I recall that he looked at me strangely for a moment and then responded that he was sure his company could come up with a report that would help us better track our Egyptian depositions. It was then my turn to look strangely at him. Many times I had not been on the same page with a person sitting across from me, but this was the first time we were not on the same continent.

That experience brought home the need to select an e-billing company that has a focus on insurance claims legal work rather than corporate legal work. The two types of legal work and the way they are managed can be as different as different can be.

Employees of e-billing companies that are more focused on corporate legal customers may not be well versed in the jargon -- let alone the intricacies -- of claim legal work. Their employees may know all about IP suits, but have no clue about LSVI suits. Thus, their ability after the sale to help the insurer customize business rules (notice they call them "business" rules and not "claim legal" rules) for use in their rules engines, train the insurer's staff on how to properly review legal bills, or design customized claim management reports is limited to non-existent. If they have lawyers on staff to assist customers, then these lawyers typically come from "white shoe" law firms and have corporate law rather than insurance defense law backgrounds.

Performing Due Diligence

Once you have narrowed your vendor selection, the next step is to perform due diligence. A big part of due diligence is to check vendors' references. However, as any experienced claim manager who has ever purchased services knows, everyone has references. The real trick in the due diligence process is to get beyond the carefully chosen, and often pre-scripted, references.

After the vendors have given you the names of references they would like for you to contact, ask to see a list of all of their insurance company customers with key contact names. That was once a show stopper for one major vendor I interviewed. They refused to provide any additional contact information other than their three pre-scripted references. Of course, the implication is, "What don't they want me to find out about them?"

In doing your due diligence, it is important to ask the same questions of each vendor customer contact. This ensures that the set of questions you use will give you the consistent information that you need to properly evaluate the vendor based upon your particular needs.

Besides asking questions designed to get at how the vendor's system works for them, you also need to ask more pointed questions that will uncover any problems. My favorite questions to ask include, "What things about the vendor's system/its reporting features/their service do you not like or wish were different? Why so?" Pregnant pauses or what sounds to be very carefully chosen words may speak volumes.

If you want to get the "deer in the headlights" look from a vendor, then just ask them a similar question, such as, "If I were to ask each of your customers what they did not like or wish they could be changed about your system/its reporting features/your service, what do you think they would tell me?" No one has a right to expect a vendor's program or service to be perfect in all respects, but you do have a right to expect honesty in the relationship. If the vendor cannot honestly answer that question candidly and be upfront about what you might hear from some of its customers, then the company is either not being truthful with you or is out of touch with its customers. Either situation would not be helpful in establishing a solid foundation upon which to build a good working relationship.

Another question to be sure to ask each vendor is if they have lost any customers in the past three years and, if so, to supply you with the names. There has been some shifting around in the past few years among insurers and e-billers. Some of this shifting is not necessarily the fault of the vendor's service or its programs. But as part of your due diligence, you need to contact each customer that the vendor lost to carefully examine each situation and determine if the reasons the customer left the vendor are valid for your consideration.

Hosting Versus Non-Hosting

One of the key decisions you will need to make early on in the process is whether you want to choose an e-billing system that is hosted or non-hosted. A non-hosted system is one in which the vendor's e-billing application resides within the customer's network system. On the other hand, a hosted e-billing system is one that the vendor hosts and customer data is stored and gained access to from within the vendor's system. The hosted approach may also be referred to as a Software as a Service (SaaS) delivered solution.

One of the primary reasons that companies prefer a non-hosted solution is that they believe it the best way to keep their data secure. But this if often a misconception, as it is just as likely that company data will be as secure (if not more secure) within the vendor's hosted system. If data security is a primary argument for choosing a non-hosted system, then the decision should be based on more than an assumption that the vendor's system is not as secure. The assumption should be verified. Otherwise, you may be committing to a system that is going to be much more expensive to implement and maintain based on unsubstantiated and invalid reasoning.

The most significant reason to choose a hosted e-billing system may be that it costs less. Hosted systems have virtually no start-up costs and cost less to operate and maintain. Because of this, it is easier to cancel or switch vendors as your needs change. With a non-hosted system, you are heavily invested in infrastructure costs and are certainly not as flexible in your ability to cancel or switch, unless money is no object at your company.

Hosted systems take much less time to implement than non-hosted systems, which means a quicker path to legal cost savings. Also, from a start-up cost standpoint, hosted systems require little involvement by company IT personnel, which can be a very significant issue. Apart from the fact that IT must be heavily involved in the installation of a non-hosted system, they must continue to be involved to perform equipment and software maintenance, such as daily back-ups, security scans, and patches (software upgrades). Unless your company is different from other insurers, IT resources are already spread pretty thin. While they may be available now to help with the installation of a non-hosted e-billing system, there are certainly no guarantees they will be available later on at the times you may need them the most.

Remember that IT priorities at most insurers are geared more toward customer and agent issues. Frustrating delays can result when other IT priorities or emergencies must be put ahead of working on an e-billing system. Thus, an important consideration to keep in mind is that if you choose a non-hosted e-billing system, you may find yourself standing in line for IT time and resources to work on even routine IT issues related to your system.

Vendor Multi-Product Discounts

Companies offering e-billing programs typically sell other products and services, such as claim management systems, legal matter management systems, and legal research services. Many of these products and services come with a steeper price tag than the e-billing system. Frequently, vendors will bundle e-billing with one or more of the other options and offer the package at a discount, hoping to entice you to buy. While it may sound attractive at first glance, it's only a good deal if you actually need the other products or services, and only if each is a best fit for your organization. After all, what is the point of buying two products or services at a discount when what you really wanted was just a good e-billing program?

Each product or service decision should stand on its own merits. If an e-billing program is a priority, then buy the one that best fits your organizational needs. With a good e-billing program, you should expect to see a minimum savings of 10-20 percent in claim legal expense in the first year. This kind of savings goes straight to the company's bottom line. It's highly unlikely that other products and services offered with a vendor's discounted bundle will deliver anything close to that kind of savings.

That said, if all the products in the bundle are the right fit for your company, then by all means buy them together and reap the savings from the discount pricing.

Know Where You Are Going

As that great Yankee catcher and philosopher Yogi Berra once observed, "If you don't know where you are going, you will wind up somewhere else." If you do not start the e-billing system selection process by thinking about where you want to end up, then you will end up somewhere else. That "somewhere else" might be getting an e-billing system that is not designed for an insurance claim legal environment, or one chosen just to receive a discount on a so-so management system.

Knowing where you are going in selecting the right e-billing system for your company begins with a disciplined selection process that focuses on two important factors: selecting a vendor with a demonstrated claim legal focus, and selecting an e-billing system that is better suited for an insurance claim environment rather than a corporate environment. Keeping the proper focus in the selection process should keep you from winding up somewhere else.

John Conlon is an attorney and former insurance claims executive. He consults with insurers on litigation management, legal billing, and e-billing issues. He can be reached at [email protected].