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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.
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Strategies for Reducing Costs
Associated with Processing Claims
HIAA Technology & Business Solutions Conference
April 15, 2003Chicago, Illinois
Balancing Process and Technology to Drive Value
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
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Strategies for reducing processing costs
How do you decide where to start?
Cultur
eStru
ctur
e
Product
Process
Technology
People
StrateStrategygy
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Strategies for reducing processing costs
ClaimsProcess
CustomerInteractions
CustomerService
Proposition
Profit&
LossAccount
$
Profit&
LossAccount
$
CompetitivePosition
Financial & Management Information Processes
IT Infrastructure
CostsRevenues
Areas of Focus2
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Strategies for reducing processing costs
Organizational Scope
Product Mgmt & Actuaries
Policy Services
Agents & Brokers
Underwriting
New Business
Board of Directors &
Management
LOB
Claims
Marketing
3
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Strategies for reducing processing costs
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
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Strategies for reducing processing costs
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
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Strategies for reducing processing costs
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?
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Methodology for reducing processing costs
Methodology drives Effective Delivery
$
DeliveryTime
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Methodology for reducing processing costs
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
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Methodology for reducing processing costs
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
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Methodology for reducing processing costs
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
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Methodology for reducing processing costs
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
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Methodology for reducing processing costs
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
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
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
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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
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Deliverables for reducing processing costs
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.
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Project Expenses
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Deliverables for reducing processing costs
Format Illustration: Project Benefits & Expenses
Project Savings
PROJECT 1 Location 1 Location 2 Location 3 Total
BenefitsExpensesNet
PROJECT 2BenefitsExpensesNet
TOTAL NET BENEFIT
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Deliverables for reducing processing costs
Illustration: Timeline
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
PROJECT 1AnalysisDesignPrototypeImplementTrain
Deploy
PROJECT 2AnalysisDesignPrototypeImplementTrain
Deploy
Pilot
Month 7
Pilot
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Project Timeline
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
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
$$
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Claim Operations Review and Enhancement
Steve Horvath / Ralph Mollenhauer
A Case Study of Trustmark Insurance
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Strategy
Methodology
Results
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Trustmark Process
Business Strategy and Project Identification
Business & IT Baseline Assessment
Options Development & CBA
Planning, Analysis and Design
Development, Testing and Implementation
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Central Database
Rules-BasedExpert System
PatientNotes
Image/WorkManagement
Tool
Paper Scan& EDIAudit &
ReportingCustomer Interactive
Web and PhoneTools
ClaimFacts System
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
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
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
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
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Results
Improved Work Management
Electronic Adjudication and Automation
Productivity Improvement
Reduction of Unit Costs
Geographic Independence
Customer Interactive Tools
Kept Pace with Business Changes
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
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.
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
Reducing claims costs
Questions/Discussion
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Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
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
Steve.horvath@trustmarkins.com
Ralph Mollenhauer, FLMISecond Vice President, Systems DevelopmentTrustmark Insurance Company400 Field DriveLake Forest, IL 60045(847) 283-1112
rmollen@trustmarkins.com
Dave AdolphsonManagement ChampionObjective-AIM: Automation/Innovation/Management483 East Oxford RoadNorth Barrington, IL 60010(847) 381-1516
dwa@objective-aim.com
John SchladweilerInnovation ChampionObjective-AIM: Automation/Innovation/Management1630 Sheridan Road, Suite 8EWilmette, IL 60091(847) 853-6190
jws@objective-aim.com
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Strategies: Case Study:
Balancing Process and Technology to Drive Value
Objective – Automation Innovation Management
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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