Solving The eBilling Dilemma For Your Law Firm

Why eBilling Is So Complex For Law Firms & How To Solve It

The complexities of eBilling are making it more difficult for law firms to bill clients without complications, appeals and violations. As a result, law firms are having a much more difficult time following the eBilling rules and guidelines which in turn leads to lost billing revenue in the form of fees and costs. In this article, we will go through the process of eBilling and discuss potential solutions firms can implement to solve their eBilling issues.

The eBilling Process & Why It’s So Difficult

Let's briefly go over the eBilling process and why it's so complicated. When eBilling was first introduced, the concept was to streamline the eBilling process and move from paper billing to electronic to make it easier for both the client and the firm to process bills and receive payment. Somewhere along the line, eBilling companies figured out they could use this process to put rules and complications in place for legal clients in order to ensure the law firm followed a specific set of rules and guidelines and then adhere to such rules or face penalties and/or delayed payments. In the last few years, one can argue that these eBilling companies are using the technology purposely as a tool to save their clients’ money and make the billing process so complicated law firms struggle to follow all the rules for each client.

Let's say I'm a corporation and I need to hire a law firm to represent me in a large litigation matter. I can go hire an eBilling company that specializes in sending and receiving my legal bills to the law firm I use for my litigation case. Instead of simply accepting all the bills the law firm sends me and ignorantly paying them, the eBilling company I hire can make sure that the fees and costs on the bill are fair and in line with industry rates so I'm not over-billed or abused. In theory, the whole system makes sense. However, what's happened recently is that the rules also called guidelines, have become so complicated that law firms have an almost impossible time following them and complying with the clients’ guidelines. In our example, the company that hired the law firm for its litigation case also went out and hired any eBilling company to handle sending receiving the bills from the law firm. When they hired this eBilling company, the eBilling company sent the law firm a document (usually in the form of a PDF) that is usually over 20 pages which lays out exactly what the law firm can bill, how it can bill and when it can bill.

Your average midsize law firm that does about 50% of their billing electronically can have an average of 1400 eBilling guideline documents to follow. From the law firm perspective, in our example, the firm will have to follow a very complex document just to provide services for the corporation’s litigation case. Someone has to sit and read through that document to figure out everything in that document in terms of how they can bill, when they can bill and all the restrictions laid out. Imagine your law firm has about 1400 documents from different eBilling companies on average 50 to 200 pages long which are extremely complex full of rules and regulations you need to follow when you generate the bills. As you can imagine, the situation is becoming more difficult for a law firm to keep track of every single guideline document the rules that pertain to that document.

Going back to our example, let's say we incur costs during our litigation process. For example, an attorney may drive 25 miles from the office to a deposition or take a flight or even make copies for the litigation case. There's probably rules in the guideline document that outlines how many miles the attorney can drive per day before he is supposed to rent a car, what type of flight he can take, and how many copies a day can be made. The law firm needs a system to tell each attorney when they need to rent a car, what airlines or flights they can take and how many copies they can make.

Let’s say in our litigation case the attorney makes a mistake and he ends up driving 30 miles for a specific day and there's a rule in the eBilling document that says you're supposed to rent a car if you drive over 25 miles a day. Automatically, the law firm is most likely going to lose the money spent on driving those 30 miles unless they file an appeal and explain why the attorney forgot to rent a car. Even worse, if you make the same mistakes multiple times the eBilling company is less likely to grant your appeal and reimburse you for the costs you incurred. Let's say you're handling 20 different cases as an attorney. You then must remember 20 different guideline documents all containing dozens of rules. It becomes almost impossible. And this is the point! If the eBilling companies can wear you out, it becomes almost impossible for the law firm to follow the rules. In turn, the eBilling company is saving their client money because every time the law firm doesn't follow one of these rules correctly it means the law firm can't bill to recoup the time or costs.

A simple process of streamlining billing between a law firm and a client has become an unbelievably complicated process of rules and documents that favor the eBilling companies. And the eBilling companies know this! If you go to a few of these eBilling companies’ websites, you will see they advertise saving the client between 5 and 20%. And how did they save the client that money? They do so by making the eBilling guidelines so complicated that law firms struggle to follow the rules. Your average midsize firm loses at least $1,000,000 a year on eBilling violations due to mistakes.

How Do Law Firms Combat This Situation?

As the situation has evolved for law firms, a few solutions have come to market to help firms better follow these guidelines. However, there's no simple solution or no one system that is going to make it simple and easy. In this section, we will discuss a few solutions to combat the complexity of eBilling guidelines.

First and foremost, regardless of the solution, each law firm must take the time to read through all the eBilling guideline documents and properly document all the rules and regulations within these documents. Unfortunately, this is a time consuming and complicated process made even worse by the fact that these documents are often updated and changed throughout the year by the eBilling companies. Once reviewed, you need to make sure both your billing department and attorneys understand the guidelines.

There are a few software products that take the law firm's guidelines and put those guidelines into a database. The software then reads the time and cost entries to stop violations. Software is usually the best way to comply since humans have a hard time keeping all the rules straight. I have seen three types of systems on the market that all work a little differently.

“Cleaning” Time Entry Solutions

The first type of solution that exists takes all the time entries entered and reads through those time entries. It then compares the time entries to the guidelines and finds any time entries that violate the guidelines. For example, if a firm is running a popular time entry package, the time entries will be downloaded from the program into the compliance software and checked for violations. The time entries will then be corrected and sent back to the time entry database for final processing. In some software packages, when violations are found, either billing corrects manually, or one system can ask questions and correct automatically.

If the attorney already violated the rule, let's say by driving over said mileage instead of renting a car, there isn't much the system can do to stop this. Furthermore, these solutions are unable to process costs and only time. On the positive side, these types of solutions will make sure your time entries are as compliant as possible before they are sent to the billing company.

“Stopping” Time Entry Solutions

This type of system can stop the attorney from entering time if it violates the rules. This ensures billing will receive clean time entries that don’t break the rules. Again, this has the same downside as the first solution because the attorney can still break the rules but won't be able to enter the time entry system. As the attorney enters time, he or she should better learn the rules as they use the system. With some systems, the law firm can display a summary of the rules as they enter time.

“Processing Proformas (Prebill)” Solutions

This solution reads through the firm’s proformas (prebills) and checks for violations. This is the only solution that can check both time and costs for violations. The other solutions are only able to check for time violations. This solution does not require the firm to change any of its billing processes, hire new people or have the timekeepers worry about how they enter their time within the system. In my opinion, this is the best solution I've seen thus far. It’s simple yet effective and very easy to implement.

What’s The Ultimate Solution To This Problem?

In my opinion, there is no perfect solution. I will give you my thoughts on the closest a law firm can get to a perfect solution. First, as discussed before, a law firm needs to have a good handle on its eBilling guideline documents by either reviewing them in-house or hiring a company to review. As the guidelines are being reviewed, they should be entered into the software package of your choice and then exported into a database for the firm to use.

Personally, and this is just my own opinion, I prefer the profroma (prebill) processing solution because it is the only solution that allows a firm to process both time and costs. It also allows the firm to rapidly implement the solution without any changes to the firms process or any complex technical solutions because the system simply reads the performance and analyzes the data from the performance to make sure they don't violate any of the guideline rules. It also allows for a rapid implementation without any changes to the firm’s core systems. The system reads through the firm’s proformas, generates a violation report and allows billing to correct any issues before generating final invoices.

Future Solutions

There is one solution that can potentially solve the entire issue. However, it's currently not realistic and will require a great deal of investment and technical implementation. For argument sake, I will go through it.

To completely solve this issue, a software company will need to build a system that contains a time entry client along with the compliance core system. When the rules are entered into the system, the system will communicate with the time entry client to ensure all time entries, while being entered, comply with the rules. The time entry client is in constant communication between the core rules engine. Furthermore, the time entry client can act upon rules that are close to violation. If an attorney is entering 4 hours for legal research and the total allowed research for the case is 6 hours, the time entry client should warn the attorney that he or she is close to violating the limit. Ultimately, the time client needs to interact between the system and attorney and warn the attorney or prompt for action when a rule is close to violation or has occurred.

Unfortunately, this ideal solution requires a firm replace their existing time entry client and install a complex eBilling solution to do so. Most firms will flatly refuse to replace their existing time entry systems for a myriad of reasons. One company attempted this solution but ended up scaling down the product because law firm’s will not replace their core software. Furthermore, development of support of such a complex system will be tremendously expensive to build and maintain. ?

In Conclusion

The complexity of eBilling is here to stay and will continue to get more complicated. Law firms are going to need to find a solution that works for them and start to put these solutions in place because you simply can't hire your way out of this problem. Even if you add additional billers, the rules are still so complicated for a human being to follow that it's almost impossible to get both your attorneys and billers on the same page following the same set of rules. Software seems like the only probable solution.

I compare the eBilling process that is occurring to medical billing. Doctors used to bill their patients directly and once insurance companies got involved, they put in more complex billing systems that enforced costs, procedures and other items related to patient care. Over time, doctors lost control of billing and had to follow insurance company demands. The same process is occurring in legal as law firms are losing control over billing and must follow eBilling company demands ultimately driven by clients.

About The Author

Scott McCarthy has over 28 years’ experience in the legal field and has studied the eBilling guideline issue for over seven years and has reviewed almost every solution on the market. He has also studied several firms processes and the way they are attempting to comply with eBilling. You can reach Scott McCarthy at [email protected]. Mr McCarthy firm does offer a eBilling solution called Scan Logic (www.scan-logic.com) and can recommend several other solutions for your specific needs. He can also recommend companies that are able to review and document your eBilling guidelines if you do not have the in-house staff to do so. Feel free to reach out with any questions you may have about the eBilling process.