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2021 Legal Asset Report: Healthcare industry insights

November 11, 2021

Over the last 18 months, healthcare companies have had to quickly adapt and evolve to the pandemic’s changing circumstances. Today, healthcare companies are reevaluating their businesses in light of those changes that are here to stay.

According to Deloitte’s 2021 Healthcare Outlook, major changes include the reprioritization of preventive over reactive care; the adoption of virtual health and other digital innovations; a push for interoperable data and data analytics uses; and unprecedented collaborations in vaccine and therapeutics development.

Along with these new business pressures, healthcare companies face a range of economic pressures and affirmative recovery opportunities including litigation directly related to the pandemic as well as unrelated, ongoing litigation including pharmaceutical patent disputes and opioid litigation.

Specific to the pandemic, players in the healthcare industry experienced its disruption differently. For example, healthcare providers lost significant revenue on lower-priority and elective procedures that were cancelled or postponed. Some of that loss was offset by government spending and some of the business has come back, but providers still have a gap to fill. Meanwhile, insurers benefited from not having to cover those cancelled and postponed procedures and have had to return premiums in some instances. But insurers are also more likely to be formalizing their affirmative recovery programs—a corporate law department’s organized effort to pursue meritorious, value-add litigation as the plaintiff—which has increased litigation on the insurer side.

Despite varying economic pressures and litigation opportunities, healthcare companies are looking at how they are spending money and the ways in which they can do so more effectively. Burford’s latest research features a healthcare industry snapshot that reveals how healthcare companies’ finance teams are managing their corporate litigation assets. Below are the key takeaways:

Healthcare companies’ legal departments can generate value for the business through affirmative recoveries 

Healthcare companies are no strangers to litigation, and thus it's no surprise that 75% of financial officers at healthcare companies report having extremely/very extensive affirmative recovery programs. These programs can be a cash-generating tool by which legal departments can add value to their organizations and offset other unavoidable legal costs. Financing these claims as part of an affirmative recovery program versus pursuing one-off cases reduces the risk of loss as well as the cost of capital.

To maintain a comprehensive affirmative recovery program while also investing capital into new areas of the business, healthcare companies can partner with a legal finance provider that can fund fees and expenses associated with single litigation cases or monetize a portion of the expected award or settlement. And for companies looking establish affirmative recovery programs, Burford can provide guidance to help implement one. 

Opportunity to add commercial targets to healthcare companies’ legal departments

Despite having widespread affirmative recovery programs, many healthcare legal departments do not have commercial targets—value-add and cost control goals—as would be expected of any other part of the business. Further, according to the research, many finance officers believe that litigation variables don’t lend themselves to quantitative analysis, making it difficult to establish commercial targets for their legal departments. As a result they may be missing an opportunity to enhance liquidity and reduce risk with their litigation assets.

Legal finance offers a solution—quantifying legal risk is the foundation of Burford’s business, and we routinely work with our clients to help them optimize their litigation assets. By working with a legal finance provider, companies can access third-party data and expertise that wouldn’t otherwise be available to them and as a result, enhance working capital and improve results.

Increased collaboration between finance and legal teams can increase liquidity and protect earnings

While finance teams in the industry are significantly more engaged with decision-making about high-risk litigation, the fact that they are less likely to recognize that the legal department should have commercial targets shows a disconnect between their influence over litigation decisions and their understanding of the value of legal claims.

By working with legal to set value-add goals alongside cost-control goals healthcare companies will gain more value from legal departments when finance and legal leaders encourage more commercial thinking about litigation. And by working with a legal finance provider, companies can more efficiently identify and pursue value-generating opportunities.

Healthcare finance officers have new tools available to inform litigation decisions 

Just as healthcare companies routinely seek outside expertise and financing for areas that are not core to their business, they should have the same expectations for their legal assets. Few companies litigate with enough frequency to have built expertise in key aspects of case budgeting and quantitative modeling for litigation costs and outcomes, and their data sets will be limited to their own experience. Along with capital to finance affirmative litigation, Burford's expertise and data are valuable tools that can help clients improve outcomes for their businesses.