Quantcast

Is e-Billing … a sinister trade-off?

By on October 3, 2010

Has it just become too hard to e-bill clients?

  Let’s look at some of the challenges:

  1. There is no standard e-bill format, LEDES 1998B is probably the best there is.  Clients have not adopted the LEXES XML format, despite years of effort to make it the standard. The 1998B format has loop-holes and almost every corporation has added customizations to it.
  2. E-billing submissions get disputed and results in a payment delay. An attorney has not been approved by the software, he’s approved alright, but the clients software hasn’t been updated.
  3. The audit software used by the client says “this work should have been done by an associate, not a partner”, the time entry is rejected. There is a “;” in the narrative, the entry is rejected.
  4. The current Phase codes, Task codes and Activity codes are not always easy to use, attorneys don’t always understand them. Wrong phase/task/activity code, the entry is rejected.
  5. Then there are the billing rules for each client, they won’t pay for this, that and the other thing. You need special advanced permission for a variety of day to day items.
  6. Did I mention that the firm submits the e-bill in a matter of seconds on-line, and waits, and waits and waits for payment, less all the disputed items, of course.

 What’s the real purpose of e-billing? To make life difficult, delay payment and lower legal expenses?

  It’s almost like a sinister trade-off.

 Since law firms charge incredibly high hourly rates and bill for everything under the sun  …  companies paying these bills require e-Billing, all sorts of codes and impose increasingly difficult billing rules.


Comments (0)
Categories: Best Practices, Financial Management, Law firm billing, The Legal Market

Doctors and Lawyers – 7 Business Facts

By on August 16, 2010

Doctors and lawyers are similar, what can lawyers learn from them?

 Fact #1:

When big “consumers” of services pay the bills they get to dictate the terms.That’s how the law of supply and demand works. Let’s take a look at the medical profession. Over the years the very largest “consumers” of healthcare, read insurance companies, the federal (Medicare) and state government (Medicaid) have fought doctors and hospitals over the costs of their services. The results have at times been chaotic, yet the profession appears to be intact. Doctor complain, yet keep practicing. Some might say doctors are more trusted.

 Fact #2:

There are plenty of doctors and lawyers; access to volume and specialization drives growth. Competition demands best practices and controlled costs since it always lowers prices. Higher fees come from specialization and profitability comes from fine tuning the internal costs.

 Fact #3:

Work is best pushed down to the lowest risk, practical level. Doctors, at least in larger practices have learned how to push work done to the lowest practical level. The surgeon doesn’t take out routine stiches, draw blood for a test or take your weight. Law firms need to get paralegals and legal assistant’s to do the same, get the lower value work done by the support staff.

 Fact #4:

If you don’t bill it right, it won’t get paid. Doctors and hospitals have become experts at billing hundreds of different carriers and plans. They know if they don’t provide the right procedure codes, diagnosis codes and work location (offices, hospital), they just won’t get paid. Attorneys can learn from this, get your bills to be short and to the point, exactly what did you do. If you don’t use the phase/task codes you too won’t get paid. Cut out the “mumbo – jumbo” in legal bills.

 Fact #5

There are rates, and there are rates. Doctors charge different rates for the same services provided to different “consumers”, so do law firms. Some think this is shocking, what’s shocking is the cost for these services if you’re not a big “consumer” (and pay cash).

 Fact #6

If you do “transactional” work, you’ll get transactional fees. Some doctors do “transactional” type work and get paid transactional fees. Neural surgeons might be compared to top end litigators, both get much higher rates, peer prestige and the risk associated with their personal performance.

 Fact #7

Cut out the noise, don’t bill for petty things. Can you imagine getting a doctors bill with a price per bandage, or latex glove? “Consumer” will no longer pay for every little phone call, review memo and photocopy. They will gross these up to a larger task and pay accordingly. Here is where firms can get a head-start and propose AFA’s (alternative fee arrangements) to cover minor items and routine office costs.

 Lawyers can fight the change and complain like doctors but at the end of the day the big “consumers” are going to dictate the price of services and lawyers will become more like doctors.


Comments (0)
Categories: Best Practices, Financial Management, The Legal Market

Survey on Law Firm Time Entry

By on July 7, 2010

The survey on law firm time entry caught my eye this morning.

The survey was sponsored by Adam Smith, Esq., and Smart WebParts.  Of the 155 respondents, 86 were partners, 72 were associates, and 51 were senior staff at firms with titles such as CFO, CIO, Executive Director, etc.

Here are some statistics cited:

  • The average “leakage,” that is, lawyers and other timekeepers failing to report all billable time, ranges from $20,000 to nearly $40,000 annually, per individual.
  • The “overhead” costs of keeping time are very heavy, with a mean 3.1 hours/month per individual devoted to filling out timesheets. The mean billing rate of respondents was $438/hour, indicating an imputed cost of $16,294 per person per year.
  • Clearly, significant efficiencies could be gained if streamlined time entry systems were available.

So how efficient are timekeepers in this survey, let’s see.

How long it takes to actually do TE’s at 3.1 Hours/mo. (186min/mo.):

Example #1   12 TE’s per day x 22 days/mo. = 42 seconds/TE

Example #2 (TE requiring task codes) 24 TE’s per day x 22 days/mo. = 21 sec/TE

Sure seems to me that this might be pretty efficient, especially for an attorney who has to try and remember in some level of detail what he or she did a few days or weeks ago .

So how can firms make attorneys even more efficient?

  1. Insist on daily time entries, it must be easier to recall details if you are entering your time as the work is performed.
  2. Provide attorneys with the proper tools and train them how to use the tools. For example, some vendors allow time entry right from within Outlook, where attorneys are spending a good bit of time already.
  3. Provide attorneys with short-hand codes unique to their practice. They just enter a code and the narrative explodes out into an entire description that they helped create.
  4. If you have a mobile attorney, let them try a Blackberry or iPhone time capture app, see if it will help improve productivity.
  5. Have the partnership set strict rules requiring attorneys to have their time in “on time” with some sore of penalty for non-compliance. Set an example at the partner level by adhering to the policy.

The better the time entry, the better chance the bill will go out sooner, the better the chance the client will pay it sooner.

Comments (0)
Categories: Best Practices, Financial Management, Practice Management, Productivity, Technology, The Legal Market

E-Billing Let’s Law Firms Develop a True Costing Model

By on July 7, 2010

The 3 Geeks posted an interesting atricle titled:

The ‘Fuzzy’ Difference Between Case Management & Legal Project Management

One of the points made by Bruce MacEwen was that e-Billing was a great case management tool due to the use of task codes. I’d like to take this a step further and say that e-Billing allows a firm to finally determine a “cost” for providing a unit of service which can then be used to intelligently price future work.

E-Billing has been the overall driving force behind the use of task codes (including phase and activity codes) to quantify a discrete measure of legal service. The codes allow both a firm and client to finally dissect services down to tasks and sub-tasks levels with actual costs involved. The roll-up of thousands of tasks from many firms has allowed large corporate clients to model their exposure to risks and potential legal costs to resolve their issues. Unfortunately law firms for the most part have not seen the benefit of doing the same roll-up and modeling internally.

Law firms need to know their costs beyond grossed-up utilization and realization calculations. Most of the calculations done today at firms are merely compensation or firm profitability related. Knowing than an attorney has an “effective rate” of $320/hr. which is $50 less than his “standard rate” or that this attorney has a 95% utilization and 92% realization does nothing to determine the cost and later the profit of doing an actual task of work.

The development of a “cost” model will help a firm offer any type of Alternative Fee arrangement or bid new work. With enough data the firm will have a perspective on what tasks really cost them and how the roll-up of tasks can build a potential engagement model to price a competitive bid. The model will also help determine which attorneys are most cost effective at each task.

Here is a model that will help firms get started on first understanding the “cost” of doing work:

  1. Use task codes on every line of business within the firm, not just e-billed matters. Most systems let you build your own custom task codes sets that can match any area of law, try and get as granular as possible for each task or sub-task.
  2. Make the use of a task code mandatory for every billable time entry, most systems can easily do this. The specific task code set can be assigned to any client/matter for ease of use by the timekeeper.
  3. Let your system roll-up these, area of law specific task codes into a general set of standard tasks, so that you get a firm wide consolidation of common activities.
  4. Now you can start modeling the average and mean length of time for, say a deposition across the entire firm.  Let your system tell you that for 1,000 depositions the average billable time was 1.5 hours, the utilization (ability to get it billed) was 97%, and the realization (ability to get it paid) was 99%.
  5. Your system can then also further analyze the internal cost for each of these depo’s since we know how the attorney was for each time entry and we know the burdened or unburden cost for an hour of that attorney’s time.
  6. The average cost of a deposition is therefore; attorney true cost/hr . x the # hours required for the deposition.

Here are questions that can be answered:

  • Which attorneys are the most cost effective at certain tasks?
  • Which tasks are tough to make money on or are under-valued by clients?
  • Which types of cases (matters) are we the best at getting high utilization, realization AND are most profitable ?

The assumption is that you have a business intelligence database that will do most if not all of the heavy lifting here and that you gather enough data to make it statistically relevant to the costing model. This same process is what corporate e-billing clients have done on their end to model their cost of services.

Law firms that want to be relevant and competitive in the next decade must have a costing model to generate business as much as a profitability model.

For related information on costing models check out my blog post on June 2, 2010 “What Law Firms Should Learn from Manufacturing Companies”

Comments (0)
Categories: Best Practices, Financial Management, Productivity, Technology, The Legal Market
Gallery
ist2_11425109-business-woman-with-colleagues-at-the-back ist2_5516813-business-people-joining-their-hands ist2_7730216-library-tables
Blogroll
Follow RainMaker