Best tips for risk management

• Risk Management and IT
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• Shopping for a New RMIS
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Shopping for a New RMIS When most people enter a department store and corporate philosophy. We wanted to have such as Macy’s or control and make direct modifications if Bloomingdale’s, they anticipate a day necessary.” of shopping, not mulling over the intricacies of insurance and risk management. But to Ann The other vendor was Valley Oak Systems Schnure, director of self-insurance and (VOS), a company perceived as predominantly claims at Federated Department Stores (FDS), focused on the California workers’ millions of square footage of retail and compensation market. “We knew that merchandising space translates into critical Valley Oak had expanded to national claims  and  risk  management  issues. capability, and in all honesty, California drives one of the most complex As one of the nation’s leading workers’ compensation markets in the department store retailers, Federated country,” says Schnure. “When we operates more than 450 stores in thirty-four looked at their system, we realized that states under the names Bloomingdale’s, Valley Oak’s feature, initially built The Bon Marché, Burdines, for California, really could be used in any Goldsmith’s, Lazarus, Macy’s state.” and  Rich’s-Macy’s. Data  Conversion Since the early 1990s, the company has covered its general liability and By February 2002, Federated signed an workers’ compensation claims through a agreement to license VOS Portal. After some self-insured, self-administered program. In initial planning, Schnure’s department 2001, FDS decided that it needed a new claims began work with the Valley Oak implementation administration system to update some of the team to jump-start the data conversion critical processes and procedures in their process in May 2002. They were under a tight claims department. The department was using deadline. an old, limited product. Although it had been cutting-edge when it was implemented, it “We had to go live with the system could no longer effectively manage an either before our 2002 holiday season, or electronic claims workflow and information after,” says Schnure. “A huge exchange between different systems. The portion of our claims activity occurs during claims department had turned to building the busy holiday season. If we didn’t labor-intensive workarounds when the task of have the system ready to go by November, we finding a new system fell to Schnure. She had would be forced to push the implementation to find the system to meet her back  until  February  2003.” company’s needs, but wanted to avoid a lengthy  request  for proposal (RFP) process. She knew that data conversions were typically a nightmare. With their prior system, they A  Shopping  List  of  Features had performed a product upgrade only to discover the system had a bug that corrupted Federated was looking for a system to handle their data. Having gone through this multiple workers’ compensation states experience, Schnure’s team wanted to that also could be customized to handle make sure that the conversion and disability claims. Since Federated had always implementation went forward without a hitch. been progressive in implementing state-of-the-art technology, it wanted to “Our main strategy was to test, test select a system that could adapt to changing and test,” Schnure says. “My IT times  and  have  long-lasting  benefits. counterpart played a huge role in this process. Valley Oak had a well thought-out “If it made good business sense, we implementation process, which included a didn’t mind investing in the IT protocol for verifying data integrity and infrastructure up front. That always has been system functionality. During the conversion, our approach to technology in claims and risk we had about one-third of our staff involved management—have systems in place to in making sure the data was solid. As a control the data so that it can be analyzed result, we went live on October 15, later, and have systems to control the claims 2002—an extremely short conversion process to carefully monitor losses along the time.” way,”  Schnure  explains. Immediate  Workflow  Benefits “When we first decided to go to a self-insurance model, we approached a vendor Once the new claims administration system that had a paperless claims administration went live, the adjusters were the first to product. We made this decision and investment experience  immediate  workflow  benefits. relatively early because we recognized the long-term benefits and advantages to our “The adjusters noticed that a lot of claims operations. That system worked for ten thought had been put into the usability of years.” the system,” says Schnure. “For instance, in the prior system, the general When Schnure’s team went shopping for liability and workers’ compensation a claims system the second time around, they modules both looked the same. This made it utilized this same forward-looking awkward  to  know  which module you were in. philosophy, and had a specific list of features and functions they were looking for: “[With the new system] the general liability and workers’ comp modules looked different, so adjusters knew they were Paperless claims system. Since FDS had been operating in different lines and intuitively using a paperless claims process since 1991, knew the claims needed to be handled the new system would likewise need to have differently.” this  feature. The new system also allowed adjusters to work Electronic data interfaces. One of the main on more than one claim at a time. “From reasons FDS needed a new system was to the adjusters’ viewpoint, this alone leverage the power of electronic data was  a  tremendous  workflow  benefit.” interfaces to easily exchange information with its partners and other internal In addition to these immediate usability applications. benefits, the new system has other advantages. Sophisticated reporting. Another benefit that the prior system could not deliver was With automated correspondence and state specific reports that the risk management forms, instead of creating a letter from team needed. It was important to have scratch, printing it, and then scanning it “as of” reporting with snapshots into the system, FDS is now able to run an of financial data for analysis, trending and automated correspondence template. The letter actuarial projection. They needed a system is part of the trackable claims file. This that would allow anyone to generate ad hoc results  in  huge  clerical  savings. reports  with  ease. Previously, FDS had two people manually Automated forms and letters. FDS wanted a entering the workers’ compensation module that would automatically generate medical bills into the claims system. The new custom letters and state mandated system provides an electronic data interface workers’ compensation forms, with data with Federated’s bill review vendor, fields automatically populated from the so they can electronically import the medical claims  system. payments, eliminating the need for data entry. Shopping  at  the  RIMS  Exhibit  Hall In order to monitor the claims process, FDS Schnure saw the 2001 RIMS conference as a also set up business rules that triggered perfect opportunity to meet various vendors automatic responses to generate a notepad and obtain a comprehensive overview of the entry, or set a reserve amount on a claim. claims administration market in one These rules allow for consistency in claims convenient location. In anticipation of the handling and reduced the possibility of conference, her team looked over the exhibit unnecessary  losses. directory and determined which companies they wanted  to  meet. The inclusion of an automated explanation of benefit (EOB) within the check-writing “We were interested in twelve vendors interface is another improvement. At one that were exhibiting,” she says. time, FDS produced and mailed their EOBs and “We didn’t make appointments in checks from two different locations. Payers advance. That way, if the system then had to manually match payments to EOBs, didn’t have the minimal requirements and often called FDS to ask which EOB went we were looking for, we could simply move with which check. Now, the EOB appears on the on.” check stub, eliminating work for the claims department, reducing provider calls and At the conference in Atlanta, Schnure improving  provider  relations. discovered that every vendor’s application had unique features. Some were Future  Improvements stronger in specific modules, but weaker in other  areas. Now that the new system has been implemented, Schnure and her team are getting ready to “A major stumbling block for many of make further improvements and enhancements to the vendors was our paperless claims the  claims  operations. process,” says Schnure. “Some of the vendors were very honest, and said their They are in the process of rolling out system wouldn’t work. Others said they Web-enabled claims reporting. Managers will could develop something for us, but quite be able to submit a claims report through the frankly, we didn’t want a vendor to company’s intranet, which connects all make special accommodations. We wanted a 450  stores. system that contained most of our vision coming off-the-shelf. Otherwise, we knew from In addition, FDS is linking its claims system experience that customizations could give us to its gift card center. If a customer problems  with  future  upgrades.” sustains an injury on the premises, in addition to the medical care those Headquarter  Demos individuals receive, FDS will also be able to automatically generate a gift card to its By the time they returned home, stores. Schnure’s team had whittled down their initial list of vendors from twelve companies “We’re thrilled to have a system to five. They had completed a significant that works well within our paperless claims portion of their vendor research and process,” says Schnure. “As an developed a cursory list of the pros and cons off-the-shelf package, it was not only close for  each  system. to our initial vision, but in some ways it has  exceeded  it.” “We were getting ready to send out RFPs, but, instead, we invited each company Creating  a  Short  List of Qualified Vendors to our Cincinnati headquarters to provide an in-depth product demonstration,” Requests for proposals can total one hundred Schnure says. “Each demo lasted two to pages and the process—from four hours, and in the end, the RIMS development, distribution, review and conference and the in-person demos saved us evaluation—takes up to a year to an enormous amount of time and complete. It is no wonder risk managers dread resources.” the laborious task of selecting a new information technology system. It is a Checking  Twice project that requires large investments of time and resources, even before a penny is After the demonstrations, the list of five spent on the application. There are ways, had been narrowed down to just two companies. however, to efficiently narrow the universe Schnure did not leave any stone unturned. In of vendors to a strategic short list of the reference-checking process, she requested qualified providers. Here are some tips to contacts  from other self-insured companies. abbreviate  the  process: “We did conference calls and checked Select a strong leader who can serve as the very thoroughly on what these clients liked project advocate, helping to drive the and disliked,” she says. “We evaluation  and  section  process. checked on each company’s level of service and support and asked what they Identify the key decision makers that will wanted to see changed. We spent a good hour form a small, effective committee, dedicated or  two  talking  to  each  reference.” to making decisions that are right for all users. The IT department was also intensely involved in the selection process, making sure the Develop a complete list of system needs both application would work with what the company from a business and IT perspective. Start by already had in place. For instance, the having each group clearly articulate system systems manager made sure the prospective specifications and compile these requirements application would work with an Oracle into a centralized document. This may be in database,  InfoMaker  and  Crystal  Reports. the form of an RFP, or it could be just a list  of  needs  and  wants. “The systems manager and I were about a 50-50 team in making the final decision, and Utilize an exhibit venue, like the RIMS were really well complemented to select the conference, to arrange for product demos in system,”  Schnure  says. one location. These initial demos will allow you to quickly eliminate systems that do not “We also were under tremendous pressure meet  your  requirements. to present a sound business case to our vice president of risk management, Tim Schwirtz. IT  Checklist  for  New  Claims  Systems We prepared a proposal with the specific reasons we required a new claims system; the Purchasing a new claims system often involves specific benefits we would obtain; the two critical groups—the business users savings we would experience, and even and the IT department that will support the drill-down details on the administrative head system. Both of these groups will have count it would affect. As a result, we had specific needs and requirements. An IT looked closely and critically at the specific department should consider this checklist of benefit breakdown between the two remaining common  items: competitors.” Will the claims system work with the existing The  Decision  to  Control  their  Destiny platform,  infrastructure  and  database? Schnure realized that the two vendors were Is the application architecture progressive? very different and saw that there was a business  case  for  both  products. Can the claims system interface with other departmental applications, such as HR and One was a task-oriented system that charged accounts  payable? every time the company used the application. “It would eliminate our need to support What types of system-support options are the IT infrastructure,” Schnure says. available? “We would run the application off their server, and it would not utilize our internal Is the vendor a good partner? Do they have a IT resources. However, we also saw this model client-focused culture and service-oriented as a big disadvantage to our specific needs philosophy? 1 A B C D 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112