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The Association of Corporate Counsel’s Value Challenge recognizes legal service innovations that deliver exceptional value and efficiencies to clients. A collaboration between Borden Ladner Gervais LLP and Healthcare Insurance Reciprocal of Canada (HIROC) is one of this year’s success stories.
This innovation came about largely through the efforts of John Morris, National Practice Group Leader for the Health Law Group of Borden Ladner Gervais LLP, and Mike Boyce, Vice President of Claims, HIROC. They describe here how this winning process innovation came to be, and the benefits and challenges for both parties.
A.Healthcare Insurance Reciprocal of Canada (HIROC) and its external legal counsel, Borden Ladner Gervais LLP (BLG), established a six-year, value-based partnership that increases the predictability of legal fees while also rewarding law firm performance.
“We took a different approach to medical malpractice in Canada. We wanted expertise rather than an area of geographic concentration,” said Mike Boyce, HIROC’s Vice President of Claims. “We offered steady, ongoing work, which allowed us to attract the best and brightest defense counsel.”
The current arrangement between the two partners consists of a base fee combined with a performance fee, which is determined by process management, responsiveness, predictable costs and results.
“In today’s terms, the most progressive arrangements are those that are based on billing for service rather than hours,” said John. “We can’t predict every matter but we do have a sense of what is a reasonable fee. In HIROC’s case, the volume makes it easier to predict.”
The partnership makes fee adjustments for HIROC’s plans to insource some legal matters, as well as other evolutions, over the six-year period, which began in 2011.
A.Having worked together for 25 years, HIROC and BLG were well positioned to take their relationship to the next level.
HIROC and BLG had already ventured into alternative fee arrangements together in phases: first, an average hourly rate plus a 10 per cent productivity incentive; then, a new average hourly rate discounted for volume instituted in 2009. Even so, HIROC wanted increased predictability of legal fees and sought a new approach to pricing its work.
“We compared our costs to settle claims with doctors and with other insurers; ours were usually lower,” said Mike. “But we are always looking for ways to improve and simplify, and we wanted to make use of the fact that we could predict the number of claims very accurately; and how long it would take to settle most of them.”
To arrive at that knowledge, HIROC brought in Catalyst Consulting of Vancouver, British Columbia, to conduct an in-depth analysis of four years of matters with five levels of complexity for litigation and to study average and total hours and staffing patterns for each level. To this was added a five-year forecast of the demand and growth in matters by level of complexity.
The forecast detailed criteria for the configuration of a team of about 20 lawyers and 10 paralegals, rigorous protocols for the preparation and approval of matter budgets, and the use of legal process management methodologies. Compensation would be in the form of a base fee combined with a performance fee determined by such value criteria as process management, responsiveness, predictable costs, and results delivered.
HIROC has worked with BLG for over 25 years. Through this time, we have built a strong foundation of trust and a true partnership based on a desire to see each other’s business succeed. BLG has always been incredibly efficient at having the right level of lawyer do the work and the strategic use of paralegals. We saw the new agreement as an inducement to be even more efficient, and as a learning experience. HIROC now enjoys greater predictability in areas other than budget. The agreement allows both HIROC and BLG to retain top legal talent, address succession issues, and minimize bureaucracy to support the new working arrangement.
A.We saw this more as an opportunity rather than a challenge as we moved from a traditional model to a very innovative model. You can only do this if there is a high degree of trust between the partners and for BLG we have been very fortunate to have such a strong and collaborative relationship with our client. Our partnership with HIROC is predicated on performance rather than just strictly volume – and being recognized and compensated for our performance is much more rewarding. These types of arrangements are really about a long-term relationship and investment. You want to do well, but you also want your client to do well and you expect each other to be there for the long-term.
A.A comprehensive performance de-briefing is conducted every six months. After the first year of the project, an evaluation of the effectiveness of the agreement was conducted. Additional refinements were made to the arrangement enabling improved alignment between HIROC and BLG in the categorization of complexity of cases and the move to more frequent and focused evaluation of BLG’s performance. A commitment to open and frank communications is key to further innovations and we anticipate ongoing refinements as we continue to move forward in our partnership as our needs and requirements shift.
A.The innovations certainly increased our expectations for the legal work product we receive. Both HIROC and BLG modified their reporting and monitoring systems to increase efficiencies and reduce overheads as much as was appropriate. These changes get us more information, with easier access to legal recommendations, and in less time. They have confirmed the validity of our choice of BLG as preferred counsel.
A.For these arrangements to be successful both parties need to be open to a long-term relationship built on trust and interest in seeing each other succeed. For BLG, understanding the client’s needs is paramount to our mutual success and we very much see ourselves as an extension of our client’s legal department.
We believe that these types of relationship are organic. You are changing behaviors and practices, and adopting new ones. You’re picking up new skills and techniques. Such arrangements should not be mechanical but rather we must continue to make adjustments.
John Morris is National Practice Group Leader for the Health Law Group of Borden Ladner Gervais LLP. He has had a diverse career in litigation. In recent years, John has focused principally on health law, medical negligence and alternative dispute resolution. He and other members of the Health Law Group act for over 100 facilities in Ontario. John has appeared before all levels of Court in Ontario and numerous health-related administrative tribunals. He is a co-author of Canadian Nurses and the Law and Law for Canadian Health Administrators. In February 2007, he received the designation of Certified Specialist (Health Law) from the Law Society of Upper Canada.
Mike Boyce joined HIROC in 1990 and, as Vice President of Claims, oversees the work of 18 claims and law professionals inside the organization. Mike is recognized as a leader in the health insurance field. In 2004, he proposed and oversaw the development of a new compensation approach for HIROC's Ontario lawyers, moving from an hourly payment rate to a contract basis, and saving several millions of dollars annually. He has reviewed and renewed this agreement several times, on each occasion yielding new performance improvements and developing more effective metrics. In 2006, he spearheaded the successful migration from a paper-based system to an image based claims system. During this time, he also oversaw the assumption of claims and risk management handling for the province of New Brunswick. In 2011, Mike was awarded the Fellow of Distinction award by the CIP Society. In addition to this award, he holds both the CIP and the FCIP designations from the Insurance Institute of Canada.
The Association of Corporate Counsel is a global bar association promoting the common professional and business interests of in-house counsel who work for corporations, associations and other private-sector organizations through information, education, networking opportunities and advocacy initiatives. ACC has more than 30,000 members in more than 75 countries, employed by over 10,000 organizations. The Value Champions initiative is part of the ACC Value Challenge, launched in 2008 to provide resources and training for in-house counsel and law firm lawyers to help affect change within the legal industry. By re-aligning relationships and promoting value-based fee arrangements and other management tactics, the market for the delivery of legal services benefits from the same insights upon which every other service industry relies to provide world-class value to their clients. Nominations for next year's Value Champions will be accepted starting in December 2013 through February 7, 2014.
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