Shopping for a New RMIS

When most people enter a department store such asinfrastructure,” Schnure says.
Macy’s or Bloomingdale’s, they“We would run the application off their
anticipate a day of shopping, not mulling over theserver, and it would not utilize our internal IT
intricacies of insurance and risk management. But toresources. However, we also saw this model as a big
Ann Schnure, director of self-insurance and claims atdisadvantage to our specific needs and corporate
Federated Department Stores (FDS), millions ofphilosophy. We wanted to have control and make
square footage of retail and merchandising spacedirect modifications if necessary.”
translates into critical claims and risk managementThe other vendor was Valley Oak Systems (VOS), a
issues.company perceived as predominantly focused on the
As one of the nation’s leading departmentCalifornia workers’ compensation market.
store retailers, Federated operates more than 450“We knew that Valley Oak had expanded
stores in thirty-four states under the namesto national capability, and in all honesty, California
Bloomingdale’s, The Bon Marché,drives one of the most complex workers’
Burdines, Goldsmith’s, Lazarus,compensation markets in the country,”
Macy’s andsays Schnure. “When we looked at their
Rich’s-Macy’s.system, we realized that Valley Oak’s
Since the early 1990s, the company has covered itsfeature, initially built for California, really could be used
general liability and workers’ compensationin any state.”
claims through a self-insured, self-administeredData Conversion
program. In 2001, FDS decided that it needed a newBy February 2002, Federated signed an agreement
claims administration system to update some of theto license VOS Portal. After some initial planning,
critical processes and procedures in their claimsSchnure’s department began work with
department. The department was using an old, limitedthe Valley Oak implementation team to jump-start
product. Although it had been cutting-edge when itthe data conversion process in May 2002. They were
was implemented, it could no longer effectivelyunder a tight deadline.
manage an electronic claims workflow and information“We had to go live with the system either
exchange between different systems. The claimsbefore our 2002 holiday season, or after,”
department had turned to building labor-intensivesays Schnure. “A huge portion of our claims
workarounds when the task of finding a new systemactivity occurs during the busy holiday season. If we
fell to Schnure. She had to find the system to meetdidn’t have the system ready to go by
her company’s needs, but wanted toNovember, we would be forced to push the
avoid a lengthy request for proposal (RFP) process.implementation back until February 2003.”
A Shopping List of FeaturesShe knew that data conversions were typically a
Federated was looking for a system to handlenightmare. With their prior system, they had
multiple workers’ compensation statesperformed a product upgrade only to discover the
that also could be customized to handle disabilitysystem had a bug that corrupted their data. Having
claims. Since Federated had always been progressivegone through this experience, Schnure’s
in implementing state-of-the-art technology, it wantedteam wanted to make sure that the conversion and
to select a system that could adapt to changingimplementation went forward without a hitch.
times and have long-lasting benefits.“Our main strategy was to test, test and
“If it made good business sense, wetest,” Schnure says. “My IT
didn’t mind investing in the ITcounterpart played a huge role in this process. Valley
infrastructure up front. That always has been ourOak had a well thought-out implementation process,
approach to technology in claims and riskwhich included a protocol for verifying data integrity
management—have systems in place toand system functionality. During the conversion, we
control the data so that it can be analyzed later, andhad about one-third of our staff involved in making
have systems to control the claims process tosure the data was solid. As a result, we went live on
carefully monitor losses along the way,”October 15, 2002—an extremely short
Schnure explains.conversion time.”
“When we first decided to go to aImmediate Workflow Benefits
self-insurance model, we approached a vendor thatOnce the new claims administration system went live,
had a paperless claims administration product. Wethe adjusters were the first to experience immediate
made this decision and investment relatively earlyworkflow benefits.
because we recognized the long-term benefits and“The adjusters noticed that a lot of
advantages to our claims operations. That systemthought had been put into the usability of the
worked for ten years.”system,” says Schnure. “For
When Schnure’s team went shopping forinstance, in the prior system, the general liability and
a claims system the second time around, they utilizedworkers’ compensation modules both
this same forward-looking philosophy, and had alooked the same. This made it awkward to know
specific list of features and functions they werewhich module you were in.
looking for:“[With the new system] the general liability
Paperless claims system. Since FDS had been using aand workers’ comp modules looked
paperless claims process since 1991, the new systemdifferent, so adjusters knew they were operating in
would likewise need to have this feature.different lines and intuitively knew the claims needed
Electronic data interfaces. One of the main reasonsto be handled differently.”
FDS needed a new system was to leverage theThe new system also allowed adjusters to work on
power of electronic data interfaces to easilymore than one claim at a time. “From the
exchange information with its partners and otheradjusters’ viewpoint, this alone was a
internal applications.tremendous workflow benefit.”
Sophisticated reporting. Another benefit that the priorIn addition to these immediate usability benefits, the
system could not deliver was specific reports thatnew system has other advantages.
the risk management team needed. It was importantWith automated correspondence and state forms,
to have “as of” reporting withinstead of creating a letter from scratch, printing it,
snapshots of financial data for analysis, trending andand then scanning it into the system, FDS is now able
actuarial projection. They needed a system thatto run an automated correspondence template. The
would allow anyone to generate ad hoc reports withletter is part of the trackable claims file. This results in
ease.huge clerical savings.
Automated forms and letters. FDS wanted a modulePreviously, FDS had two people manually entering the
that would automatically generate custom letters andworkers’ compensation medical bills into
state mandated workers’ compensationthe claims system. The new system provides an
forms, with data fields automatically populated fromelectronic data interface with Federated’s
the claims system.bill review vendor, so they can electronically import
Shopping at the RIMS Exhibit Hallthe medical payments, eliminating the need for data
Schnure saw the 2001 RIMS conference as a perfectentry.
opportunity to meet various vendors and obtain aIn order to monitor the claims process, FDS also set
comprehensive overview of the claims administrationup business rules that triggered automatic responses
market in one convenient location. In anticipation ofto generate a notepad entry, or set a reserve
the conference, her team looked over the exhibitamount on a claim. These rules allow for consistency
directory and determined which companies theyin claims handling and reduced the possibility of
wanted to meet.unnecessary losses.
“We were interested in twelve vendorsThe inclusion of an automated explanation of benefit
that were exhibiting,” she says.(EOB) within the check-writing interface is another
“We didn’t make appointmentsimprovement. At one time, FDS produced and mailed
in advance. That way, if the system didn’ttheir EOBs and checks from two different locations.
have the minimal requirements we were looking for,Payers then had to manually match payments to
we could simply move on.”EOBs, and often called FDS to ask which EOB went
At the conference in Atlanta, Schnure discoveredwith which check. Now, the EOB appears on the
that every vendor’s application had uniquecheck stub, eliminating work for the claims
features. Some were stronger in specific modules,department, reducing provider calls and improving
but weaker in other areas.provider relations.
“A major stumbling block for many of theFuture Improvements
vendors was our paperless claims process,”Now that the new system has been implemented,
says Schnure. “Some of the vendors wereSchnure and her team are getting ready to make
very honest, and said their systemfurther improvements and enhancements to the
wouldn’t work. Others said they couldclaims operations.
develop something for us, but quite frankly, weThey are in the process of rolling out Web-enabled
didn’t want a vendor to make specialclaims reporting. Managers will be able to submit a
accommodations. We wanted a system thatclaims report through the company’s
contained most of our vision coming off-the-shelf.intranet, which connects all 450 stores.
Otherwise, we knew from experience thatIn addition, FDS is linking its claims system to its gift
customizations could give us problems with futurecard center. If a customer sustains an injury on the
upgrades.”premises, in addition to the medical care those
Headquarter Demosindividuals receive, FDS will also be able to
By the time they returned home,automatically generate a gift card to its stores.
Schnure’s team had whittled down their“We’re thrilled to have a system
initial list of vendors from twelve companies to five.that works well within our paperless claims
They had completed a significant portion of theirprocess,” says Schnure. “As an
vendor research and developed a cursory list of theoff-the-shelf package, it was not only close to our
pros and cons for each system.initial vision, but in some ways it has exceeded
“We were getting ready to send out RFPs,it.”
but, instead, we invited each company to ourCreating a Short List of Qualified Vendors
Cincinnati headquarters to provide an in-depthRequests for proposals can total one hundred pages
product demonstration,” Schnure says.and the process—from development,
“Each demo lasted two to four hours, anddistribution, review and evaluation—takes
in the end, the RIMS conference and the in-personup to a year to complete. It is no wonder risk
demos saved us an enormous amount of time andmanagers dread the laborious task of selecting a new
resources.”information technology system. It is a project that
Checking Twicerequires large investments of time and resources,
After the demonstrations, the list of five had beeneven before a penny is spent on the application.
narrowed down to just two companies. Schnure didThere are ways, however, to efficiently narrow the
not leave any stone unturned. In theuniverse of vendors to a strategic short list of
reference-checking process, she requested contactsqualified providers. Here are some tips to abbreviate
from other self-insured companies.the process:
“We did conference calls and checked verySelect a strong leader who can serve as the project
thoroughly on what these clients liked andadvocate, helping to drive the evaluation and section
disliked,” she says. “We checkedprocess.
on each company’s level of service andIdentify the key decision makers that will form a
support and asked what they wanted to seesmall, effective committee, dedicated to making
changed. We spent a good hour or two talking todecisions that are right for all users.
each reference.”Develop a complete list of system needs both from
The IT department was also intensely involved in thea business and IT perspective. Start by having each
selection process, making sure the application wouldgroup clearly articulate system specifications and
work with what the company already had in place.compile these requirements into a centralized
For instance, the systems manager made sure thedocument. This may be in the form of an RFP, or it
prospective application would work with an Oraclecould be just a list of needs and wants.
database, InfoMaker and Crystal Reports.Utilize an exhibit venue, like the RIMS conference, to
“The systems manager and I were about aarrange for product demos in one location. These
50-50 team in making the final decision, and wereinitial demos will allow you to quickly eliminate
really well complemented to select thesystems that do not meet your requirements.
system,” Schnure says.IT Checklist for New Claims Systems
“We also were under tremendous pressurePurchasing a new claims system often involves two
to present a sound business case to our vicecritical groups—the business users and the
president of risk management, Tim Schwirtz. WeIT department that will support the system. Both of
prepared a proposal with the specific reasons wethese groups will have specific needs and
required a new claims system; the specific benefitsrequirements. An IT department should consider this
we would obtain; the savings we would experience,checklist of common items:
and even drill-down details on the administrative headWill the claims system work with the existing
count it would affect. As a result, we had lookedplatform, infrastructure and database?
closely and critically at the specific benefit breakdownIs the application architecture progressive?
between the two remaining competitors.”Can the claims system interface with other
The Decision to Control their Destinydepartmental applications, such as HR and accounts
Schnure realized that the two vendors were verypayable?
different and saw that there was a business case forWhat types of system-support options are available?
both products.
One was a task-oriented system that charged everyIs the vendor a good partner? Do they have a
time the company used the application. “Itclient-focused culture and service-oriented philosophy?
would eliminate our need to support the IT