Claims Litigation Vendor Management
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What is it?
Legal spend management is a framework for the rules of engagement with law firms to help control cost and ensure you only pay what you owe
As we discussed in Controlling Costs in Your Self-Insurance Program, a legal spend management program is often the best way for self-insured organizations to keep legal costs under control and ensure they only pay what they owe on invoices.
That sounds great on the surface, but how can you even begin to predict the value of a legal spend management program so you can build the business case for implementing one?
That's actually easier to do than it sounds.
It's a simple matter of comparing:
It's a simple matter of comparing:
What you spend on legal costs now
vs.
What you'd spend if you had a program in place
Okay, so maybe that is a little confusing.
Let's try that again.
The best way to understand the impact of a legal spend management program is to conduct a feasibility study, or spot audit, of your current program.
This test process, where an expert bill review attorney analyzes a subset of your invoices, will identify the accuracy and reasonableness of the charges based on contemporary guidelines and accepted billing standards.
This invoice review, if conducted with a handful of different law firms, will give you an idea of where you can expect to find efficiency throughout your program that will translate into savings.
For example.
In the past 5 years, we've conducted more than 150 feasibility studies for risk management and claims departments of all sizes.
That's more than 5,300 invoices with a value of in excess of $38 million dollars!
From these feasibility studies, here are some of the things we learned...
1. Only 16% of legal invoices submitted are error free
2. On average, there are 3 non-complaint entries
3. The average post-review cost reduction is 8.26%
We also found that 82% of all deductions come from just 7 categories:
Eye-opening, isn't it?
Seeing the results that can be achieved when an expert bill review attorney audits your invoice makes it very clear how much legal spend leakage you experience every single day.
You're leaving money on the table.
Why do law firm billing errors continue to persist? Here are the top reasons:
- Simple mistakes
- Unfamiliarity with billing guidelines
- Over-aggressive billing
Unfortunately, paying more than you owe, regardless of the reason, will have negative long-term consequences for your self-insured program.
These errors go undetected by the claims professionals because of the following challenges:
- No system in place to enforce rate and guidelines compliance
- No time to dedicate to bill review
- Don't always comprehend the work as described
- Uncomfortable questioning the attorney about the work being done
Overcoming the top objections
You can put together the most rock-solid business case in the world for implementing a legal spend management program, but there will always be a nay sayer who will come up with reasons why it won't work. Here are three common misunderstandings about legal spend management and how to overcome them:
1. Switching to electronic
2. Charging law firms
3. Damage Relationships
1. Our law firms won't submit bills electronically
Electronic invoicing has been around since 1999 and is the standard for insurance defense firms today. Bottomline alone has more than 13,000 law firms submitting more than 1,000,000 invoices annually within their legal spend management community. The chances are more than good that your law firms are already submitting invoices electronically for other clients.
2. We don't want to nickel and dime our law firms
Of course you don't. A reputable bill review program isn't about excessive reductions or fine-line adjustments. Instead, it is a systematic approach validating that what was billed and what was paid matches up with what is owed, all based on agreements in place between the client and their law firms.
3. This will damage the relationships we have with our law firms
With modern billing practices, law firms expect that the charges they submit on an invoice will undergo some level of scrutiny before being paid. As long as the review process is consistent and there is a mechanism for appeals when deductions aren't warranted, implementing a legal spend management program will not be an issue for your firm.
No one wants to pay more than they owe on invoices - it's as simple as that.
Having a trained bill review expert conduct a thorough audit of your invoices will help you understand exactly where a legal spend management program would benefit your organization. It will pinpoint the factual areas of cost savings you would experience - and that's more than enough to build a business case to implement a program.
