The Collapse of Big Law: A Cautionary Tale for Big Med

The legal industry's obsession with performance metrics has contributed to its dramatic collapse. Could the same happen with physicians and hospitals?

Lawyers have something to teach doctors. But it is not how to avoid medical malpractice claims, protect patients’ rights, or negotiate better contracts with hospitals and insurance companies. Instead it is a cautionary tale—a tale of woe, really—about pitfalls the medical profession needs to guard against if it wants to avoid reprising the epidemic of de-professionalization and demoralization that has beset lawyers and the legal profession.

Simply put, the law is not well. US law school applications are down by nearly half from eight years ago, and 85% of graduates now carry at least $100,000 in debt. More than 180 of the 200 US law schools are unable to find jobs for more than 80% of their graduates. Median starting salaries for those who do find work are down by 17%, and more than a third of graduates cannot find full-time employment. Tellingly, lawyers have higher rates of depression and alcoholism than the general population.

When surveyed, about 6 in 10 lawyers say they would advise young people to avoid a legal career. Part of the problem is low public esteem for the law.  Compared to the 85% of Americans who say you can trust nurses, only 19% say you can trust lawyers. But this is more of a symptom than an explanation. To understand why public esteem for the legal profession has fallen so far, why so many lawyers are so unhappy, and what medicine can learn them, we must look deeper.

Part of the explanation is simply economic. Since the severe recession of 2008, the number of clients willing to pay top dollar for high-priced legal service has declined precipitously. Many of the nation’s largest law firms—those employing over 1,000 attorneys, often referred to as “Big Law”—have been forced to reduce their staffs.  In dozens of cases, they have had no choice but to merge or file for bankruptcy, economically unable to sustain their operations.

But look deeper still and other more fundamental problems emerge. One is the increasing popularity of law school rankings. In order to compete for students and tuition dollars, law schools do what they can to improve their standing, which means in part encouraging as many students as possible to apply and to take jobs with high-paying firms when they graduate. And for any school to move up in the rankings, another needs to move down.

An even more serious problem is the way law firms keep score. One prevalent measure is PPP, or profit per partner, introduced by The American Lawyer in 1985. When such statistics began to be published, firms that thought they were doing well suddenly discovered that they were being outperformed by peers.  Soon bidding wars ensued for top earners, who are sometimes referred to as “rainmakers.”

In one respect, ranking law schools by job placement rates and law firms by profits sounds like a good idea. It provides a seemingly fair and objective basis for prospective students, employers, and clients to assess performance. But such rankings have a tendency to bring out the worst in those they evaluate.  For example, as soon as law firms begin measuring their performance by the revenue each attorney generates, money begins to supplant all other means of assessing performance.

Lawyers whose work is gauged above all by billable hours experience great pressure to make every minute count in the dollar column. Noble aspirations that may have drawn young people to the law in the first place—serving their fellow citizens, making the community a more just place, and securing democracy—evaporate thanks to this constant attention to money. Soon pro bono work seems a waste of time.

To professionals who choose careers in fields such as law, medicine, and teaching, it is demoralizing to be treated as a unit of production. Even some of the lawyers earning millions of dollars report that they find little or no fulfillment in the work they do. In essence, by stoking the flames of competition between law firms and attorneys, the current system has engrained what economists call a “zero-sum” mentality. There is only a relatively fixed quantity of legal work to be done, and for one firm or attorney to command more of it, others must make due with less. At many big firms, just beneath a veneer of cordiality lurks a shark-like ethic of eat-or-be-eaten, winner-take-all, cut-throat competition.

The most problematic aspect is the demotion of lawyers from professionals to mere service providers. This works to the detriment of lawyers, their clients, and society. As a professional, a lawyer represents her clients in the courtroom, in her office and at the negotiating table. She operates with an appreciation for her role in the adversarial judicial process, the need to educate clients about the limits and purpose of the law, and the importance of helping clients create frameworks to work together to form organizations, build businesses, and plan for the future. Doing these things well provides a sense of meaning and value in work.

As a mere service provider, by contrast, her role is to provide a discrete technical service—usually assumed to be the same as any other lawyer would provide—for a fee. Her success is measured not in the professional insight and practical wisdom she offers but in the technical efficiency with which she provides services and her ability to attract other clients willing to pay her to do the same. The sense of professional fulfillment associated with the role of service provider is small at best.

Medicine lags behind the law by several decades, but it is now proceeding down the same path. Rankings are playing an increasing role in how medical schools and hospitals assess their performance. We know a hospital that regularly scoffed at such polls until one year it fell in the rankings. Almost immediately, it began taking steps calculated to restore its former status. We know a medical school dean whose annual report regularly focuses on breaking into the “Top Ten.”

Medicine has developed its version of PPP, as well.  It is known as the RVU/FTE, or relative value units per full-time equivalent.  To their credit, physicians have been a bit more reluctant than attorneys to measure productivity directly in dollars, but RVUs amount to much the same thing.  Performing a procedure usually generates far more revenue than talking with a patient, which is part of the reason that procedure-based specialists are so much more highly paid than their colleagues in primary care.

If current trends persist, it won’t be long before health systems will begin widely touting their standings in the RVU per FTE race. Hospitals and medical practices will be placing increasing pressure on their physicians to ratchet up productivity, another euphemism for the amount of revenue they generate.  Physicians who care for the poor, take their time, and get to know their patients are likely to suffer in the rankings.

With each passing year, Big Med is following Big Law.  Physicians, medical schools, and hospitals all proudly trumpet their standing in national rankings.  Efforts to preserve and augment revenue streams produce a less patient-centered and more business-oriented approach to organizing the practice of medicine. Physicians are more and more commonly referred to as healthcare providers. And billboards hawking the services of injury attorneys are being crowded out by hospital ads touting high-margin service lines.

Many clients, patients, and legal and medical professionals regard the erosion of the professions as the equivalent a tidal wave—deeply regrettable but utterly unstoppable. But this is not so. It is possible to reverse the tide and restore a sense of what it really means to be a professional—to be devoted to the service of others and the ideals of a noble profession. Collaboration can supplant competition, and the best interests of clients and patients can regain their rightful primacy.

Who would gain from such a restoration of professional integrity? First, the professionals themselves, who could still go to work in the morning and lay their heads down at night knowing that they are serving something beyond their own narrow self-interest. Another group of beneficiaries would be clients and patients, who would be able to trust that the professionals serving them are truly following their hearts and doing what they believe to be right.

And third and most importantly, society itself would benefit from such an example. In the short-term, to strive to be anything other than number one is foolish. But in the long term, life need not be a zero-sum game. There are many opportunities for each of us to serve others and enjoy long and richly rewarding careers without always maximizing our incomes at other’s expense. As the story of Big Law indicates, competition can be good, but only when it truly brings out the best in us.