Artificial Intelligence Isn’t Sufficient When it Comes To Effective Law Firm Billing
Welcome to this month’s issue of inVOICE. These “5-minute reads,” brought to you by InvoicePrep, are short, informational executive briefs designed for law firm executives and managing partners. They provide practical tips and provoke new ideas to make your management of your Firm more effective. (For our prior newsletters please visit us here).
Last month, I wrote about the fact that hourly billing isn’t going away, no matter what the industry predictors say about alternative fees, new ways of showing value, and new paradigms for delivering legal services. Not only are hourly billing integral to certain segments of the legal marketplace (e.g. litigation) but, as we’ve seen with insurance litigation, shadow billing and the need to review singular attorneys are critical to how industry payers audit for both quality and cost.
I also wrote about integrated vs. non-integrated firms. Citing about the work of Marvin Ervin, I painted a picture of a new kind of law firm — one that combines attorneys on the one hand with other specialists on the other (MBAs, accountants, and maybe billing experts) to improve the quality of service being delivered to clients.
A Key Message from the CLM Conference
This month I’m just back from another great Annual Conference of the Claims and Litigation Management (CLM) Alliance. I’ve supported the CLM for many years. Many of our law firm customers are CLM members and what happens at that conference is of great interest to us.
This year several of the participating chief claim officers and CEOs focused their discussions on the growth of machine learning and in particular Artificial Intelligence (AI) – defined loosely as the ability to automate routine tasks formerly done by people. Without paraphrasing the presenters’ comments too severely, the key messages revolved around the theme of: “AI will allow us to automate much more, but it won’t reduce the need for claims professionals and for those on whose judgement and reason we depend to do our jobs.”
The audience seemed to find this message reassuring. The presenters were emphatic that machines can’t do, and will never be able to do, the core functions inherent to resolving claims and disputes in that arena.
About Artificial Intelligence and Law Firms
The discussion about automation at the CLM Conference reminded me of a very good Wall Street Journal article about Artificial Intelligence in the law firm. This March 2017 article chronicles leading advances in AI, including natural language processing, and cites a University of North Carolina School of Law study suggesting that if all available new legal technology were put in place, firms would experience a 13 percent decline in lawyers’ hours.
Despite this attention-grabbing headline, the article points out that a more realistic adoption rate would decrease hours worked by attorneys by 2.5 percent annually over five years. This may still be alarming to some, but really says more about how attorneys will become more efficient with their time, not that their roles, judgement, and reason are going to be replaced. In fact, the title of the article itself reflects that truism: “A.I. Is Doing Legal Work. But it won’t Replace Lawyers, Yet.”
The Limitations of AI Extend to Law Firm Billing Practices Too
Perhaps one of the observations that continues to surprise me the most is the degree to which law firm attorneys believe that their invoices are no longer reviewed by humans. Rather, they tell me, their bills go off into an e-billing software platform and come back severely adjusted and marked up. Therefore, they say, it must be the software, and possibly using AI, that is arbitrarily (and unfairly they would add) not acknowledging the value of the work performed.
Nothing could be further from the truth. The reality is that in today’s environment 80 + percent of the dollar adjustments made to any attorney’s invoice are made by humans. E-billing software has many benefits for bill reviewers. It can organize the invoice in certain ways; it can spot repetitive tasks; it can highlight certain activities, time spent, or timekeeper roles —- but what it cannot do is make a judgement about what it finds.
Three primary high-dollar adjustment categories for attorney invoices are 1) inadequate description of work; 2) unreasonable time spent on the activity; and 3) lack or prior authorization for the activity. Imagine now that an invoice with these issues is presented through an e-billing platform. Dutifully, the software puts a flag next to all line items that contain key combinations of words, UTBMS task codes, and timekeeper roles. Is the description adequate? Was the time reasonable? Was authorization actually given? The software has no idea. In other words, humans are required to evaluate and analyze what the software has flagged, and then to make a judgement about whether to adjust the line item or leave it alone.
Expertise – When Supported by Automation – Is a Powerful Solution for Firms
It’s no surprise that attorneys who believe that e-billing software is the cause of their adjusted invoices crave a similar kind of technology for the firm. And it’s absolutely correct that, to some degree, firm-centric bill preparation software will help. Specifically, such software helps to more efficiently spot issues, identify problem time-keepers, highlight suspect activities or key words – in essence, performing a pre-check of the invoice before it goes to a client’s e-billing software.
But just as the software on the payer side doesn’t know exactly what to do with the issues it identifies, software on the law firm side can’t “fix” the problems it finds. It just knows that maybe, possibly, somehow, there might be an issue with a specific line item. And just as humans are required to take action on the payer side, real experts are required on the firm side.
I stress the “real experts” component of this solution for an important reason. Payers have recognized, after roughly 15 years of working with e-billing software, that it matters more who is using the software, than which specific software package is used. After all, if what is done to the invoice is a function of the human looking at the software flags, it’s more important to have expert humans. For that reason, the use of third-party expert auditors (using software) continues grow at a rapid clip.
A Positive View of the Future
So, just as the speakers at the CLM were quick to reassure the audience that their jobs are not in jeopardy, and just as the Wall Street Journal article suggests that attorneys aren’t going to be replaced by AI in the near future, I too have a positive view of the future. Soon, I predict, all law firms, even small ones will hire or retain invoicing experts who are just as capable as the experts the payers have hired.
When that happens two important industry shifts will take place. First, there will be parity between firm and client. Both will have advanced technology and as importantly, both will have invoicing experts. Second, as a result of that parity, I predict that firms will once again be seen by clients as fully capable and trustworthy of creating compliant, accurate invoices. And when that happens, maybe payers will conclude that those specific firms don’t even need to be subjected to an audit process in the first place!
How’s that for a future you can live with?!
What do you think? Do you agree there are limitations on what AI and automation can do? Do you think your invoice preparation team is as expert as the teams reviewing your invoices? Please let me know!
InvoicePrep enhances law firm profitability by improving e-billing quality and accuracy. When invoices are prepared properly, payment is more prompt and the number of denied charges decreases. InvoicePrep’s system is streamlined, efficient and uses a combination of cutting-edge technology and professionals with extensive legal invoice compliance and e-billing software knowledge. To learn more about InvoicePrep, please visit www.invoiceprep.com