10 Best Practices for Split-Party Billing – Paper and e-Bills

By on February 12, 2012

Quite often insurance carriers require law firms to split a bill among two or more parties, this is normally referred to as Split-party Billing. Many times there are complexities that make a seemingly simple task, much more complex.

 We’ll examine “best practices” to both meet client requirements and provide the firm with solid accounting transactions for proper reporting and profitability analysis.

  1.  Split-party Billing usually calls for a master file to be set-up where all fees and costs are posted to that file. Additional “bill parties” are then added with a designation as to what % of the fees and costs will be billed to each of the parties.
  2. The system should check to be sure that 100% of the fees and costs are being allocated at all times.
  3. The use of effective dates for each party is very important, it’s not unusual that there are “in’s and out’s” of bill parties throughout the life of a case. The ‘bill parties” don’t necessarily have to be clients and matters in the system, they can just be an entity called “bill party”. Many times this is much easier to just designate a person or company that will pay a portion of a bill without setting up all the official client/matter information. You just need a name and address to send the bill to.
  4. Normally, in the case of Split-party Billing, a single rate is used to value each time entry. If different rates are used for each party it is difficult to determine a % of each bill to be split, from a dollar point of view. If each party must have a different rate, then the actual time entries are first split, and then valued separately for each party. If different rates are used each party receives a completely separate bill without calculations showing the % split.
  5. Since most Split-party bills are going to one or more insurance carriers it is convenient to get agreement ahead of time on a common phase and task code set to be used.
  6. At the time of billing the system looks to actually generate, in effect a single bill, with each bill party seeing their share of the total bill. So for example, if bill party #1 is paying 50% of the total and the bill is for $10,000 the bill would show all the detailed fees and costs, a “total bill amount” and then a line in the bill showing bill party #1 owes 50% or $5,000. If bill party #2 is paying 25%, they would get the same bill sent to their attention showing on one line that they owed $2,500.
  7. There are a lot of iterations of this general idea of a “single bill”, including different bill formats, including past billing and payment history and outstanding AR or Retainers being applied for each of the bill parties on only their copy of the bill.
  8. In Split-party Billing the “bill parties’ act as “sub-matters” to the master file or master matter. Therefore in many systems, Accounts Receivable can roll-up to the master matter, with the ability to drill-down to a bill party’s portion of the AR.   
  9. Split-party bills can also be separately e-billed to multiple “bill parties”, i.e. insurance carriers.  In the case of e-billing it is not unusual that the e-bill party want all the “pre-split” transactions, the e-bill party already knows what % they have agreed to pay and the LEDES format will handle all of this.
  10. The system should save all detailed transactions so that normal accounting adjustments can be made such as, reversing a bill, transferring a payment, charging interest for one or more of the bill parties, etc.

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Categories: Best Practices, Financial Management, Law firm billing

Corporate America …. want to lower legal costs, here’s how! (Part 2)

By on February 27, 2011

You hear it everywhere; companies want to lower legal costs. In my previous blog post I discussed the need to adopt standards. Law firms have a “hidden” high cost of e-billing because there is no single e-bill standard, there are hundreds or thousands of “standards”.

 Firms are delaying their billings, proof-reading every entry on every bill, submitting bills that get rejected or short-paid, and finally writing off a great deal of money. Corporations need to understand that all this is reflected back into law firm rates.

 Here is a simple way to fix this problem and lower costs to both firms and corporations:

  1. Quickly accept the current LEDES XML e-bill standard. The XML technology allows for tremendous flexibility for dealing with custom fields. Corporations should force the middle tier processors to accept this single standard. There won’t be a standard until the very top recipients of e-bills, primarily insurance carriers make the switch.
  2.  Work with Time and Billing vendors (or LEDES) to provide specific billing guidelines in an electronic format that the Time and Billing system can import and use for Bill Scrubbing. Law firms want to submit bills that fit your guidelines, but like e-bill formats, there are few standards. Time and billing vendors can provide tools to “scrub” bills if they had your guidelines in something better than just written documents.

 So, corporate America, do you want to collaborate to use technology to reduce costs for everyone involved?

 Your feedback is welcome.

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Categories: Best Practices, Financial Management, Law firm billing, Productivity, Technology, The Legal Market

Corporate America …. want to lower legal costs, here’s how! (Part 1)

By on February 21, 2011

You hear it everywhere; companies want to lower legal costs. They need AFA’s, lower rates, project management, a new set of task codes … the list goes on. All these might help lower costs.

I’ll give you another idea, adopt standards. Sounds too simple so let me explain. Let’s assume that a portion of law firms billing rates are based on the costs of doing business. The obvious costs are salary, rent and other overhead expenses. One expense that is coming to light is the hidden, or not so hidden cost of e-billing and following corporate guidelines. The cost isn’t in the actual transmission of the e-bill, today that’s pretty easy. The cost is the total lack of standards in the entire process of e-billing and finding ways to adhere to complex billing guidelines.

 I learned first-hand as I was researching a new technology called Bill Scrubber that was developed by my company. Firms told me that they were delaying their billings, proof-reading every entry on every bill, submitting bills that got rejected or short-paid, and finally writing off a great deal of money. Corporations need to understand that somehow all this is reflected back into law firm rates.

So one might draw the conclusion, that law firms are just inefficient, but that’s just too easy. The root cause of this issue is the lack of standardization and little progress has unfortunately been made in the last few years. The efforts by the industry volunteer organization LEDES, comprised mostly of software vendors and private law firms has been almost heroic. The board and members of LEDES have put forth sincere proposals to produce standards and a few are commonly accepted (sort of) like phase and task codes. I know many of these people and they have tried hard to get standards developed and accepted. However, the attempt to get a single standard new electronic submission design, for example LEDES XML accepted has not come to past. This project is 4-5 years old yet very few corporations use it. Isn’t LEDES 98B the standard … maybe all 400-500 variations of it might be considered standard(s). But LEDES 98B has some critical short-comings. There is just no standard.

Can you imagine if every corporation demanded a different size sheet of billing paper that their bills needed to be submitted on, or a completely different type of magnetic ink to be used in printing the bills so that their systems could read the bill electronically? Having no electronic submission standard is no different.

There appears to be no desired to adopt a simple way of submitting an electronic bill. How difficult can this be? There are hundreds, maybe thousands of iterations of e-bill requirements. Standards will reduce costs. Law firms need a way to get the all the billing guidelines sent to them electronically in a standard format and a single yet flexible standard submission template.

In my next blog post I’ll suggest some specific ways this can be done. 

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Categories: Best Practices, Financial Management, Law firm billing, Technology, The Legal Market

Proposed Changes to Litigation Task Codes & Survey

By on July 18, 2010

Over the past year the LOC (LEDES Oversight Committee) has been working to revise the current ABA UTBMS Litigation Code Set. The UTBMS Task Force merged under the LOC umbrella in 2006. It is now a permanent LOC Subcommittee charged with considering issues on the UTBMS codes used in legal electronic billing.

 The current Litigation task code set has many gaps and lacks the granularity necessary to provide the meaningful data that the affected parties would like to have. Public input is required to help better define the changes to these codes. A survey site has been set up to get feedback on the proposed changes; the survey will end on September 7, 2010. All interested parties should take advantage of this survey to insure a voice in the matter.

The UTBMS site is located here.

The survey and the proposed changes can acccessed from the UTBMS site.

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Categories: Best Practices, Financial Management, Practice Management, Technology, The Legal Market
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