The Endless Quest for Prior Approvals & Subsequent Loss of Revenue for Law Firms

The Endless Quest for Prior Approvals & Subsequent Loss of Revenue for Law Firms

The Endless Quest for Prior Approvals & Subsequent Loss of Revenue for Law Firms

By ALB In Legal On 20 Dec 2019

As we race into the New Year 2020, let us take a month to reflect on what law firms have been through in 2019. Month after month, law firms are consistently seeing reductions on their invoices for not having obtained prior approval from their claim adjusters or clients before performing certain activities or incurring certain expenses on behalf of their clients.

The resultant losses amount to anywhere between several hundred to several thousands of dollars each month.

List of activities requiring prior approval include but not limited to:

filing and arguing defensive motions, lawyers performing paralegal/Administrative tasks, intra-office conference calls, local travels, multiple attorneys working on a file, legal research in excess of allowed hours, eDiscovery, travel insurance, medical record review, non-billable file review, expert engagement, research on experts, online research etc.

However, when their already incredibly hectic day-to-day schedules are piled on by huge volumes of work and related stress, it becomes virtually impossible for lawyers to get around to seeking approval before the tasks are performed, bearing in mind that each "Prior Approval" will vary from one client to another and requirement will defer from one practice to another, making it all the more complicated.

Over the past decade, bill review vendors have expended a lot of effort in constantly improving their platform to a point where most of the bill review process is automated and entries that lack necessary approval are automatically flagged and reduced.

In many cases, the bill review vendors’ fees are paid by the law firms, usually based on the invoice total amount submitted by the firm. This amount, along with the non-compliance related reductions, place significant financial burdens on law firms.

Reductions aside, bill review vendors’ fees which in many cases are paid by the law firms for some bill review vendors are based on the total submitted amount and not the final amount after they have made their reductions, this further emptying the firm’s pocket.

Here is an example of a firm ‘A’ that submits an invoice totaling $45,000 via a bill review vendor’s platform ‘XYZ’. Following review, the invoice total is reduced by $8,500 citing a valid reason “Lawyers Performing Paralegal Task”, which have been billed at attorney rates. The law firm files an appeal supported by an email from the claim adjuster which was obtained after the reductions were made by the bill review vendor. The bill review vendor refuses, and rightly so, to refund the $8,500. Knowing full well that this back-and-forth would further delay the processing of the invoice and payment, law firm “A” accepts the reduction. The bill review vendor charges a fee of 2% of the gross submitted amount for their services, which is deducted from the final amount paid to the law firm- which totals to $35,600.

 The firm has hence suffered multiple losses, resulting from both non-compliance as well as charges placed by the bill review vendor.

The growing need for strict compliance with billing guidelines tends to interfere with the quality of the attorneys’ work who wish to extend their focus on achieving the best outcome for the case(s) assigned to them so as to benefit their client. There really is no time left for them to seek appropriate approval for every single activity/expense prior to performing them.

A detailed billing guideline for an outside counsel can contain up to 90 different items for which written approval from the claim adjuster or their claim manager is mandatory, which must be obtained prior to the task being performed. This is quite a lot for a client-focused attorney who already has a lot on his/her plate to remember.

In an effort to save law firms time, ALB dashboard contains the list of activities that "prior approval" are necessary and the firm team can refer to the same at any point ( either during litigation planning or at the time of billing)

When attorneys use ALB, they are reminded to obtain approval prior to billing for activities/expenses. Moreover, entries can be sent to the claims professional directly for approval using ALB. All prior approvals obtained are kept track of, by the system and the same are presented to the attorneys as and when they bill for time. This process collectively saves attorneys and the billing team a lot of time and the firm, a lot of money.

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Source: This article has been obtained from Andre Wouansi's Linkedin profile. Andre Wouansi is the founder and CEO of Accurate Legal Billing.