Passable Legal Expenses Explained

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Expenses incurred during the process of litigation are not always passable.

coins and gavelWhat are passable expenses? In every kind of professional services business, there are expenses which are expected and billed back to the client. Often these are “hard” costs which are relevant and necessary to conduct matters, and are provided by a third party. However, when it comes to time and billing, these expenses can be “softer”. Soft expenses may be time which are incurred by the legal staff doing research or capturing pertinent information necessary for the case.

When legal office staff is dealing with medical record retrieval, and conducting follow up calls to healthcare providers, they typically check status on multiple cases to maximize time. But unless the staff is carrying a stop watch, and measuring each moment for each case when discussing it with the record provider, it becomes more of an estimate and less of an actual accounting of billable time.

This presents a potential ethics problem for the legal firm. It becomes a matter of estimating time spent and if challenged by a client, proving time spent on one client’s matter chasing record status may be exceptionally difficult. Since most states have incorporated the ABA’s Model Rules of Professional Conduct, there are specific rules to how expenses are captured and recovered. Attorneys can offer clients the option to pay all expenses related to a case upfront. Alternatively, the client can choose to incur the expenses and recover them at the end from the settlement. It’s important to note that attorneys must advise clients regularly of expenses in writing. This is particularly important in the event that costs incurred are payable regardless of the success or failure of the case to settlement.

office admin legalWith the advent of electronic records, it is important to note that internal costs for cloud-based storage of documents considered overhead of typical office expenses are NOT considered PASSABLE and must be absorbed by the attorney. Likewise, any staff costs associated with copying records, printing forms, and/or conducting on-line research is not recoverable and becomes another internal, non-passable expense to the client.

To simplify the dilemma of what is and is not passable to a client as an expense, one needs to consider the following rule. A passable expense is one that can be clearly and defensibly assigned to one specific case.

ca state bar logoFinally, there are state caps that expressly define what can be considered passable even if qualified. In the State of California, a Pro Bono Attorney seeking to recover out-of-pocket expenses of up to $10,000.00 per case must complete a “Request for Reimbursement of Out-of-Pocket Expenses” form, setting forth the nature, reason, and amount of each expenditure, and supported by invoices and actual receipts or copies thereof.no expenses of any kind can exceed $10,000 if handled pro bono. In addition, any expense in excess of $500 must be approved in advance by the client. Please click here to view the PDF application for Request and Authority to Request Fees in Excess of $500.

RRS logoAn easier way to separate tangible and passable expenses is by outsourcing medical record retrieval (MRR) to an MRR specialist such as Record Retrieval Solutions (RRS). RRS will only bill for the unique costs associated with their efforts on your behalf for a specific client, and as a hard cost, is not only defensible, but relieves the firm of record keeping of time, non-recoverable/non-passable expenses considered office overheard.

Record Retrieval Solutions complies with all State of California, HIPAA and related guidelines to ensure your clients are billed correctly, and that no unnecessary costs are absorbed by the law firm. As always, if you have any questions please contact RRS at cdart@recordrs.com or 866-211-7866. We look forward to hearing from you and helping your law firm practice better.

About The Author

img Chuck Dart
Chuck Dart started in the record retrieval business three decades ago. As the industry evolved from analog to digital, he recognized an opportunity to create a single, simple online solution that standardizes the record request and retrieval process across the entire healthcare industry.

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