In my post on Jauuary 23 on eliminating “leakage” in claim legal costs, I provided three alternative solutions: establishing a separate in-house legal bill review (LBR) unit, training (and monitoring) all the litigated file handling staff on appropriate legal bill review techniques, or outsourcing legal bill reviews. I also stated that in some instances a combination of these solutions might be appropriate. This post will focus on the first identified solution, establishing a separate LBR unit and what is involved in deciding whether a LBR unit is the right solution for your company.
Over the years, larger insurers have found the best solution to reducing legal costs is to have legal bill reviewed by a separate LBR unit. However, as will be noted below, there is a way for smaller insurers to form LBR units and leverage the same level of legal cost savings that larger insurers do with their LBR units.
The reasons for a LBR unit’s success are quite simple to see. These units save money mainly by ensuring that the company’s billing guidelines are uniformly and consistently applied to all outside attorney bills. Since legal bill review is all that the unit’s personnel do, it is easy to understand how the unit’s personnel is able to remain on mission as opposed to having to balance the multiple priorities that adjusters have in companies without LBR units. Also, important to note is that as these LBR units are one step removed from the file, there is no chance of friendships getting in the way of doing what is the right thing to do.
In my view, to have a functioning LBR unit, a company needs to have enough legal bill review volume to support the work of at least two and preferably three or more FTEs. (Some large insurers have 60 or more in their LBR units.) The reasons why you need at least two or more FTEs to have a viable LBR unit should be obvious. Nevertheless, I will go ahead and explain the obvious.
The most obvious reasons to have more than a one-person LBR unit are to avoid what happens when that one person gets hit by a bus on the way to work or has an extended illness or takes their in-demand legal bill review skills and goes to another company. (Easy to do since LBR can be done remotely.) What happens in any one of those situations is that you are likely going to have to go back to square one. As the old adage goes, “never put all your eggs in one basket.”
Another old adage is that “sometimes one and one equal three.” So it is when two or more people review legal bills. A sort of symbiotic relationship comes into play where they tend to feed off one another and energize each other. Not only can they help each other, but they also can learn from each other. There may even be some good old fashioned rivalry as to who is doing the better job when it comes to performance review time and the distribution of salary increases or bonuses. More importantly, if something does happen to one, the other(s) can pick up the extra work (at least temporarily) in order to give management the time to come up with a more permanent solution. This option is certainly not available when just one person does all the legal bill reviews.
Just how much volume is “enough” for two to three people to handle will vary from company to company. Some companies look at the total number of legal bill bills as the measure to use; others look at the total dollar volume as the measure to use to decide whether to establish a LBR unit and how to staff the unit. I prefer to look at a combination of these two factors as well as other relevant factors. These other factors include the personnel to be used (attorney v. non-attorney, experience level), lines of business, whether an e-billing system is used, whether an electronic file system is in place, and the number of law firms. This is an example of where the “art” part of the “art and science” of legal bill review (see sub-title of blog) comes into play.
Also, while it best to have the LBR unit staff all be FTEs, it may be possible to have a LBR where the staff is a combination of full and part-time employees. It may even be possible to have a LBR unit with all part-time employees. That is, they could be part-time in the sense that they only work for the company part-time or part-time in the sense that they also have other duties within the company. Either way, a LBR unit with part-time employees can help smaller insurers bring about the cost savings that such units provide to larger insurers. However, a word of caution here. Establishing a LBR unit with part-time employees can be more difficult to do than establishing a unit with full time employees. Again, the “art” part of legal bill review comes into play. And then there is the “science” part which comes into play in the form of training on how to properly review a legal bill. But more on the training part in a future post.
I have tried to cover the major considerations involved in deciding whether establishing a LBR unit is the right solution for your company. Believe me, there are many other factors to consider. Please feel free to contact me at firstname.lastname@example.org or call 317-258-0671 for questions or for more information about how to establish a full or part-time LBR and if a LBR unit is the right solution for your company.
My next post will discuss the third alternative solution controlling legal claim “leakage,” training the staff on how to do legal bill reviews the right way. One of the first things to be discussed is that training the staff is not the beginning or the end of a successful legal cost control program; it is just the “tip of the spear.” Just what other things need to be done to have a successful legal bill review program will be covered in a future post.
Also to be covered in a future post will be the answer to this important question: what does looking at your hand have to do with deciding whether or not it is going to be worthwhile to train your staff on appropriate legal bill review techniques? The answer you will find out is really quite simple.