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If imitation is the sincerest form of flattery, then praise from a direct competitor must be a close second. It’s not in Robert Fabrikant’s interest to talk up Los Angeles-based Latham & Watkins’s ComplianceNet Web tool for health care clients. Fabrikant is in charge of the health care group at Chicago’s Sidley & Austin. He competes directly against Latham and ComplianceNet. But Fabrikant doesn’t hide his admiration for ComplianceNet. “I don’t know of any other firm that’s got a platform that’s this advanced,” he says. “It’s helping them portray themselves as the premier health care compliance group in the country.” For several years, law firms have been building extranets, private Web sites that they set up for clients. Most of them are a waste of time and a failure of imagination — collections of working documents, memos, and phone numbers of lawyers. They don’t let the client and lawyer interact or give the client new and useful tools. Enter Latham’s ComplianceNet. Think of it as a road map through the rocky terrain of hospital regulation, with its complex and arcane policies for Medicare and Medicaid reimbursement and anti-kickback rules governing relationships between hospitals and doctors. The design of ComplianceNet is not dead-sexy, and its ambitions are modest. But it is a model of how a site can help clients solve some of their own legal problems. Latham’s Daniel Settelmayer and his partner, Bruce Shih, were the chief architects. Three years ago, they started to think about how the health care practice group could cut down on the paper filing, shuffling, and exchanging that goes on between lawyer and client. Settelmayer had the intriguing thought that Latham’s clients would be better off if they did more of this work themselves, even if it meant lower legal fees for Latham. Compliance work is not brain surgery. It can be and usually is dull. But it’s important for two reasons. First, the federal and many state governments have started to beef up enforcement. Second, law firms that land compliance assignments have a better chance of doing the more lucrative and creative work that hospitals generate. ComplianceNet speeds the compliance process along by blending together the drafting and the review of each contract. Through the site, a client opens a template of the particular type of contract, anything from a medical office lease agreement to an employment contract. The client then fills in the missing information over the Web, and sends it back to Latham. Latham assembles the contracts and returns them to the client for final approval from an in-house compliance board. The site has several thousand of these contracts online. As a next step, Shih is currently tweaking the platform so the client doesn’t even have to send the document to Latham for assembly. It will all be done in-house. “It’s not revolutionary,” Shih says, “but it’ll just make the process that much smoother.” “This isn’t rocket science,” says Settelmayer. “The goal is simple. All we’re trying to do is wring the inefficiencies out of what otherwise can be a fairly cumbersome process.” Prior to ComplianceNet, clients would often bog Latham lawyers down with basic questions about, say, the duration of a certain type of contract or whether a certain term in a contract was required. The hands-on level of attention needed to make and monitor hundreds of contracts added up. And so could Latham’s fees. ComplianceNet pre-emptively answers these basic questions. The full text of statutes and regulations are only a click away. Examples of model agreements and past agreements are also stored on the site. And contracts are immediately returned to sender if required information is not filled out properly. The organization of the site encourages clients to find the answers to their own questions. Latham is using the site primarily with only one client, Los Angeles-based Adventist Health System. “It certainly makes communications easier and faster,” says Kathleen Peterson, the physician and contract compliance officer at Los Angeles’s White Memorial Medical Center, an Adventist facility. “The site tells me if I, say, need to do fair market value research for a certain piece of property or which corporate guidelines to follow if we’re preparing a loan,” she explains. “And because you know that up front, you don’t have to waste time and money calling an attorney.” “Our compliance bills have really come down,” adds Jim Leeper, the compliance officer at Deer Park, Calif.’s California Medical Foundation, another Adventist facility. “And I’d venture to guess that as the platform advances, they’re going to come down even more.” Neither Latham nor Adventist say they know precisely how much the service has saved the client. But Latham is willing to lose the billable hours to hold onto the client. It’s a vital part of the strategy — hospitals don’t need a pricey firm like Latham to review these contracts. “Compliance is an extremely competitive area,” says Michael Scarano, the San Diego-based cochairman of Milwaukee’s Foley & Lardner’s corporate compliance practice group. “You have accounting firms, smaller law firms, sole practitioners, and specialty consulting firms all competing for it.” ComplianceNet is a sort of loss leader for Latham. It charged Adventist and one other client a one-time fee to set up the site, but isn’t charging ongoing fees. But by taking on the low-end work, the firm hopes to be the natural choice whenever more lucrative matters arise — a merger, acquisition, or a compliance-related white collar investigation. Settelmayer says that this is how the arrangement is working for Adventist. “They’ve been our client for five years, but recently we’ve been getting more of their high-end litigation work,” he says. “I mean, we’re on their desktop. We’ve become part of their landscape.” Settelmayer expects to start pitching the site to other hospital companies, both existing clients and prospective ones. “Selling the strength of ComplianceNet is an obvious way to get into other geographic markets,” he says. “Nobody else has anything like this, and it’s going to be a great entr�e to our cold calls.” While the firm’s practice is well established on both coasts, the Midwest is unscrubbed territory. Among the hospital systems Latham already represents are: Cedars-Sinai Health System, Columbia/HCA Healthcare Corp., and Catholic Healthcare West. The firm also handles much of the University of Southern California’s health care work. Still, as a Washington, D.C.-based large firm partner maintains, Latham hasn’t swept the nation yet. “Almost everyone out there can handle this work more cheaply than Latham can,” he says. “And it’s a hypercompetitive niche. It can be easy work to get, and easy work to lose.” The origins of ComplianceNet go back three years to two unrelated events. Adventist was struggling to manage its doctor referral contracts. At the time, Latham was developing ClientNet, a generic extranet package for clients. Settelmayer began wondering if there was a way to adapt the ClientNet idea to the compliance process. He began brainstorming with his partner Shih and information technology director Ken Heaps. ComplianceNet became a skunk works within the firm. Settelmayer, Shih, and a paralegal, Jodi Rothwell, collectively spent more 400 hours developing it along with the IT staff. “We did it all in our spare time,” says Settelmayer. Latham rolled out the platform in mid-1998. Clients aren’t the only ones who find the site handy. Latham lawyers themselves use it as a document retrieval service. It’s quicker than finding something in the file room. Settelmayer and Shih are proud of their creation. “This is a simple idea that anyone else could have just as easily developed,” says Settelmayer. “But we did it first.”

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