Cost-benefit analysis as a goal for law department research

Britain’s National Health Service analyzes particular drugs, at a known cost per patient per year, to decide whether they provide sufficient benefit, measured in terms of additional “quality-adjusted life years” (QALY). For example, as described in the Wall St. J., Vol. 246, Nov. 23, 2005 at A1, an Alzheimer’s drug costs more than $100,000 per QALY, which is far too expensive for the health service to underwrite. In other contexts, a cost-benefit analysis guides or critiques policies, such as environmental protection mandates, surgical interventions, and tariff or import quota protections.

Can law departments calculate the costs and benefits of their decisions, say in the area of litigation management? Yes, if they aggregated data.

If ten law departments would contribute data on the last 20 employment discrimination cases they resolved, and provide the same information about them, the consortium could come closer to answering cost-benefit questions that now remain unanswerable. Do investments in reducing cycle time reduce total litigation costs (See my post of Nov. 14, 2005 on total investment.), and by how much? To what degree does investing in discovery reduce total litigation costs? Does the size of the company’s law firm influence total litigation costs? Does early case assessment (ECA) make a difference, and how much (See my post of Sept. 14, 2005 regarding claimed cost savings.)? Where does spending on ADR show a payoff?

Only by naturalistic experiments – where people have acted and researchers thereafter look at the inputs and outputs – will law departments as a whole come to understand their costs and “quality-adjusted litigation yields” (QALY).

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