What Can Health Care Teach Business about Managing its Lawyers? Seeking Answers at the Mayo Clinic (Part 3 of 3)

Collaboration — on a consistent basis at least — calls for more than good intentions. Real teamwork is promoted — or it’s discouraged — by the way we pay people for their work.   

In her “What Makes Minnesota’s Mayo Clinic Different?”, financial journalist Maggie Mahar interviewed one of its physicians, Dr. Marc Patterson:

“You may have heard that at Mayo, doctors collaborate. But did you know that after their first five years all physicians within a single department are paid the same salary?

” … ‘Most could earn substantially more in private fee-for-service practice’, he adds.

“’It doesn’t matter how much revenue you bring in,’ Patterson explains, ‘or how many procedures you do. We’re all salaried staff—paid equally. This is very good for collegiality and people working together,‘ he adds.

Part 2 of this series described the Mayo Clinic’s teamwork approach to medicine. Mayo Clinic insiders describe this use of salaries rather than fee-for-service or other rewards for revenue generation as the foundation of teamwork medicine. Dr. Larry Jameson, executive vice-president of the University of Pennsylvania Health System, in a recent Knowledge@Wharton issue, stated that this use of salary to pay physicians removes, “potentially perverse incentives that are based on volume“.

Mayo Clinic chief administrative officer Jeffrey Bolton in that same Knowledge@Wharton issue observed that basing doctor compensation on salary supports collaboration among them. And he credited that collaboration with keeping the Mayo Clinic patient — not anyone’s profit center — uppermost in the minds of all physicians and other staff:

“‘So there’s no real incentive for driving volume within your practice …. You’re really, again, focused on what the needs of the patient are.'”

In medicine it’s a challenge to align professionals’ incentives with the interests of those they serve. The business legal sector faces the same challenge.

Consider this comment from Ben Heineman, Jr. — general counsel of GE during the Jack Welch era and (I believe) the most accomplished chief legal officer at any company in history — in remarks at New York University Law School on October 28, 2016:

I was always worried with the lawyer inside the big firm that the pressures of the economic model would lead to overstaffing and overbilling no matter how careful they were.”

Consider this comment from Sung Hui Kim — Professor of Law at UCLA writing at The Conglomerate an August 21, 2014 post:

I worry about uncontrolled expenditures …. My prior experience as general counsel of a corporation (plus my six years of practicing law in a law firm) make me skeptical of the incentives of partners within firms (‘Bill, bill, bill!’).”

Years ago I was associate general counsel at a Fortune 500 corporation in Portland, Oregon. My boss — the general counsel — found himself being chastised by a partner at one of our outside law firms. An AmLaw 100 firm — one of the 100 largest U.S. law firms by gross revenue and other key metrics.

Never mind that usually — if anyone’s doing the chastising — it’s supposed to be the client-to-the-law-firm and not the law-firm-to-the-client. But anyway ….

It seems that my boss had heard that someone in the firm’s Seattle office was really astute in a particular legal specialty, so my boss called this astute guy in the Seattle office and had him do some work for us.

Fierce blowback from our “relationship partner” in the AmLaw 100 firm’s Portland office. By calling the astute guy in Seattle, we’d taken our question to the “wrong office”. The Portland office had its own lawyer in that legal specialty — thank you very much.

Which made me wonder …

What was the priority of our AmLaw 100 firm: Was it us, the client — or was it the revenue-generation target of our law firm’s Portland office?

Don’t be too hard on that Portland “relationship partner”. He was acting in accord with the business model that’s still almost universally accepted among law firms and in-house counsel as the basis for pricing, staffing, and structuring of lawyers’ work flow.

But if the business legal sector is ever to reach the Mayo Clinic’s “pick up the phone and call a colleague” level of collaboration described in Part 2 of this series, it might have something to learn from that institution’s use of salaries — rather than revenue targets — to compensate their doctors.

Part 1

Part 2