Tag Archive: flow

Today’s law firms are struggling to pay for their 3 most importance expenses: labor, rent, and insurance. This week, Ed offers tips to help you manage your cash flow so that paying the bills doesn’t break the bank.

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Value billing in health care: Back to the future for law?

Insurance companies hire lawyers as in-house counsel at reduced (wholesale) rates, pay lawyers in accordance with insurance policies for their insureds, and otherwise have a dramatic influence over the billing practices in the legal community. Wasn’t it insurance companies in or about the 1960s that demanded lawyers submit bills that showed the time expended in matters for which they pay? And then, as a consequence, lawyers began using time increments as a basis for pricing, not just as a management tool. Before then, lawyers based their fees on the value received by the client.

Perhaps the insurance industry will, once again, have a dramatic impact on the legal profession, but indirectly this time. In Rhode Island, it’s reported that the Lifespan hospital group and Blue Cross have reached an agreement intended to overturn the way hospital care is financed. The goal is to promote and pay for health (value) rather than episodes (hourly) of treatment. Currently, when you go to a hospital, you pay (and the insurance company reimburses or pays directly) for your stay in the hospital, for tests performed and surgeries and related care. Does this remind you of the hourly bill that lawyers produce monthly (hopefully no less frequently?.

The agreement is the first to meet Rhode Island’s unique rules concerning health insurance policies and their premiums. Blue Cross, the largest health plan in the state, and Lifespan, the largest provider in the state, have agreed in principle (details yet to be worked out). The program will provide for fixed fees (alternative, or value, billing) for given procedures, thus discouraging tests and procedures that might not be needed – but usually performed because of insurance payments or attempts to make sure “no stone is unturned” in the treatment. Does this sound familiar? Performing more discovery than needed just to make sure “no stone is unturned” and to avoid an accusation of malpractice for failure to uncover the hidden evidence.

The hospital will be eligible for bonus payments when they meet as yet to be determined quality standards. Again, does this sound familiar? Bonus payments for faster resolution of the litigation, payment for results below the insurance company’s reserve or other standards determined by the parties. Almost sounds like a sport’s figure’s bonus payments when playing more games or hitting more home runs, etc. than set forth as minimums in the contract.

Increased and more effective communications and streamlining payment processes to increase the hospitals cash flow are also part of the agreement. Again, does this sound familiar? When lawyers have effective communications in place, it is seldom that the client is upset with the lawyer and it is seldom the client refuses to pay in accord with the engagement agreement, thus increasing realization rates for the lawyer.

Tying payment to quality care is available elsewhere, but to a modest extent and never before to an entire state. The insurance commissioner in Rhode Island is mandating change in connection with premium rate reviews. As they say elsewhere, “follow the money.” In this case, when customers demand change, suppliers change. Here, the review process for payment of insurance premiums and health care will change, not overnight, but quite assuredly … only because the customer (or regulator) demands the change. When will clients of lawyers finally say “enough is enough” and demand change? Until then, lawyers are not likely to alter current billing practices   

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Loan modification — Interview lawyers handling this practice area

I’m seeking to connect with lawyer(s) who either did or are currently doing loan refinance work for homeowners. In some states, the bar and/or legislature has created regulations preventing lawyers from taking money from clients for this work in advance of completing the work.


I’ve written about this and now have a major newspaper interested in talking with such lawyers to inquire whether such work is still available and how the lawyer is handling the fee.

Please contact me directly at edpoll@lawbiz.com


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Think for yourself – Work your ideas, not others

Today, I had a discussion with a very bright individual who is seeking new office quarters. He was having difficulty with the math, so he thought. He was seeking to understand the interplay between basic rent, common area charges (charges for maintenance, taxes, etc. that the landlord assesses at the end of each lease year to cover the cost of operating the building, paid pro rata by each tenant), and his actual cost of occupancy (total actual rent!).

I suggested that he walk away from this bottom down thinking. Instead, I suggested he look at the situation bottom up, and get his real estate broker involved to earn his keep.

First, figure out what you want to pay for monthly and/or annual rent. You can do this in a number of different ways. You can say that historically I’ve earned X% profit on Y number of revenue dollars; when I move into new quarters, I will earn more revenue because (better facilities, closer to prospective clients, larger space to hire more staff, etc.) and therefore, with the same percentage for occupancy cost, I can pay more …. and that number is $X.

Or you can say my revenue is likely to stay the same even after the move (or I’m not sure and I want to be conservative) …  and don’t want to pay more than the same rent I’m paying now. That number is $X.

With that number in mind, tell your broker to find you the space you require (with the specifications you want) for that amount. Don’t worry what words are used, whether base rent or common area charges, etc. The lease contract must state that the maximum annual rent will be $X.

If the broker says that you can find plenty of space for that amount, great; if he says you’re crazy, there is no space for that amount, then you have choices to make: Work harder, work smarter to earn more revenue/profit to pay the higher rent, reduce your profit and take-home pay, or join forces with another to share the space and cost of the space.

But, don’t let others dictate how you should think. Don’t let the system force you into a thinking pattern that will confuse you or prevent you from knowing what your cost of operation will be.


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Malpractice Insurance Report

In the recent California Lawyer’s Annual Professional Liability Insurance Report, the writer quotes the ABA. Their study shows that 44,000 claims were lodged against insured lawyers nationally within the study’s three year period. Of this group, “…(s)olos and smaller firms were sued the most: 70 percent of all insurance claims were brought against lawyers in firms with one to five attorneys.”

I suppose this was the basis for arguing that lawyers either need malpractice insurance or should disclose to their clients that they don’t have such insurance. Yet, if 70% of the legal community works in the small firm environment, wouldn’t it make sense that 70% of the claims would be filed against this goup?

Despite these statistics, there is no study ever cited that shows how many claims, IF ANY, were filed against the approximately 30,000 (20%) attorneys in California who do not carry malpractice insurance. There is no study to conclude they have claims filed against them; there is no study to conclude they have been unable to negotiate settlements with their aggrieved clients, if any; there is no study to conclude these are “bad” or negligent attorneys from whom the public needs protection.

Despite this, the Bar (now about 23 states) has moved forward in lock-step to punish this group of attorneys by increasing their already marginal cost of operation and forcing them to become adversarial with their prospective clients by having this discussion.

Clever lawyers who may seek to avoid the negative consequences of this new rule can take a number of alternative paths to side-step the issue. They can obtain the most minimal policy, the true net effect of which will leave nothing for the client at the end of any malpractice litigation. They can bury the required disclosure language in a long written engagement agreement, seldom read by clients, thus avoiding the necessity of raising the issue with the client. Among other tactics.

As in other instances, the Bar fails to protect its members who pay their salaries and fails to protect the public by availing attorneys with affordable negligence insurance.


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Growing Your Law Practice in Tough Times

West Pub. Co. has announced the pre-release offering for my new book, Growing Your Law Practice in Tough Times.

I’m very excited about the new book … and encourage you to take advantage of West’s offer. You can also see the new offering at LawBiz.

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The End of Lawyers?

Richard Susskind has written a book suggesting that lawyers may become obsolete unless we make some dramatic changes.


I see nothing unusual about his conclusion … that legal work will be unbundled and that the work that is more mundane and routine will be systematized and perhaps even automated. Technology advances provide us with opportunities that didn’t exist before. We can, today, create better product for less money. Technology is only one aspect. Globalization is another. And this isn’t just for the large law firms. A client of mine, in Texas, opened an office in India for the specific purpose of document review and document production – it’s done for less money more quickly … And he can get a faster turnaround because of the time difference.


Law is slow coming to this process. My background is in manufacturing. I’ve owned and operated several companies. In order to retain prices, not to increase prices, we would do everything we could to automate. When automation, reducing the amount of labor costs, would go no further, we reduced the size of the container. For example, we would go from 32 oz to a 22 oz jar or a 10 gal. container to a 5 gal. container.


When we have time of challenge as we do now or changes in our economy and culture, we have the opportunity to innovate for improvements in products and services. We have the opportunity to create new demand. I see this beginning to happen in our parts of our economy. It will have to happen in the legal profession, nay the legal business (The Business of Law®), if we are to continue to serve our public as we know.



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Will 2008 be a brief dip for law firms?

Aric Press, editor in chief of The American Lawyer, wrote in this month’s edition that “Next year’s Global 100 is apt to be a less pleasant experience (than this year’s law firm’s financial results). The best that law firms can hope for is that 2008 will mark the bottom, a dip in the otherwise inexorable rise of firm revenues and profits. A brief pause: Those are the optimists talking…. the work is down, collections are slower, hiring is off, and law firm leaders spend less of their time plotting global conquests and more trying to decide if anyone will notice that the quality of the paper in the Xerox machine has been taken down a grade…”

Alan Greenspan said recently that this crisis will not go away in the near future; it’s a longer term challenge. I’m old enough to have experienced a prior economic crisis (no John, not the Great Depression!), and it took a full generation to overcome. My fear is that it will take a full generation, or more, to overcome today’s crisis. Although the participants of the recently concluded ALM Law Firm Leaders conference seem to be more optimistic. I’m hoping they’re going to be proven correct.

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General Counsel & The Future of the Profession

I had the pleasure of talking with Paul Williams of Major, Lindsey & Africa. Paul focuses his energies on placing lawyers as General Counsel of major corporations. From his perspective, he suggests that General Counsel today receive more respect. Of course, GCs today have a much larger budget for legal fees than ever before. And many GCs come from the ranks of major law firms. Coming from the elite law firms and handling such large sums of money, one would expect private lawyers to give the corporate lawyers more respect. Also, in many cases, GCs are increasing the size of their legal departments as one way to control legal costs … they can “purchase” the legal talent at wholesale (as an employee of the legal department) rather than retail (law firm associate or partner).

Following are some of my thoughts and conclusions drawn from my conversation with Paul. Not wanting to attribute words or ideas to Paul that he may not have intended, I will accept responsibility for the following conclusions that I reached from our conversation:


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Lawyers should go where the business is

It’s time to stop focusing on real estate, construction, banks, mortgage companies and airlines, according to Larry Bodine. Go where the money is: energy, steel, industrial metals, coal companies and railroads. See the 10 Best Performing Industries on MarketWatch.com.

This reminds me of the book written by Harvey MacKay,  Dig Your Well Before You’re Thirsty  or the phrase "… fish where the bass are…"

In other words,  provide services that your clients need … If your skills are no longer in hot demand, modify your practice area to adapt your skills to the needs of the clients.  If you’re in the larger firms, and are practicing real estate law currently, you might be better advised to learn bankruptcy or workouts to adapt your current skills to the needs of the clients.  If you’re in a small firm or sole practice, this might be more difficult to accomplish with less personal economic impact,  but still possible.

The key is to either provide services the market needs … or to have the capital to sustain the wait until the market comes back to your skills.

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