In late ’90s and early 2000s, insurance companies claimed they were forced to create litigation management and billing guidelines in response to widespread abuses and fraudulent billing practices by lawyers. Insurers complained that they had been perceived by their defense counsel as a deep pocket, and that this view of an unlimited defense fund led to wasteful defense spending. They also view guidelines as a tool to measure law firms’ performance and efficiency.
Today the focus has shifted and there is a claim that corporate legal departments, insurance companies, and third-party administrators are purely using billing guidelines as a way to control legal spend and cut expenses.
Although, law firms’ profits increased in 2021, a 2021 survey by Clio found that the average reduction on law firms’ invoices was 12% and that the average lawyer billed just 2.5 hours (31%) of an 8-hour day.
Guidelines employed by insurers/TPA and self-insured come in a variety of shapes and sizes and as clients continue to roll out their unique set of billing rules, attorneys are under a huge amount of pressure to comply with these different guidelines whilst performing similar tasks for different clients. On top of the new billing guidelines, the attorneys have to keep up with the updates on existing ones.
A recent survey conducted by Aderant reported that in 2020, law firms saw an increase of billing guidelines from their clients with most firms reporting, receiving between 10 -50 new guidelines.
Another survey conducted by Corporate Legal Operations Consortium found that nearly 80% of law firms’ clients are now using an e-billing vendor to enforce their guidelines.
Since 2000, billing guidelines have slowly but surely become the optimum service contract between the insurance companies and their penal firm. Therefore, adhering to clients’ guidelines will not only enhance your relationship with the carrier, it will also save your firm a lot of time otherwise wasted in appealing invoice reductions, which then result in delay in paying your firm’s invoices thus leading to cashflow issues.
Adopt and implement the right technology
We all know too well how slow the legal industry is when it comes to adopting or deploying new technology. Whilst law firms are extremely slow in adopting technology, the e-billing vendors on the other hand, have been very quick in using one or two branches of artificial intelligence known as Natural Language Processing (NLP) and Machine Learning (ML) to access detailed invoice line entries and the unstructured data, which support the billing codes, in order to ensure that they catch non-compliance in law firms’ invoices on a consistent basis.
All the e-billing companies using NLP and ML in their invoices review process state that they will deliver up to 20% in billing guideline compliance.
Even though law firms are losing 20% or more of their revenue to non-compliance, most of them still rely on their billing and collections team to ensure compliance with their client’s guidelines. Some firms even share summaries of the guidelines to timekeepers working on a client’s matters. With the constant update on clients’ guidelines, these summaries provided to lawyers are not updated, as they should.
In a recent study, 60% of U.S. law firms who participated confirmed that they rely solely on their billing team to ensure guideline compliance.
As e-billing vendors have turned to AI to ensure that they can quickly and easily analyze every invoice line entry narrative in the same way, leaving no room for errors. Law firms ought to adopt innovative tools that can help them ensure compliance as the timekeepers capture their time or cleanse the timekeepers’ time entries prior to them landing on the firm’s invoices.
Billing guideline compliance should rest with the timekeeper performing the task rather than the billing partner or the billing team. This is the only way a firm can really ensure compliance. However, these attorneys are facing with the issues of complying with various clients’ guidelines whilst working on the same kind of tasks. This is where firms that are turning to ALB AI Time Entry Cleansing are able to achieve close to if not 100% compliance without relying on the attorneys.
Increase in billing dispute or appeals with the e-billing vendors. As the e-billing companies continue to deploy Natural Language Processing (NLP) and Machine Learning (ML). Their reductions will be consistent across various practice areas and will continue to increase as long as law firms rely solely on humans to comply with guidelines.
Provide billing metrics to your clients
It is clear from the clients’ guidelines that compliance to their billing rules is one of the major factors in determining whether to allocate more cases to a firm, increase firm rate or retain a firm on their panel.
Law firms should capture metrics showing their compliance to the client’s guideline and present these to clients on a quarterly basis.
Consistent adherence to their billing rules will not only improve the firms’ relationship with their client it will also lead to increase in firm rate that in turn will lead to increase in firm revenue realization.
Below are some of the metrics law firms should track and share with their clients on a consistent basis.
- Number of matters with Budgets per line of business
- Number of matters without Budgets per line of business
Claims/Cases Budget Vs Actual Legal Spend Ratio
- Budget v Actual spend per case/claim
- Budget v Spend per line of business
Matters/Claims in Various Status
- Number of matters/claims in open status
- Number of matters/claims in closed status
- Metrics showing how law firm staff their cases. For example, number of partners working on cases and their total billable hours and amount.
Invoice Status/ Ageing with Bill Review Vendors
- Providing report that shows firm aging with the client will help in getting these invoices paid, especially if provided with the above metrics on a consistent basis.