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A Classic of Legal Technology: Legal Bill Review Software

Legal bill review is a crucial part of an effective legal spend management strategy. So what is legal bill review, and is outsourced legal bill review software worth it?

Quite simply, legal bill review (LBR) is the analysis and review of legal bills against Service Level Agreements (SLAs), regulatory compliance guidelines, such as LEDES and UBTMS. Given the large volume of property & casualty (P&C) invoices or workers compensation (WC) invoice claims, and the reasonably high demand for LBR professionals, LBR is often outsourced to pure play experts.

While the analysis of legal invoices often drives adjustments, ensuring the right amount is paid for the right amount of services is just as important. Firms must be able to answer the question of whether a law firm is compliant with not only guidelines, but also ethical, professional and legal standard. In short, LBR must fit within a broader strategy, which includes enterprise legal management, otherwise known as claims management or matter management. Each invoice reveals details about the activities undertaken in a case, and empowers a check and balance with the case file. An important distinction to note is that effective legal auditing relies mainly on an understanding of billing practices and an ability to spot potential billing abuses, and not in-depth knowledge of the factual background of the litigation.

Earlier in the life cycle of the legal technology industry, many companies managed legal bill review in-house with full time employees. At that point in time, LBR was handled by employees whose main role would revolve around the auditing and analysis legal bills. This employee could be assigned other duties within the company, as needed. As the duties of that legal auditing program expanded, the company would onboard additional employees to manage the review of legal bills. In theory, training would be carried out in-house, thereby keeping costs associated with the legal audit unit small.

The truth couldn’t be more different.

Every time an insurance company or TPA onboards another employee it incurs significant overhead expenses such as office space, salaries and benefits. There are less obvious costs too. Staffing to an exact level is no easy business. After a case is completed, the cost of increased staffing does not stop. The company must find other duties for this new, larger legal bill review team or commence the layoff process, which hurts morale and reputation. The next time a large project arises, it may be more difficult to rehire staff.

With the cost and time associated with legal bill review, third party legal bill review services start to make a lot more sense, especially those with strong track records. For example, the third party LBR service partnered with LEDES has reduced client costs by $500M+ over the last decade. Armed with experienced, specially trained auditors, cutting edge technology (from PowerBI data analytics to machine learning), and the ability to complete legal auditing projects quickly, the independent legal auditing firm provides the corporation with the most cost-effective means of controlling one of the largest factors impacting profits. One third party, LSG, revealed a study that showed profit savings of over 30% with an effective, technology-driven legal bill review software process.

With an independent approach to law firms, third party legal bill review software providers are worth exploring, in order to avoid the pitfalls associated with the in house experience. Further, every insurance and TPA firm should not only be considering technology-driven LBR, but also technology-driven enterprise legal management software.

Gary R Markham is co-founder and Chief Executive of Legal Solutions Group, which designs, develops and deploys an array of in-house legal technology tools. He is an author of Timekeeping for Dummies, regularly speaks at conferences, panels and symposiums, a Global Director of the Hedge Fund Association, a recent recipient of the Keys to the County of Miami Dade. Gary has over 20 years experience in FinTech, specializing in spend, expense management, vendor and allocation and apportionment software solutions.

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