Like many insurance operations, the Alternative Markets division of Great American Insurance Co. faced a mountain of inefficient workers' compensation claims processing tasks. Simply put, the division needed to selectively apply modern information technology to become more competitive and improve customer service while working within the limitations of its legacy claims system.The claims system, for example, couldn't handle electronic data interchange (EDI) between Alternative Markets and any of its outside vendors. Therefore, routine payments to both medical service providers-doctors, hospitals and physical therapists-and bill review vendors were locked in a time warp of old-fashioned snail mail.
Because its legacy claims processing system was based on paper rather than electronic files, tens of thousands of claims-oriented transactions had to be manually entered by staff each month.
Furthermore, binder listings of outside service providers, such as nurse case managers and defense attorneys that Great American could call on for workers' compensation cases, were outdated and unreliable.
In addition to information technology challenges, some third-party vendors were not meeting the needs of the business unit. For example, the turnaround time for medical bill review stretched out more than a month.
"Overall we were spending too much time on actions or activities that added no value to our claims services yet were needed to keep our records and filings in order," explains Robin L. Spaulding, divisional vice president of workers' compensation claims for the Alternative Markets unit of Great American Insurance Co., Cincinnati, Ohio. (About 70% of Alternative Markets' business is workers' compensation; the remaining is large commercial automobile and general liability.)
Business transformation
Since those quaint days, the Alternative Markets division has jettisoned the age of the Flintstones and morphed into the age of the Jetsons.
With the help of a personalized strategic alliance between claims and information technology, the business unit rolled out 16 IT enhancements to improve its claims processing system during a recent 24-month period.
The enhancements include the implementation of EDI with outside vendors that provide services such as medical bill review, pharmaceutical and durable medical equipment purchasing, telephonic case management, utilization review, and policy administration.
The business unit applied information technology to create electronic claim files as a replacement for its old paper-based system.
"Going to a paperless environment was a major enhancement," Spaulding explains. "The electronic system allows us to get document images to the bill review company faster and has helped reduce (bill review) turnaround time from 30 days to three days."
Another area receiving an IT makeover was the carrier's paper-based binder listings of defense attorneys and nurse case managers. The pre-screened listings are now contained in two separate electronic databases that can be accessed via the Web by both internal claims processing personnel and approved third-party administrators.
"This is much better than a binder system because as soon as you print a binder, it is out of date," Spaulding notes. The nursing database was rolled out in 2003 and the attorney database was rolled out in March. Next up are databases for independent medical exam physicians and surveillance companies, scheduled to arrive before the end of 2004.
Beneficial results
Collectively, the information technology modernization effort has improved workflow, eliminated inefficiencies and duplication and produced cost savings for the $100-million (in written premium) business unit.
"We have significantly reduced the number of manual transaction entries every month. We have also reduced the turnaround time on our medical bill review process and increased medical review savings by 200%," Spaulding says. "A big part of the improvements came as the result of implementing electronic claim processing files (for exchanges with outside vendors)."
For example, the EDI hookup with outside bill review vendors has eliminated six manual processing steps for each transaction. On funded policies (where a large deductible is first met by the insured), three processing steps have been removed from thousands of transactions per month.
"We write 5,000 to 10,000 checks to medical service providers each month," Spaulding says. Previously, claims processing staff had to manually enter the check information for each payment. Now with EDI, the forms are all pre-filled and the process is automated.
"We needed to gain some efficiencies so we could give our claims staff more time to concentrate on things that make a difference in a claim . . . investigation, evaluation and negotiation," she adds.
Secret to success
Before Great American undertook the project, Spaulding and others surveyed the landscape.
"I talked with managers, supervisors, claims representatives and staff who perform claims processing functions to find out the pain points," she says.
But the true secret behind the rapid-fire implementation and deployment of the 16 IT enhancements within 24 months is more likely the partnership created between IT and claims.
And the key to the partnership was the working relationship forged between Spaulding and Karen Birdseye, the IT relationship manager for Alternative Markets.
Great American Insurance Co. uses IT relationship managers to work with specific business customers to identify current IT needs and future IT wants that are then translated into formal requests. The IT relationship manager works as the "interpreter" to foster understanding between the business unit and the IT department and helps project implementation move forward.
"In my opinion, our IT relationship manager was the key to our success," says Spaulding, whose division accounts for 40% of the annual premium written by Great American Insurance Co.
"Karen managed the IT side and I presented the business needs. Candidly, without her, these enhancements would not have occurred in such a short time," she adds.
The pair acted as the final decision-makers on vendors, solutions, projects and timelines.
"We brought openness to the relationship. We had free-form discussions where we expressed our thoughts and opinions openly," says Birdseye, the IT liaison.
Workplace equals
The two executives approached the IT projects as true workplace partners. "It was just a given that we had equal opinion, we had equal discussion time and we were equal in all ways concerning decision-making," adds Birdseye. "There were no power plays. There were no egos involved. We had common goals that put us on equal footing."
Spaulding recalls, "we worked together and didn't step on each other's toes. I didn't try to be an IT person and she never tried to be a businessperson. I never tried to tell her what IT resources I needed and she never tried to tell me what the business side should do."
Together, Birdseye--who understood outsourced IT cost structures,--and Spaulding-who knew the cost of outsourced bill review, negotiated contracts with outside vendors.
Birdseye cites another important success factor. "I was accepted by the business side as one of them and was treated as though I were a claims professional."
In addition to their interpersonal relationship, the managers developed a relationship between their respective departments. "She and I developed a great relationship with the internal IT staff," says Spaulding.
"We made a big deal each time another enhancement went live. We really thanked them. Surprisingly, most people don't do that," says the claims executive.
Just as Spaulding involved Birdseye with the business side, the internal IT teams were brought over to the claims processing department.
"We physically brought them over to the business side for meetings. They interacted face-to-face with the customers that they were developing the projects for," Birdseye says.
"That way the IT folks weren't working for 'invisible' individuals. They were working to develop a deliverable product to someone that they knew . . . someone that they had had conversations with and could have a conversation with if necessary to clarify some of the requirements."
Another factor that contributed to the long-term partnership was the celebration of each success. Success celebrations included group gatherings for ice cream, a beer at a local pub and a catered lunch.
"We didn't take people for granted. We didn't behave as though this was the expected result," says Birdseye.
Brian S. Moskal is a business and financial writer based in Chicago.
