The major benefit of ADR is not as an alternative to disputes that have already ripened to the point that a lawsuit is about to be filed. ADR should been seen as part of a general strategy of avoiding disputes rather than just a more expeditious method of resolving them. ADR is most effective when it is incorporated in all business transactions. Many Fortune 500 companies are putting ADR provisions in their contracts with suppliers and corporate customers. In addition to requiring ADR should a formal dispute arise, the unavailability of litigation encourages the quick, informal resolution of disputes.

All states allow ADR for medical business disputes, and most allow it for medical malpractice claims, but only if the choice of ADR is voluntary. For example, an MCO might require persons who choose to subscribe to agree to the binding arbitration of potential medical malpractice claims. Although most states would accept this, there is growing trend to require that the ADR agreement be signed after the patient is injured so that it is really a free choice. The courts would likely reject an agreement with a private physician who allowed a patient to schedule an appointment and arrive at the office, but then required the patient to agree to arbitration before treatment. ADR agreements are not allowed as a condition of emergency care or in other situations where the patient cannot exercise free choice.

In many cases, it is the malpractice insurance companies that resist ADR agreements because ADR has the potential to increase the overall payments to claimants. An efficient system for resolving disputes will allow patients with small claims to be compensated. Studies of the incidence of medical malpractice find that many more patients are injured by negligent medical care than file medical malpractice lawsuits. [ Compensation in New York. Report of the Harvard Medical Malpractice Study to the State of New York. 1990.] Some of these patients do not realize that they were the victims of malpractice, some intentionally choose not to sue their medical care providers, but most are unable to secure representation because their claim is too small. If the cost of these small claims exceeds the savings in limiting large claims and attorney’s fees, then ADR will only increase the cost of insurance.