The Familiar Subject of Costs in the News

Thursday, July 18, 2013 | 0

David Paige, managing director at Legal Fee Advisors in New York, recently asked the question on LinkedIn, "may a law firm make a 'profit' on expenses charged to a client?" He posits that some in the legal community may charge a "mark up" on expenses such as "postage, telephone charges, and even . . . research database charges." He cites American Bar Association Opinion 93-379 and opines that it is clear law firms may not pass on any mark-up to clients. He has a notable following on LinkedIn, and his question/post generated some interesting responses. The posting is here if you are on LinkedIn.

Some comments focused on the comparative ethics of companies that use software or vendors to mark-down attorney's bills for services. Louis Schmitt said, "It's at least as ethical as 'auditors' automatically reducing legal bills by 10% to 15% in order to justify their jobs, forcing lawyers to provide significant services at no compensation." This seems like it may be the familiar "two wrongs make a right" argument.

One comment introduced a modern debate that I have heard at some conferences recently. What of the cost of providing "digitized documents?" Paula Unrau noted that digitizing the documents that come into a law firm allows all attorneys ready access to the documents and makes them more efficient. She notes, though, that, "Some firms have even set up an in-house service to do this work, listing it as a vendor even though it is owned by and located within the firm." Many businesses are now digitizing all incoming mail for convenience; that is not new. But having a nominally independent business that performs work within the business and charges for services, costs, as an independent vendor?

A cost issue apart from this LinkedIn discussion is working its way through the rulemaking process at the Florida Department of Health. They are proposing a rule that would allow medical providers to charge $1 per page for medical records from many requestors. The rule is 64B8-10.003 and it limits the charges for "patients and governmental entities," to $1 per page for the first 25 pages and 25 cents per page thereafter. For all others, it limits costs to $1 per page.

I have heard many people talking about this recently. Many question whether this rule authority would override the specific workers' compensation limit of 50 cents per page, see Fla Stat. 440.13(4)(b). It seems logical that statute would prevail over conflicting rule. This statute also limits to "actual direct cost" what can be charged for "other nonpaper records." With the trend towards electronic medical records, this last element of the statute may be critical.

The proposed 64B8-10.003 does not specifically mention "nonpaper," but may address the digital medical record, stating that for "special kinds of records" the reimbursement would be the "actual cost" which is "the cost of the material and supplies used to duplicate the record, as well as the labor costs and overhead costs associated with such duplication." Are digital, nonpaper, records "special?" Seemingly, we are moving to a time when paper records will be the exception to the rule. We may be there now.

Byron Townsend, a trial lawyer from Tampa, recently took to LinkedIn to alert people to the proposed Rule 64B8-10.003. He notes that there will be a public hearing on Aug. 2; according to the meeting notice, this will be in Deerfield Beach.

An interesting series of cost issues.

Is it appropriate to charge more for some expense or cost? There is the argument that someone's time is invested in procuring and affixing that stamp to an envelope. That time might be charged as a fee, or is it appropriate to "up charge" the stamp a few cents to account for that? A photocopy can be obtained from (major retailer name omitted here) for $.10 per page. Is it appropriate to charge 25 cents, or even $1 for that copy? When a fax machine is used to make a 30-second phone call (local), is it appropriate to charge $1 per page for sending or receiving that fax?

If a set of records is maintained digitally (PDF images on a computer), and someone at the facility merely copies a computer file and emails (or mails a CD) to the requestor, is it appropriate to charge $1 or even 50 cents per page for the contents of the file? It is possible that such a digital file, which is copied and sent to the requestor in digital form, might contain 100 pages. Should the records provider charge $50 to $100 for copying and providing that digital file?

Interesting questions all. For your consideration.

David Langham is deputy chief judge of the Florida Office of Workers' Compensation Claims. This column was reprinted with his permission from his Florida Workers' Compensation Adjudication blog.