With healthcare budgets squeezed by the falling economy and declining reimbursements, alert executives are pruning costs in other areas. Legal costs, a traditional budget buster due to litigation and regulatory requirements, are a prime target for a number of reasons, including more progressive attitudes and the growth of domestic outsourcing.

“The first step is an awareness of where you’re spending money,” said Candice Reed, executive director of Counsel On Call’s Nashville office. “The traditional way of doing things didn’t necessarily require hospital management to think about it in this way—legal spent as much money as it needed and was left alone. I don’t think you can do that any more and be responsible.” Counsel On Call is a legal outsourcing firm.

Mac Stewart, a partner with healthcare law firm Stewart Stimmell in Dallas, Texas, agrees that healthcare providers are more budget-conscious now than in the past and that law firms that want to successfully compete for business in this area need to act as partners with their clients in controlling costs. 

“We consider that we are in partnership with our clients, and to be a good partner, I have to be a good steward of their budget,” he said. 

When seeking to cut legal costs and run a more effective and efficient legal operation going forward, there are four issues to zero in on.

Consider outsourcing

Outsourcing is a quick way to cut legal costs, although you must be smart about how you do it. Reed has seen a lot of healthcare litigation, for example, being outsourced, especially in the area of discovery. 

“Create a process that is tailored for your company that incorporates low-cost litigation support attorneys, outside counsel, and your inhouse team, and make sure results are quantifiable,” she said. 

Stewart makes use of outsourcing in several different ways. During times when his local healthcare clients have had an inhouse attorney on leave for several months, his firm has placed an associate there to handle that workload. In those cases, his firm negotiates a set fee to cover that workload for the specified time. His firm has also hired contract lawyers to help out in certain areas, working out of his firm’s offices. 

Inhouse counsel at healthcare firms must be aware of any outsourcing that is being done on the part of their outside counsels, cautions Stewart. “We’re very transparent about it. I think as long as there’s transparency, outsourcing can allow for more efficiency,” he said.

Set project and case budgets

The sky is no longer the limit when it comes to legal billing. Demand up-front estimates and set project fees from outside counsel and outsourcing firms. When you get a bill, ask questions if any areas aren’t clear.

“My most efficient healthcare client insists, when a new case comes in, that we provide a proposed budget within 30 days,” Stewart said. “Everyone understands that as the case progresses, it may go one way as opposed to another, so the budget could come in higher or lower, but at least there is a basis for comparison.”

Stewart noted that clients have to be realistic about financial risk in a given case and figure out the most cost-effective ways to proceed, because when litigation is driven by emotion or other issues, the financial costs of a given outcome can outweigh potential rewards. This is especially true with commercial litigation, he said.

“What is really important for the client in a commercial case is to consider how much money they have at risk and how much they are trying to recover,” he continued. “They need to decide what they want to accomplish within a specific budget.”

Go local

For many years, hospital and healthcare executives looked to mega-firms in New York, Los Angeles, and Chicago to meet their legal needs. Today, local and regional law firms with lower hourly rates and more flexible approaches to billing are more attractive. There is also more of a tendency to spread legal work over a number of law firms that either specialize in a particular area or are more willing to entertain alternative billing arrangements.

“Healthcare companies seem to be recognizing that there are attorneys in smaller markets who can do the same quality level of work as a large firm and at a much-reduced price,” said Reed. “The question is what firm or entity is most willing to address whatever needs they have, whether it’s price or setting up a team to take care of that particular hospital.”

Use technology

As Reed notes, technology is increasingly important in the practice of law. Inhouse counsel needs to be aware of the technological solutions that can reduce costs, and it is incumbent upon their partners, including outside counsel and outsourcing firms, to make them aware of software, databases, and other solutions.

“The technology is out there, but many inhouse lawyers aren’t aware of it,” she said. “It’s nice to have outside vendors and companies that specialize in this area say you can use this software or this particular vendor to process your data in a way that, for example, will decrease the number of documents attorneys need to review.” 

Stewart said he is constantly on the outlook for technology and other services that can improve efficiency and cut costs and passes on those services to his clients. “When we have to engage third-party vendors to do stuff on cases, we try to negotiate these prices down, and we just pass it through,” he said.

When it comes to legal costs, with enough knowledge and motivation on your part, you’re literally in the driver’s seat. “Remember, you are the client and drive the process,” said Reed. “Don’t be afraid to ask vendors and outside legal counsel to work collaboratively, request data that shows what work is being done and how much it costs, and ask for estimates on the front-end.”

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