Legal Spend Management: Paying What You Owe

Transcription

1 Legal Spend Management: Paying What You Owe Bob Mullen, Director of Industry Relations, Bottomline Technologies John Alles, Regional Sales Director Southeast, Bottomline Technologies

2 This Morning s Agenda What is Legal Spend Management? Who Utilizes Legal Spend Management? Legal Spend Management Models & Results Common Billing Mistakes Measuring Results Appendix

3 Confidential 3 What is Legal Spend Management? It s About Cost Control

4 Why the Focus on Legal Cost Control? Largest Claims Expense

5 What is Legal Spend Management? Framework for the Rules of Engagement Not an Open Ended Assignment Driven by Billing & Case Guidelines Manage and Control Legal Spend Industry Accepted Standards Ethical Billing ABA Model Rules Only Pay What You Owe Negotiated Rates Expense Reimbursement Thresholds Authorized Work

6 Legal Spend Management Components Common Industry Practices Vendor Management Centralized Management Preferred Panel Negotiated Rates Billing Guidelines Case Budgets Electronic Billing Prompt Pay Discounts Non-panel Electronic Billing Cost Control Central Bill Review Automated Workflow Validation of Rates Guideline Compliance Budget Warnings Claim System Integration Payments Integration Tracking Key Metrics

7 Who Practices Legal Spend Management? Bottomline Technologies Legal-X Community

8 Bottomline Technologies Legal Spend Management Community ,000 + Law Firms 200+ Programs 30 of AM Best Top 50 Insurance Company/ TPA Independent Adjusters Annual Volume 2,300,000 Invoices $5,800,000,000 Expert Review Insurance I Company/ TPA

9 Legal Spend Management Entrenched Across All Markets and Regions

10 Legal Spend Management Connected to Whole of the Law Firm Community Attys Attys 2, Attys Attys 7, Attys 21

11 Vendor Spend Management Extending a Successful Model to Independent Adjusters

12 Models For Legal Spend Management Not One Size Fits All

13 Legal Spend Management Philosophy Conservative vs. Aggressive Different Levels of Tolerance Related to Task, Time & Talent Objective Moderate Subjective Rates Expenses Overhead Clerical Budgeting Authorized Time Staffing Billable Automated 1-3% Additional Time 1-3% Analysis Required 1-3%

14 Bill Review Business Models Decentralized Claim Adjuster Standing Tradition Claim Management Function Centralized Specialist Attorney or Paralegal Staff Evolving Business Model Vendor Management Function

15 Decentralized Adjuster Review Pros: Proximity to Materials In-depth Knowledge of File & Parties Aligns with Budgeting & Case Management Cons: Thorough Review Very Time Consuming Lower Priority/Lower Interest Task Often Lack Expertise to Evaluate Bill

16 Centralized - Dedicated Bill Reviewer Pros: Expertise to Evaluate Legal Fees & Expenses Consistent Review Process Higher Guideline Compliance & Lower Cost Cons: Investment in Headcount or Added Vendor Services No Direct Access to Case File Some Law Firms May Feel Micro-Managed

17 ABC Mutual - Invoice Adjustments Industry Comparison August 2013 Measure ABC Mutual Ins Co 1 Ins Co 2 Ins Co 3 Ins Co 4 Ins Co 5 Approved Invoices 14,954 16,189 11,417 14, ,323 Client Adjustments 5.20% 9.00% 9.00% 10.00% 6.81% 7.48% Give Back on Appeal 2.00% 1.00% 3.00% 3.80% 0.12% 1.45% Net Adjustments 3.20% 8.00% 6.00% 6.20% 6.69% 6.03% Vendor Edits 0.75% 1.00% 1.35% 1.20% 0.68% 0.10% Total Adjustments 3.95% 9.00% 7.35% 7.40% 7.37% 6.13% Bill Review Structure Claims Central Central BT EBR Central BT EBR

18 Common Billing Mistakes Invoice Examples

19 ABC Mutual Feasibility Study Deduction Categories Category Reduction Amount Reduction % Travel Time* $6, % Paralegal Activity* $5, % Reasonableness of Time $4, % Staffing $3, % Scheduling $2, % Enclosure Letter Prep* $1, % Duplicate Entry Fees $ % Photocopy Charges* $ % Postage* $ % * Denotes Area Needing Guideline Improvements

20 Measuring Results Improved Decision Making

21 Informed Decision Making Benefit Beyond Savings

22 2012 Legal Billing: Blended Hourly Rates

23 Getting the Most from Panel Counsel 3 Key Questions 1. Is the Law Firm EFFECTIVE? 2. Is the Law Firm EFFICIENT? 3. Is the Law Firm COMPLIANT?

24 EFFECTIVE: Measuring the Results Total Cost of Outcome Law Firm Closed Cases Total Fees Total Exp. Total Cost Avg. Cost/Case Paid Loss Avg. Paid Loss Total Cost of Outcome TCO/Case Mullen PLC ,000 60, ,000 17, ,000 20, ,000 37,000 Dissen & Page ,000 50, ,000 15, ,000 30, ,000 45,000 Mullen PLC Dissen & Page $17K $20K $15K $30K Cost/Case Paid/Case 0 10,000 20,000 30,000 40,000 50,000

25 EFFICIENT: Firm Staffing Patterns Tracking the Hourly Effective Rate Law Firm Hourly Rate Effective Rate TK/Case Partner Associate Paralegal Mullen PLC $275 $ % 50% 15% Dissen & Page $275 $ % 50% 0% Mullen PLC Dissen & Page Partner Associate Paralegal Partner Associate Paralegal

26 COMPLIANT: Paying Only What You Owe Monitoring Billing Accuracy Law Firm Billed Adjusted Adjusted Percent Return on Appeal Net paid Percent Reduction Law Firm Billed Adjusted Mullen PLC 300,000 30,000 10% , % ABC 300,000 30,000 Dissen & Page 450,000 45,000 10% 25, , % XYZ 450,000 45,000 All Firms 2,000, ,000 7% 30,000 1,890, % All Firms 2,000, , Percent Reduction % All Firms Mullen PLC Dissen & Page

27 Making Meaningful Comparisons Assign Case Characteristics Venue Line of Business Case Type Severity/Complexity Plaintiff s Attorney

28 Appendix Added Materials

29 Invoice Submit and Approval Workflow LF Submits Electronic Invoice Invoice Validated by Bottomline System Invoice Received & Reviewed by EBR Attorney Bill Analysis Report Sent to Client & LF Payment Initiated

30 Invoice Submit and Approval Workflow LF Submits Electronic Invoice Secured Web Portal Standard File Format Simple Upload Invoice Status View Invoice Validated by Bottomline System Invoice Analyzed by Expert Bill Review Attorney Bill Analysis Report Sent to Client & LF Payment Initiated

31 Invoice Submit and Approval Workflow System Validation LF Submits Electronic Invoice Math Case Match TKs/Rates Auto Adjust Rules Invoice Analyzed by Expert Bill Review Attorney Bill Analysis Report Sent to Client & LF Payment Initiated

32 Invoice Submit and Approval Workflow Attorney Expert Bill Review LF Submits Electronic Invoice Invoice Validated by Bottomline System Client Guidelines Applied Reasonableness Standards Line by Line Review Multi-Invoice Review Life of Matter Review Bill Analysis Report Sent to Client & LF Payment Initiated

33 Invoice Submit and Approval Workflow Bill Analysis Report Generated LF Submits Electronic Invoice Invoice Validated by Bottomline System Invoice Analyzed by Expert Bill Review Attorney Sent to Client & Law Firm Summary & LI Details Approved Amount Deductions & Reasons Basis for Appeal if Any Payment Initiated

34 Invoice Submit and Approval Workflow Payment Initiated LF Submits Electronic Invoice Invoice Validated by Bottomline System Invoice Analyzed by Expert Bill Review Attorney Bill Analysis Report Sent to Client & LF Web Services Integration File Transfer Protocol (FTP) Bill Analysis Report Export CSV Export XML

35 Claims & Litigation Management Backgrounds Bottomline Technologies Expert Bill Review Staff Company Experience AIG Chubb Farmers Group Liberty Mutual Selective Insurance State Farm The Hartford Responsibilities Casualty Claims Supervisor Defense Attorney Director Litigation Management Litigation Cost Manager Senior Claims Attorney Vice President of Claims Vice President Staff Counsel

36 Defining an Expert Bill Reviewer Staff Biographies Tom Romando Team Leader Experienced and accomplished insurance executive, managing attorney and civil trial attorney. Member of NJ and PA Bar Associations for 30 years. Former VP and Regional Director of Staff Counsel for Selective Insurance Company. Former Shareholder Partner at Parker McCay law firm. University of Dayton School of Law, J.D. Laura Pillsbury Team Leader Accomplished senior executive in insurance litigation, litigation management, and business and legal strategies. Former Chief Legal Counsel for Legion Insurance Company. Former insurance and reinsurance attorney at White and Williams LLP. William and Mary Law School, J.D.

37 Defining an Expert Bill Reviewer Staff Biographies Kimberly Cummings Team Leader Decade of experience in medical malpractice, personal injury and toxic tort suits as both litigator and director of outside counsel. Member of PA Bar Association. Former Associate Counsel for regional health system. Former Associate at prestigious Philadelphia law firm. Villanova University School of Law, J.D. Richard Hess Team Leader Recognized expert on law firm fees with more than 25 years experience in auditing and fee dispute settlements. Former court-appointed fee expert for Enron, WorldComm & Adelphia bankruptcies. Former VP of legal spend special projects for F500 company. Former general practitioner. Widener University Law School, J.D.

38 Why Can t Law Firms Get it Right? No mechanism to track the varied client guideline agreements. Too much turnover in the billing department. Timekeepers measured by billable hours. Human nature. Human error.

39 Early on when promoting the value of legal ebilling, it was common to hear in a sales pitch something like this, So if your law firm is charging you.50 cents per page for photocopies the system will automatically adjust it down to your approved rate of.10 cents per page. Good stuff, low hanging fruit, immediate value absolutely. But as systems have become more sophisticated and legal spend management programs have matured, the focus has been on managing the bigger cost drivers of time and task. And while this is the proper focus, I still come across programs where the photocopy rate allowed is above the industry norm of.10 per page. In one scenario, the excess photocopy charges added up to a hefty $265,000 per year. Double check to see you are reimbursing expense items at a reasonable rate in line with your peers and industry standards. Specific to photocopies, the bigger questions is how many photocopies are even necessary; what are they for? With so many of us going Green, this is definitely a number that should be going down. Director of Industry Relations, Legal Solutions [email protected]

40 In a conversation with a lawyer who utilizes Legal-X to send bills to a multitude of insurance clients, he told me the number one frustration within his firm wasn t with ebilling, or even someone reviewing the bills, but rather the inconsistency of the bill review. He pointed to examples of where adjustments were taken for specific work on one invoice, but fully approved for the same work on another invoice. Handling invoice objections and appeals is time consuming, expensive, and adds friction to a relationship. Strive for consistency in your review by using standard practices within your organization. Even something as simple as having common adjustments reasons among reviewers improves the consistency and message to the law firm on acceptable billing practices. It also provides you with better data so that when you speak with individual firms about poor billing practices, you can quantify the problem areas needing correction and benchmark for future monitoring. Director of Industry Relations, Legal Solutions [email protected]

41 An important extension of any legal ebilling system is the ability for the law firm to create a budget online the client can approve and automatically track with each successive invoice. In a paper environment creating a budget in Excel and making manual edits once a paper invoices crosses your desk is an inoperable model. And given most clients come to us from the paper world, they are not in the habit of requiring case budgets from their law firms. Some firms advise it is too difficult to budget at the outset as each case follows its own lifeline. Well, if clients were asking for a budget that was in actuality a fixed pricing agreement I would concur. But what our clients want, and what we ve been able to help them automate, is a process where a firm provides a baseline budget used to proactively monitor cost. The budget might be for the life of the case or set up to track spending through a particular phase (e.g. discovery) that then requires a re-set if the case continues on. Alerts are built in to warn of potential cost overruns at various stages of the claim to avert surprises. A client recently came to us with a situation where they uncovered $100,000 of legal fees on a claim with a settlement value of $50,000. A budget set up with proper alerts would have identified early on the mismatch between the value of the case and the efforts of the law firm. Approved budgets are now required before the firm can submit an invoice for payment. No one wants to be blindsided by runaway cost and a budget can provide both perspective and a safety net when managing a claim... Director of Industry Relations, Legal Solutions [email protected]

42 Last month we went over the $500,000,000 mark for review of electronic invoices submitted to our clients by independent adjusters. The results continue to prove that, just as with legal invoices, there are significant efficiencies, cost savings, and business intelligence opportunities available by converting a vendor from paper invoicing to electronic. What we see in the legal world is a well understood and closely controlled approach to reimbursement for expenses submitted by the defense firm handling the case. Mileage, meals, hotel, transportation, photocopies, telephone, express mail, overhead, prior approvals are all defined areas of each client s guidelines distributed to the firms. But the same agreements with independent adjusters and other vendors is either lacking, or there is no mechanism in place to monitor compliance. Over 1,000 independent adjusters are ebilling ready! This is spend that can be monitored.. Director of Industry Relations, Legal Solutions [email protected]

43 Legal spend management applications have given claims organizations the upper hand in tracking the cost of defending a claim. The line item detail captured in the electronic invoice provide the ability to instantly report on legal fees and expenses for a claim, subset of claims, or all claims by any number of criteria. One critical measure enabled by ebilling is the ability to compare and contrast historic results by firm so new cases can be assigned to the firms who drive the best results. But how do you measure the best results? If you rely strictly on the data collected from electronic invoices, your measurement is limited to the Average Cost per Case - legal fees plus expenses incurred. After all, the invoice is only a reflection of the time and expense billed while working on the case. And though the Average Cost per Case is instructive, it leaves out the most important factor the end result. Total Cost of Outcome is the purest measure of law firm effectiveness as it includes the Average Cost per Case plus indemnity payments. Settlement data resides in the claim system but can easily be incorporated into a legal spend management system through simple systems integration or minimal data entry. Too many companies with legal ebilling programs overlook this important step or put it off as a project for another day. Comparing your law firms only on cost provides a false picture as your lowest cost firms aren t necessarily your most effective firms. Adding in case results may show that a firm who would otherwise rank in the middle of the pack is actually a top performers and valued partner!.. Director of Industry Relations, Legal Solutions [email protected]

44 Useful Links Sample Guidelines: Claims & Litigation Management (CLM) Guidelines - Defense Research Institute (DRI) Guidelines - %20Recommended%20Case%20Handling%20Guidelines%20for% 20Insurers%20(2000).pdf Ethical Billing: American Bar Association (ABA) Model Rule 1.5 Fees - cations/model_rules_of_professional_conduct/rule_1_5_fees.html Department of Justice (DOJ) Fee & Expense Reimbursement - _Guidelines_no_exhibits.pdf Standards: Legal Electronic Data Exchange Standard (LEDES) & Uniform Task Based Management System (UTBMS)

45 John Alles Regional Sales Director P C [email protected] Thank You! Bob Mullen Director of Industry Relations P C [email protected]