arises, even if their original agreement does not require ADR.

At the AAA, healthcare corporate transaction disputes typically proceed under the Commercial Arbitration Rules and Mediation Procedures. Unless the parties agree otherwise, the Procedures for Large, Complex Commercial Disputes apply when any disclosed claim or counterclaim is at least $1 million. Depending on the amount in dispute and the parties’ agreement, these cases may be heard by one or three arbitrators and may involve extensive document exchange and, in certain circumstances, depositions.

Choosing the Right Path for Your Healthcare Dispute