Legal bill reviewers are specialists who can help in-house counsel keep a close eye on the bottom line without spending all day poring over detailed invoice line items. Below, two legal billing and technology veterans, David Moran and Bill Sowinski of ELM Solutions, discuss the obvious, and not so obvious, advantages of third-party legal bill review. Their remarks have been edited for length and style.
MCC: Enterprise legal management (ELM) technology has had a huge impact on how legal departments work. How are legal departments using ELM to improve their operations?
Moran: There are two main pieces to it. We provide transparency. With ELM platforms, you can get a sense of what is going on throughout the entire legal department – what your caseloads look like and where potentially your spending is going up. It allows insight at a high level because you can aggregate up but also delve at a granular level into areas that could be a concern. That transparency allows for communication with the law firms and collaboration to ensure that you're resolving cases as quickly as you can with the best possible outcomes. The second component is the containment of costs. It really looks at the underlying base functionality of the system by getting those invoices from your law firms into this system to assure that if work being billed is reasonable and to keep your costs under control. Just as importantly, it helps users achieve some predictability that can be forecast into the budget.
Sowinski: When our clients have the opportunity to marry management metadata and invoicing information, they have an extraordinarily rich set of information that results in business intelligence. Once you have business intelligence, you can perform all sorts of metrics and evaluations necessary to be best in class, to avoid surprises, to identify best performers and practices, to leverage appropriate resources and so on. You can manage your legal business extraordinarily well and keep your inside counsel, outside counsel, business partners and senior management fully informed.
The tool supports collaboration, both within the organization and with your outside counsel. You have information with which you can drive strategy and improve results. It's a dynamic process that allows you to stay ahead of the competition and do a very, very good job.
MCC: How can a legal department that has already implemented e-billing take their program to the next level? What would you say is the next logical step in the evolution of this process?
Moran: The next place where they can make progress would be the legal bill review process. It's a great way to ensure that you're getting the maximum value out of e-billing. What you get with legal bill review (LBR) is a better understanding of the work your law firms are doing for you, whether the work is reasonable, and if the right person did it. You are enforcing basic guidelines and digging deeper to make sure that you're getting value from your firms and that they are in compliance with your guidelines. The challenge we see for corporate legal departments is one of resources. What legal bill review services allow for is more focus on your own issues. Legal bill reviewers can scrutinize invoices and bring issues to the forefront quicker because they're specialists used to the language and the way information is presented within an invoice. It releases the legal department staff to focus more on the matter itself and the legal issues at hand.
Sowinski: LBR professionals develop true technical expertise that drives efficiency, accuracy and consistency. Reviewers are focused on review and review only; they don't have other legal management responsibilities. Their only task is to ensure that the invoice reviews are correct, accurate and consistent. The better LBR teams make absolutely certain that every adjustment they make is documented, right to the specific billing guideline that was violated, so that it informs the law firms precisely as to where they failed to comply with the billing guidelines.
MCC: How do clients reduce their legal spend by using the LBR process, and do you have any anecdotes you can share?
Sowinski: Clients that have a dedicated in-house person generate more consistent and effective adjustments and have much better relationships with their outside counsel. The same is true relative to those clients who have third-party billing invoice reviewers. When we look at the results of invoice review for clients that have their managing attorneys reviewing invoices, we usually see two things. First, that some folks don't adjust anything at all. Ever. Second, that a relatively small number of people account for a large number of the adjustments, but there isn't commonality or level-setting across those reviewers. That sends inconsistent messages to the law firms.
Moran: What they're being allowed to do now is marry the LBR adjustments that Bill is talking about with business intelligence. They have a way to show that value to their corporate legal department. We can do that by delving in and pulling that information out with the appropriate business intelligence tool, allowing for some commonality, too, to compare one firm to another. Now you’re comparing firms – who's doing what, how well they’re doing it and making sure that everybody is in compliance. You're putting everybody on a level playing field.
Sowinski: When you impose discipline within legal bill review units, you just don't review invoices. You impose compliance with billing guidelines, identify where non-compliance occurs, and allow the client and the law firms to review that information necessary to change practices.
MCC: What benefits can a legal department expect from LBR in addition to controlling costs?
Sowinski: There are at least three big benefits. One, many in-house reviewers don't like to review invoices. They don't have time, and they're being asked to critique their colleagues, which can interfere with outside counsel relationships. If you have an internal or a third-party group performing this service on a very principled basis, that friction goes away. Counsel can focus on collaboration, not billing issues. The second thing is that individuals who review invoices for several different corporations develop expertise relative to the types of guidelines that are most efficient and effective and can help clients structure billing guidelines to accomplish their objectives. This fosters better compliance and communication. The third thing is that a bill review unit can help the client enforce provisions of the guidelines such as prior approval or touch points before the law firms undertake certain activities or tasks. This forces communication between the law firm and the client, and all of the research suggests that good communication shortens the life of cases and drives better results.
Moran: It's amazing how explaining your expectations to the law firms opens up your communications and drives the value that you get from them. They feel comfortable and they know where they stand. A good bill review team spurs open communication and keeps everybody aware of where they stand.
Sowinski: That's why we suggest that clients require prior approval before law firms undertake, for instance, extraordinary research of a legal issue, or prior to beginning trial prep. Touching base allows the client to evaluate the likely outcome and the value of the work being performed. On many occasions, it results in honing a strategy for disposition of a case.
MCC: When should GCs and other legal department leaders consider engaging a legal bill review service?
Moran: If you are growing as a legal department and you have a number of law firms that are providing invoices with a significant number of detailed line items, that's when you consider an LBR service. Ask: Are my personnel in the legal department doing the work I hired them for? Can I get better value if I give this to a legal bill review team so I don't have to shift my resources?
Sowinski: Virtually any insurance company or other corporate legal department would benefit from the use of a third-party bill review organization simply because of the expertise and benefits they provide, including improving the guidelines, and freeing up the internal organization to focus on matter management. If you have a relatively large legal expense, the return on that investment is so extraordinary that it's likely you'd want to continue the relationship indefinitely.
To the extent a legal department wants to perform excellently, you want to leverage the expertise – the technical expertise, the practical expertise – that a legal bill review team can bring.
David Moran, Senior Director of Product Management for Legal Analytics for ELM Solutions, oversees data management for the ELM Solutions LegalVIEW data warehouse. He can be reached at David.Moran@wolterskluwer.com.
Bill Sowinski, Director of Decision Support Services for ELM Solutions, leads an expert team in the design of client legal spend analyses and benchmarking disciplines. He can be reached at Bill.Sowinski@wolterskluwer.com.