Balancing Process and Technology to Drive Value Objective – A utomation I nnovation M anagement The attached document, Strategies for Reducing Costs Associated

Balancing Process and Technology to Drive Value

Objective – Automation Innovation Management

The attached document, Strategies for Reducing Costs Associated with Processing Claims, reflects our presentation at the HIAA Technology & Business Solutions Conference, April 15, 2003, in Chicago, Illinois. For the enterprise interested in reducing claims processing costs, the presenters provided ways for identifying areas of opportunity and a case study illustrating results. Information technologists John Schladweiler and Dave Adolphson presented ideas and strategies for getting started and a methodology and sample deliverables for proceeding with a cost reduction initiative, and representatives from Trustmark Insurance Company, Ralph Mollenhauer and Steve Horvath, discussed Trustmark’s experiences and results with a process improvement and cost reduction effort in their claims area.

The presentation team welcomes feedback and further discussion. If you would like to discuss this or a related topic with any of the presenters, contact information is provided on page 27.



Strategies for Reducing Costs

Associated with Processing Claims

HIAA Technology & Business Solutions Conference

April 15, 2003Chicago, Illinois


Objective – Automation Innovation Management Agenda

Introductions

Strategies for Reducing the Cost of Processing Claims Getting started John Schladweiler Methodology & Deliverables Dave Adolphson

Trustmark Case Study Process Ralph Mollenhauer Results Stephen Horvath

Questions/Discussion

i



Strategies for reducing processing costs

How do you decide where to start?

Cultur

eStru

ctur

e

Product

Process

Technology

People

StrateStrategygy

1




ClaimsProcess

CustomerInteractions

CustomerService

Proposition

Profit&

LossAccount

$

Profit&

LossAccount

$

CompetitivePosition

Financial & Management Information Processes

IT Infrastructure

CostsRevenues

Areas of Focus2




Organizational Scope

Product Mgmt & Actuaries

Policy Services

Agents & Brokers

Underwriting

New Business

Board of Directors &

Management

LOB

Claims

Marketing

3




Expense Analysis Examples

Claims Processing Expense Components

8%11%

16%

20%9%

15%

6%

15%

Receive Claim

Assign Claim

Prepare Claim

Adjudicate Claim

Communicate Claim

Resolve Pends

Overall Claims Mgmt

IT

Functional Expense Components

36%

38%

8%

7%6% 5% New Business

Underwriting

Claims

Policy Services

Mail Services

Other

4




Potential Items to Consider

Claims Process Workflow Unit Cost Customer Service

Objectives and Measures

Process Improvements Estimated Savings/

Strategic Benefits

Claims Systems Applications Data Management Technology

Architecture Service Level Goals

and Measures Systems

Improvements New Technologies Estimated Savings/

Strategic Benefits

Service Failures Competitive Threats Growth Concerns Scale Economies Product Design

5




Exploratory questions

What are the trends for data interchange among providers & payers? What are industry cycle-time/cost benchmarks for processing paper

and electronic claims? How do our cycle times compare with industry benchmarks? competitors? How do our costs compare?

What is our productivity in terms of annualized claims per employee? How do we compare with industry benchmarks? Competitors?

How effective are our claims application systems in meeting production targets? In terms of technical robustness? Expansion?

How do our process and technology costs compare? Are we investing in initiatives that will lower unit cost and take us where we want to go? Are we getting payback from our new initiatives?

What are our employee turnover rates? Are rates consistent among locations? Job classes?

What is our level of customer satisfaction?

What are the major reasons customers contact us? What are preferred forms of contact?

Do we have opportunities to improve our cycle times and quality levels and reduce our unit cost?

6



Methodology for reducing processing costs

Methodology drives Effective Delivery

$

DeliveryTime

7




Four-Step Methodology yields Results

1. Determine role of Claims in supporting enterprise mission and goals

2. Identify points of gain and associated savings

3. Analyze Claims Process Workflows

4. Review Technology base and current data and applications systems

Result: Action Plan to implement efficiencies available through process and systems improvements

8




Workflow Analysis

AssignClaim

ReceiveClaim

PrepareClaim

AjudicateClaim

CommunicateDecision

InvestigateClaims

Respond toCustomerInquireis

Request/ObtainDiscounts

ManageLarge Cases

C

RO

P

E

OR

EC

SSES

P

OR

EC

SSES

S

CE

I

P

LA

ZI

DE

9




Application Architecture

Paper ClaimsElectronic Claims

Receive Claim

Assign Claim

Prepare Claim

Adjudicate Claim

Communicate Decision

Customer Information

Work Flow Manager

Expert / Exception System

Managed Care/Med Data

Correspondence System

10




Technology Architecture

Browser

Claims Clients

Browser

Firewall

Claims System

WebInternet

Telephony

Peripherals

LAN

Admin Client

Marketing Client

MS Exchange

Support System

Ethernet & TCP/IP

PC Anywhere

eCabinet

Fax/Copier

Fax

Main Server

Policy System

Accounting & other System

11




Maturing Technologies

Telep

hon

yS

erver

•Paradigm Shift (MF – C/S – Web)

•Web-based Customer Service• Imaging•Workflow•Electronic Document Interchange (EDI)

•Electronic Document Storage•Call Centers•Expert Systems•Correspondence •eCabinet (Fax/Copier)•XML• IVR•Multi-Channel Communication

Value Driving Applications

•Coordination of Benefits•Enrollments, Eligibility List Management via Web

•Automated Claims Handling (Data entry, Checks & EOB’s)

•Provider Database•Answer System •Claims History•Experience Data Warehouse•Electronic Claims/Payments•HIPAA – Automated handling• Interfaces: (Policy Admin, Finance & Accounting, etc.)

•Electronic connectivity with Brokers, Providers, Employers

Firew

all

Intern

et

Browser Browser

Web

Server

En

terprise

LA

N S

erverAp

plication

&

Data S

erver

12



Deliverables for reducing processing costs

Illustration: Benefit Computation

Process Step FTE’s

Current

Costs* IncreasesProductivity

Estimated

w/ Improvements* Savings*

Receive Claim 10 $800 5% $760

Assign Claim

18 $1,600 20% $1,280Prepare Claim

10 $1,100 15% $935

Adjudicate Claim 20 $2,000 25% $1,500

Communicate Decision 14 $900 10% $810

Overall Claims Management 8 $600 5% $570

$10,000 $8,030Totals 100

13

Resolve Pends 15 $1,500 50% $750

IT 5 $1,500 5% $1,425

ProcessEstimated

Process CostsEstimated

Annual

*all dollar amounts in thousands

$40

$320

$165

$500

$90

$30

$1,970

$750

$75




Format Illustration: Project Costs

ONLINE PROJECTS Capital 2003 2004 2005Project 1Project 2Project 3

BATCH PROJECTSProject 1Project 2Project 3

TOTALS

Etc.

Etc.

PARTNER PROJECTSProject 1Project 2Project 3

Etc.

14

Project Expenses




Format Illustration: Project Benefits & Expenses

Project Savings

PROJECT 1 Location 1 Location 2 Location 3 Total

BenefitsExpensesNet

PROJECT 2BenefitsExpensesNet

TOTAL NET BENEFIT

15




Illustration: Timeline

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6

PROJECT 1AnalysisDesignPrototypeImplementTrain

Deploy

PROJECT 2AnalysisDesignPrototypeImplementTrain

Deploy

Pilot

Month 7

Pilot

16

Project Timeline



Deliverables for reducing claims costs

Steps to realizing benefits

Procuring tools that enable process improvements is only the beginning…

Pilot

Measure / tune

Roll out

Measure / tune

$$

17



Claim Operations Review and Enhancement

Steve Horvath / Ralph Mollenhauer

A Case Study of Trustmark Insurance

18



Strategy

Methodology

Results

19



Trustmark Process

Business Strategy and Project Identification

Business & IT Baseline Assessment

Options Development & CBA

Planning, Analysis and Design

Development, Testing and Implementation

20



Central Database

Rules-BasedExpert System

PatientNotes

Image/WorkManagement

Tool

Paper Scan& EDIAudit &

ReportingCustomer Interactive

Web and PhoneTools

ClaimFacts System

21



Keys to Success

Users and Technical Experts Side-by-Side

User Analysts and Integrators

Model Office Environment

Retention of Base System as a Foundation

Goal Setting for Results

22



Organizational Impact

Merge of Duplicate Operations

Refinement of “Best Practices”

Added Flexibility to Shift Work

Skill-Based Work Management

Greater Control and Accountability

Staff Acceptance

23



Results

Improved Work Management

Electronic Adjudication and Automation

Productivity Improvement

Reduction of Unit Costs

Geographic Independence

Customer Interactive Tools

Kept Pace with Business Changes

24



Lessons and Take-Aways

Build Expertise Internally

Set Realistic Expectations (time / cost)

Commit to Early Management Development

Avoid Trying Too Much Too Fast

Continue Updating CBA

Prepare Staff for Change

Expect the Good People to Stand Out

Seize the Future vs. “Techno” the Past.

25



Reducing claims costs

Questions/Discussion

26



It was a pleasure discussing cost reduction strategies for claims processing with you today

Steve Horvath, HIASecond Vice President, Benefits DivisionTrustmark Insurance Company400 Field DriveLake Forest, IL 60045(847) 283-3393

[email protected]

Ralph Mollenhauer, FLMISecond Vice President, Systems DevelopmentTrustmark Insurance Company400 Field DriveLake Forest, IL 60045(847) 283-1112

[email protected]

Dave AdolphsonManagement ChampionObjective-AIM: Automation/Innovation/Management483 East Oxford RoadNorth Barrington, IL 60010(847) 381-1516

[email protected]

John SchladweilerInnovation ChampionObjective-AIM: Automation/Innovation/Management1630 Sheridan Road, Suite 8EWilmette, IL 60091(847) 853-6190

[email protected]

27

Strategies: Case Study:



Speaker biographies

Steve Horvath: Second Vice President, Benefits Division for Trustmark Insurance Company, Steve has 15 years of experience in the administration and sales of medical, dental, disability and life business. At Trustmark, he is responsible for the Administrative and Technical Support of the medical claim operation as well as for the management of disability and life claim processing. Steve holds the professional designations Health Insurance Associate and Associate Customer Service. He is also active within the insurance industry, currently serving as the General Chairperson for the 2003 Midwest Claim Conference.

Ralph Mollenhauer: Second Vice President, Strategic Technology Planning, for Trustmark Insurance Company, Ralph has 17 years of experience in planning and implementing advanced technologies for health claim processing. At Trustmark, he was responsible for the implementation of document imaging, workflow management, customer service management and rules based expert systems in the claim processing centers. Recent responsibilities also include developing outsourcing arrangements to perform non-core business functions. Ralph holds Fellow, Life Management Institute, and Health Insurance Associate designations.

Dave Adolphson: a business-oriented information technology consultant and executive, Dave has focused his career on transforming enterprises through linking information technology, with enterprise objectives. He has a strong track record of reducing total costs, delivering to demanding schedules and budgets, and achieving tangible benefits. Currently a principal of Objective-AIM, Dave has Big Five consulting experience with KPMG, and he has also held senior IT executive roles with Aon, C N A Financial, and Harris Bank. He has spoken and written on related business and information technology topics such as acquiring and retaining profitable customers, justifying investments in information technology, and extending the application of methodology to Expert Systems and web-based implementation projects.

John Schladweiler: with 35 years of experience in the IT industry and a blend of vendor, client and consulting experience, he also brings a strong financial background to the assessment of business operations, including his understanding of the economics of existing and emerging technologies and how they can positively impact business opportunities and costs. His experience includes executive management roles with debis IT Services N. A., Realtors Information Network, and Harris Bank as well as engagements with financial services companies including The Equitable, Central Reserve, Chase Bank, and the Board of Trade Clearing Corporation, and also with leading and emerging technology companies, ASPs, and start-up eCommerce and application integration software companies. He serves on the Executive Committee of the Information Systems Management Forum, an organization focused on information exchange among CIO’s.

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Documents

Balancing Process and Technology to Drive Value Objective – A utomation I nnovation M anagement The attached document, Strategies for Reducing Costs Associated