Twenty years ago, a prominent legal bill auditor told the WSJ that he offered to give away his services to law firms to help them improve the way they billed their clients. He said that he “didn’t get any takers.”
Fast forward twenty years and many law firms now realize that they do need help in how they bill clients, particularly insurers, for their services. Today attorneys well know that regular legal bill reviews or audits can result in reductions in legal bills that cut into a firm’s cash flow. While many attorneys choose to challenge or appeal the reductions, many other attorneys just simply write off the reductions as a “cost of doing business” with the client.
Unfortunately, what the attorneys who either choose to appeal reductions or write them off do not realize is that they are all in the same boat if their billing error rates are considered high by the insurer. This is because that just being on a list of attorneys or firms with high billing error rates makes them prime candidates for removal from an insurer’s panel counsel list.
Many larger insurers regularly prune their panel counsel lists of the bottom 10% of firms (or individual lawyers within the firms) with high billing error rates. And often times this removal is done without notice as insurers will simply just stop sending new files.
While some attorneys blame legal bill auditors, the plain fact of the matter is that many attorneys have brought this on themselves. I cannot begin to tell you how many legal bills I see that have glaring errors that could have easily been caught by the attorney (or the attorney’s legal secretary) before the bills were sent out. As I so often tell insurer clients, when I see glaring and obvious errors in a bill, it is a clear signal that the attorney has not at all looked over the bill before it was sent out.
In fact, looking over a bill to ensure its accuracy before it is sent out is a mandatory ethical duty for all attorneys. See ABA Task Force on Lawyer Business Ethics (1996) “Lawyer’s Responsibility in Preparation of Invoices” (“The lawyer responsible for billing should review each invoice to ensure, prior to sending an invoice to a client, that the invoice is reviewed for accuracy.”). But sadly so many attorneys wind up paying the price because they do not discharge a basic ethical duty to simply check over their bills before they are sent out.
To assist lawyers who do not have the time nor the inclination to ensure their bills are accurate and in compliance with a client’s billing guidelines before they are sent out, a new consultant practice area has sprung up. These consultants will review a lawyer’s pre-bills to ensure that the bills comply with client guidelines and are otherwise accurate. And if there are subsequent problems, some consultants will stand between the attorney and the client to work out any billing errors that slip by the consultant.
The net result for the attorneys using what might be termed a “pre-bill consultant” can be fewer, if any, reductions in legal bills which definitely help for cash flow purposes. Even more importantly for cash flow purposes in the long run, it can also result in an attorney or a law firm being kept off the dreaded list of attorneys or firms that will be dropped due to high billing error rates.