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What is “baseball arbitration” and how can it be used effectively to resolve disputes? P.2

In our last post, we began looking at a proposed bill that would require health care providers and health insurers to proceed to arbitration when they cannot agree on who is responsible for paying health care costs that exceed a patient’s in-network costs. As we noted, the specific form of arbitration in which the parties would participate is commonly known as “baseball arbitration.” It is also called either/or or final-offer arbitration. This form of arbitration is commonly used to resolve commercial disputes.

In many commercial or other disputes that go to arbitration, one or both parties enter the process with a fixed position they believe is correct or at least reasonable, and expect to be vindicated in arbitration. Ordinary arbitration, fortunately, allows for parties to modify their position in the process and to receive an outcome that doesn’t entirely favor one party over another. That isn’t the case in baseball arbitration. 

Because of the way baseball arbitration works, parties need to carefully prepare their proposals to have a strong chance of a favorable outcome. Whether or not a proposal is reasonable, of course, depends on the circumstances of the case, and there can be challenges in submitting such a proposal. Parties have to understand one another’s positions and have a sense of what a fair outcome would look like under the circumstances of the case. Special circumstances that could change the way the each party’s position is evaluated have to be given due consideration.

In any arbitration case, of course, it is important to work with a neutral arbitrator who will be able to carefully consider the facts and circumstances at play and render a fair decision. This is particularly important with baseball arbitration, where parties effectively either win or lose. 

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