The Managed Mediation of a Payor-Provider Healthcare Dispute

Vol. 10 No. 11

AuthorIn the healthcare industry, payors and providers often have claims for both underpayment and overpayment arising from ongoing contracts or other healthcare services rendered.

When claims arise between a payor and a provider, they are often aggregated and combined for purposes of litigation, sometimes totaling thousands of claims in a single action. When the parties are unable to resolve the claims informally, they often become the subject of either a civil action or an arbitration. In either case, the parties try to settle those claims and do so often in mediation.  

A Different Kind of Mediation

Of the thousands of mediations this author has conducted, more than 95 percent were initiated by one or two parties who agreed on a mediator, scheduled the mediation, filed a brief, and showed up at the mediation session. The mediation session is often the first time the parties discuss the issues with the mediator or each other. In other words, all of the work is focused on showing up at the mediation with no advance planning for the conduct of the mediation session itself.

The success of mediations involving large numbers of claims and related issues, however, is often in direct proportion to the degree of pre-mediation communication, document exchanges, and analyses of these unique types of claims. It is the goal of the Managed Mediation described herein to facilitate pre-mediation activities and thereby greatly increase the likelihood of resolution at the mediation session itself or even earlier.

Unique Qualities of Payor-Provider Disputes

What makes payor-provider disputes unique is the fact that most often there are multiple issues (or categories of issues, i.e. “buckets”) involving decision makers from different departments within the same organization (i.e. the claims people, versus the contracts people, versus the case administrators). Moreover, each bucket may contain hundreds or thousands of separate claims which arise under the same contractual relationship. Because the claims are individually small, the provider most often waits until it has gathered a sufficient number of claims to make filing the action or mediating the case pre-litigation worthwhile.1

These types of claims fall into several familiar categories, such as lack of authorization, medical necessity, usual and customary rates, and the like. Typically, they will span fixed dates of service. During the pendency of the action, there may accrue additional claims for additional dates of service or claims that were not part of the original claims but which arose under the same contractual or non-contractual relationship as the original claim(s).

At the same time, the existing contract may be expiring, may have expired, or may be in the process of being renegotiated during the pending action. So by the time of the mediation, in the vast majority of this mediator’s cases, there are “original” claims, “accrued” claims, “future” claims certain to arise from the relationship, and often contract issues that need to be addressed since the relationship between the parties is ongoing.

The Managed Mediation

Advance Collaboration

In the Managed Mediation, the parties confer with the mediator well before the mediation session to agree on what events or milestones should occur prior to the mediation. Having identified the necessary milestones, the parties then agree on a schedule for their implementation.

Since individuals responsible for various issues may be from separate and distinct departments within an organization, it is important to identify the key players. It is the goal of the Managed Mediation to address all issues in an orderly and effective process designed to save time, money, and human resources. That is done by assisting the parties to organize their issues collaboratively through the interaction of the neutral mediation well in advance of the actual mediation session.

Preliminary Mediation Management Conference

When the parties submit a matter to mediation, they will be given a date for a Preliminary Mediation Management Conference (“PMMC”). The agenda for the conference will include, among others, the following items: description of the claims by bucket/category, amounts of the claims, identity of the parties required to attend the mediation, dates for exchanges of specific types of information, contract issues, identity of individuals re contract issues, dates for subsequent status conference(s), and the date(s) for the mediation. The PMMC can result in a Scheduling Agreement signed by the parties. The Scheduling Agreement then describes the path to mediation.  The advantage of the PMMC is the opportunity to effectively plan and schedule the input from, and participation with, all members of separate departments within the relevant organizations.

Organizing the Mediation Process

The goal of the Managed Mediation is the same as the goal of a well managed arbitration in which the arbitrator clarifies the rules to which the parties have agreed. By the time of the mediation session, the parties have collaboratively organized their approach to resolution of multiple issues, frequently involving different departments within the relevant organizations. They have done so by creating a plan at the outset and actually implementing the plan as they proceed toward mediation, in contrast to other types of mediation, where the parties have no plan as they walk into the mediation session. As a result they  have greatly increased the likelihood of resolution at that mediation, and they have done so in a manner that contemplates and accommodates the schedules of all parties and the most efficient use of human and financial resources leading up to the mediation.

Cost Factors

Along with the greater likelihood of resolution is a commensurate decrease in the costs associated with the prosecution or defense of claims. Because each party has a voice in factors such as timing of milestones, designation of individuals, exchange of documents, and the like, the party has an opportunity to do so in a way most convenient and efficient for that party. Likewise, the cost of the mediator may be less. The mediator can be hired as in the case of an arbitrator with the payment of a retainer prior to the PMMC.2  His/her charges thereafter are based solely on actual time spent. Given the greater likelihood of resolution at the first mediation session or even earlier as to some or all issues, total mediator charges may ultimately be less than they would be by entering a mediation without prior mediator involvement.


Parties to a traditional mediation rarely take the time to speak with the mediator in advance of the mediation session. In payor-provider disputes, this is a major missed opportunity because their mediations are precisely the type requiring collaborative preparation: they almost always have multiple issues presided over by more than a single individual on each side. As a result, there often seems to be too little time available in the mediation session to resolve all issues. In addition, there is often the problem of the “empty chair” where a decision maker was not in attendance or not available. Through the collaborative planning at the PMMC, many such problems can be avoided: the parties will have a better understanding of what is needed to prepare for mediation and can schedule the session accordingly; they will have a sense of the most effective method of dealing with issues at the mediation; the right people will be present or available; and there will be no “empty chairs.” By eliminating avoidable obstacles through thorough and effective planning with the mediator, the parties have greatly increased the likelihood of success at the mediation session.



In one case involving separate provider hospitals, all of whose cases were consolidated into a single civil action, Medicaid claims filed against the administering agency averaged more than 1,000 patients per hospital. Total amount of all claims was less than $10 million, making individual actions highly impractical. Two initial mediations set the stage for two settlements, clarification of issues, and subsequent sessions. After two years and six additional sessions, all claims were resolved.


Rates vary depending on the mediator and the location, similar to the variation in billing rates for practicing attorneys. Some charge by the hour with rates anywhere from $150.00 to more than $900.00 per hour. Others charge by the day but generally only for full-day hearings. In the Southern California market, the cost of a PMMC and follow-up work would be somewhere between $450.00 to $800.00 per hour, again, depending upon the mediator.


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