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8/12/2019 CMU Case Challenge 2012 - Final
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2012 Deloitte Case Challenge at
Carnegie Mellon UniversityCase Presentation Packet
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Agenda
Friday, April 6th
5:00pm 6:30pm Case Introduction Simon Auditorium
6:30pm 7:00am Case Solution Development Break-out Rooms
Saturday, April 7th
7:00am Presentation Due!Send to [email protected],
[email protected],[email protected]
7:45am 8:30am Breakfast Simon/Cooper Auditoriums
8:30am 9:05am Group A Presentations Presentation Rooms9:05am 9:40am Group B Presentations Presentation Rooms
9:40am 10:15am Group C Presentations Presentation Rooms
10:15am 10:50am Group D Presentations Presentation Rooms
10:50am 11:25am Group E Presentations Presentation Rooms
11:25am 12:00pm Judge Consensus Meeting TBD (presentation room 3)
12:00pm 1:00pm Lunch/Finalists Announced Simon Auditorium
12:30pm 2:00pm Finalist Preparation Break-out Rooms
2:00pm 2:20pm Room 1 Finalist Presentation Simon Auditorium2:20pm 2:40pm Room 2 Finalist Presentation Simon Auditorium
2:40pm 3:00pm Room 3 Finalist Presentation Simon Auditorium
3:00pm 3:15pm Judge Deliberation Simon Auditorium
3:15pm 3:45pm Winner Presentation Simon Auditorium
3:45pm 4:30pm Networking Session Simon Auditorium
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]8/12/2019 CMU Case Challenge 2012 - Final
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Team Room Assignments
Team Presentation Room Breakout Room
Team 1 Simon Auditorium Posner Hall 151
Team 2 Cooper Auditorium Posner Hall 152Team 3 MM 103 Baker Hall 237B
Team 4 Simon Auditorium Porter Hall A18A
Team 5 Cooper Auditorium Porter Hall A18B
Team 6 MM 103 Porter Hall A19
Team 7 Simon Auditorium Porter Hall A19A
Team 8 Cooper Auditorium Porter Hall A20
Team 9 MM 103 Porter Hall A21
Team 10 Simon Auditorium Porter Hall A19C
Team 11 Cooper Auditorium Porter Hall A19D
Team 12 MM 103 Porter Hall A20A
Team 13 Simon Auditorium Baker Hall 235A
Team 14 Cooper Auditorium Baker Hall 255A
Team 15 MM 103 Porter Hall 226B
Competition Rules
Participants may use any and all outside resources when developing a solution
Teams may NOT communicate with each other regarding case related details prior to
presenting
Teams must create a final presentation of their solution using Microsoft PowerPoint
Teams must submit Presentation decks by 7:00am, otherwise they will be disqualified
Dress code for Saturday is Business Formal
First round presentations must not exceed 20 minutes in length. Finalists will have 10
minutes
o Two warnings will be given to each team at 5 minutes remaining and 2 minutes
remaining.
o There will be 5-10 minutes of question and answer as a part of each round
Teams will be judged on equally on solution development and overall presentation skills
o Remember, your process and effective communication are more important than the
answer
All members of a team must actively participate during the presentation
All members of a team must be present 15 minutes prior to their scheduled presentation
time.
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Table of Contents
Table of Contents ....................................................................................................................... 1
Introduction ................................................................................................................................ 4Company ................................................................................................................................... 4
Capabilities ............................................................................................................................. 4
Culture.................................................................................................................................... 9
Current Systems Overview ....................................................................................................11
Options ..................................................................................................................................11
Summary of Key Challenges for Ecclestone Plans ................................................................12
Additional Industry Information ..................................................................................................13
Health Care Industry Overview ..............................................................................................13Health Plan Capabilities Spending Forecast ..........................................................................14
Mid-Market Plans ..................................................................................................................15
Challenge ..................................................................................................................................15
Directive ....................................................................................................................................16
Ground Rules ............................................................................................................................17
Supplemental Information .........................................................................................................18
Ecclestone of Montana Mission Statement ............................................................................18
Email Exchange 1 .................................................................................................................19
Email Exchange 2 .................................................................................................................25
Relevant Market Data ............................................................................................................30
Glossary of Terms .....................................................................................................................33
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Introduction
Ecclestone Health of Montana (EoM) is a health insurance plan based in Helena,
Montana. The Ecclestone Association is a federation of 34 different health insurance
organizations. They are all licensees of the same Ecclestone brand and while legally they are
different entities they are tied together by the same brand and very similar corporate cultures
and missions. In the case of Montana, Ecclestone is lagging behind many of the larger
competitors in the market. They are falling flat with their Core Administrative Processing system
(or Core Admin system) and are thus lagging in customer service, claims processing and other
core business areas. With the advent of new industry requirements, Ecclestone of Montana is
positioned in a way where changes are a necessity. Whether the motivation is EoMs own
internal mandates or the upcoming ICD-10 standards, EoM is in need of a revitalization of their
Core Administrative Processing Model to adhere to the new standards and conditions. EoM has
engaged Deloitte to begin assessing the various strategies to best align them with the strategic
objectives and goals of EoM in order to better position them in the marketplace from acapabilities standpoint, while adhering to the new mandates being imposed on them.
Company
With pressure coming from the ICD-10 deadline of October 1, 2013 as well as internal
Ecclestone mandates, enhancement of EoMs Core Admin Processing Model is a necessary
step. With much of their Capital Expenditures budget going towards improvements to adhere to
new standards, not much is left for capabilities improvements.
The Ecclestone Association has mandated that all of its associated plans operate within80 percent parity of their leading companies, that is, for each of eight capabilities the
Association has determined gauging metrics and any Ecclestone company operating below 80
percent of the top-performing company in any category will be audited by the Association and
forced to comply.
Capabilities
National players have acquired leading capabilities due to their significant investments.
Some Ecclestone plans do not have these capabilities.
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Figure 1: Large National Health Plan Capabilities
Overall, EoMs current operating position is behind national competitors. Some of the
capabilities above have been split into two rows in the table below to provide more specificity as
to where EoM is leading and lagging.
Capability Area(s) Functional AreaEoM Relative Position
Against NationalCompetitors and Other
Ecclestone PlansRationale/National Capabilities
Sales Sales Force and BrokerDistribution Channel
Leading
New relationships with potentialcustomers
EoM possess a strong internalsales force and brokerdistribution channel throughoutMontana; national competitorswould require significant time todevelop a competitive networkin the region
EoM has a larger broker programfor regional sales
EoMs internal sales force isdecentralized across theregions allowing for a localpresence among employergroups that has built goodrelationships
G
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Sales Sales, Marketing &UnderwritingOperations
Trailing
Lacking web-based brokerservices, including ability tocheck leads, review status, andobtain reports
Lacking automated leadgeneration and trackingsystems and processes,
including automated renewaltriggers Lacking automated end-to-end
quote to case installationprocess with straight through,no-touch processing
Limited Sales support tools tocompare products (i.e. basicshop and buy)
Lacking automated commissioncalculation functionality
Product
Product
Parity
National health plans bring newproducts to market within 3-6months
EoM has limited High Deductible
integration and does not yetoffer consumer directedhealthcare options (Nationalplans have direct linkagesbetween medical benefits andsavings/reimbursementaccounts)
Most national plans have table-driven systems, externalizedbusiness rules (end-userconfiguration)
System limitations do not allowfor effective marketsegmentation at product-linelevels
Currently cannot supportMember level benefits
Enrollment &Billing
Enrollment & Billing
Lagging
Lacking automated error-freeenrollment and case installationwith straight through, no-touchprocessing
Lacking on-line bill viewing,reconciliation, and payment foremployer groups and individuals
Lacking advanced web-basedenrollment tools
ClaimsProcessing
Claims Processing
Lagging
National health plans arecurrently deploying point of
service capabilities and swipecards. EoM utilizes sophisticated skills-
based routing and workflowmanagement applications forclaims
Montanas core system containssignificant hard coded logic andwould require significantmodifications to scale to largervolumes
Lacking real-time adjudication
Y/R
Y
R
R
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Customer &Provider Service
Customer & ProviderService
Lagging
Lacking automated integratedsales and service processes
National plans deploy a One anddone service model withintelligent call routing or skills-based routing
Customer and provider
segmentation withpersonalized serviceexperience or service tiers
Intelligent scripting (cross-selling,product description)
Targeted health content onspecific conditions or wellnessoptions available on-line and viamailings
Option for on-line member healthchats with health advisors orcoaches
NetworkManagement
Provider Network
Leading
EoM possesses a strong providernetwork in Montana whichwould take time for a national
health plan to develop EoM has leveraged its market
share to develop strongrelationships and allegiancewith its providers. It would bedifficult for national health plansto develop similar relationships
EoM has access to a nationalprovider network throughStoneCard which can competewith the national networkoffered by national health plans
EoM does not have wide-rangenetworks includingnested/tiered networks and
high performing networksNetworkManagement
NetworkAdministration
Lagging
National health plans utilizeprovider data managementsystems to consolidate andmaintain demographic andcontract data
National health plans utilize costand quality data to create highperformance networks andCenters of Excellence (COE)
System and processes do notallow for multiple and industryleading reimbursementmethodologies without
significant manual intervention
InformationTechnology
Ancillary Products
Trailing
National health plans integratepharmacy and medical claimsdata real-time and analyze toidentify future utilization trendsor trigger events; EoM hasimproved access to pharmacydata, but does not integratedental or other products
National health plans offer more
G
R
Y/R
R
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advanced web-basedcapabilities (education, productinformation, healthassessments) for all ancillaryproducts
MedicalManagement
Medical BenefitsManagement
Parity
EoM is lagging behind otherregional plays with niche
markets in Medicalmanagement but is on par withnationals. National plans arepartnering with third partieswhich will rapidly increase theircapabilities, including: Integrated medical
management desktop withintelligent call routing,workflow, scripting, andaccess to clinical protocols
Integrated care managementdata that care managers canaccess on a real-time basis
Self-service options for
member enrollment into careprograms
Real-time interventionsenabled by real-time triggers(predictive modeling)
Two-way web monitoring ofhealth status and behavioralindicators
InformationTechnology
InformationTechnology
Lagging
EoM has made significantenhancements for clientreporting, but process is stillhighly manual and not scalable
Nationals see differentiation ofdata and information vs.knowledge, insight, andforesight to utilize data andinformation
Real-time data warehousingarchitecture
Adverse event monitoring Data mining/OLAP tools to
identify trends and patterns Population stratification using
multiple types of data (lab,medical claims, Rx claims,demographic, case/UM data)
Automated re-stratification on areal-time basis
Figure 2: EoM Current Capabilities
The information in the above table is not news to the Board of Directors at Ecclestone of
Montana. In their meetings, they have discussed these as well as the Ecclestone Association
mandates and have developed the timeline below.
R
Y
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Figure 3: Timeline for implementation mandates
Culture
Ecclestone of Montana has a long history as a successful insurance plan. They are seenas a great place to work in Helena and have consistently maintained a strong financial
position. While the industry has experienced significant change over the last 5 years, EoM has
experienced positive growth, and employees demonstrate a fierce pride and confidence based
on their past success. However, there is an inherent internal resistance to change resulting from
the organizations ability to be successful in a dynamic industry without having to undergo any
significant, transformative change over their entire history.
Critical decisions are typically made at higher levels within the organization and tenure is
emphasized over other criteria when considering employees for promotion. This emphasis on
tenure has created a noticeable entitlement mentality amongst many employees, particularly
those who have been at EoM for a number of years. And, despite transitioning to a new matrixorganization model 5 years ago, many employees still reflect the pre-2007, siloed business
mentality.
The current observations do not support the existence of a culture ready for change.Though a number of key leaders and managers understand the sense of urgency, the broaderemployee population does not demonstrate an internalization of the change imperative.
Additionally, several previous attempts to change were not followed through to completion. Thishas resulted in employees feeling that transformation strategies have become flavor of theweek at EoM and it is becoming increasingly difficult to gain buy-in from the stakeholders.
Some final concerns with the organizational culture revolve around the leadership. One
aspect is that overall; the organization is very non-confrontational, reflecting the leadershipapproach. If someone disagrees with a point made in a meeting, rather than express theirconcerns real-time, they remain silent but then gossip with their coworkers after the meetingabout the quality of the ideas. This behavior contributes to a complete inability for people toalign on opinions. A second concern with the leadership/organizational culture is that teams donot drive to alignment and decisions during their meetings, resulting in uncertainty and lack ofdirection. Additionally, the leadership team has a tendency to agree that transformation isneeded but never gets together on a time frame, resource or priority basis. When competingpriorities emerge, it usually results in significant risk and distraction. Finally, there is a strong
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Current Systems Overview
Drivers
Currently, the existing EoM system lacks capabilities and faces struggles with softwaremalfunctioning and an increasing brittleness, which makes future enhancements more difficult.
With the emergence of ICD-10, EoM has identified that they need to shift spending from thesemandates to new capabilities, for which they do not have the Capital Expenditure budget.
Completed Decisions/Activities
To date, EoM has evaluated various options and taken steps to identify the most
plausible course of action within each option. They have selected a potential third-party
Commercial Off-the-shelf (COTS) vendor - MetaStat - they have explored the opportunity of
operating in outsourced environment as well as visited various other health plans. EoM feels like
they have collected the necessary data to make an informed decision but has asked Deloitte to
assist in providing guidance, given our eminence in the marketplace and our strong relationshipwith them.
Options
Four key options exist for regional Ecclestone plans to bridge the gap in capabilities.
1. RemediateCurrentSystems
Continue to
operate on a
stand-alone basis
without the
support of an
outsourcing
vendor orstrategic partner
2. ImplementPackage
Continue to
operate on a
stand-alone basis
leveraging a
Commercial-Off-
The-Shelf
(COTS) package(MetaStat)
3. FunctionalOutsourcing
Outsource key
areas like
claims,
customer
service, medical
management,
and/or nationalaccounts
4. Affiliation orMerger
Affiliate or convert
and merge with a
mutual or for-profit
health plan
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Remediate Current Systems
Remediation of current systems is the current method of choice at Ecclestone of
Montana. This method is considered the easiest because it is all done in-house on an as-
needed basis. The cost of this option is highly variable based on what mandates come through
and how outdated particular parts of the system are but it has the advantage of a high level of
control throughout the whole process since all changes would be made by the IT department at
EoM. For a complete system remediation, this option could be very costly and time consuming.
Implement Package
The implementation of a COTS package is an option that is almost always considered.
COTS solutions exist for virtually every requirement and can often provide an acutely
customizable solution for particular situations. The cost of these is moderate to high in
comparison with the other options being considered and the research has been done that
establishes MetaStat as a good fit for EoMs requirements. Time to implement is on the order of
months rather than years but the implementation of a COTS package often deteriorates the
pride and sense of accomplishment of the individuals involved with the effort. Additionally, there
are often concerns with companies such as EoM that they would be losing their identity by using
a major, national product.
Functional Outsourcing
Functional outsourcing tends to be the cheapest option available but while maintaining a
low cost it also turns control of the functions outsourced out of the hands of EoM. It also has the
same local identity issue outlined above when implementing a COTS package. On the positive
side, it is a good way to reduce costs and allow EoM to focus attention on other strategies.
Affiliation or Merger
The option of an affiliation or merger with another organization is one that should not be
considered lightly. The advantages and disadvantages are numerous. Firstly, by partnering with
another organization, a company does lose their sense of identity. It tends to break down the
morale of the company and can be a timely process while integrating the two entities. On the
other hand, by partnering one combines the advantages and competencies of both
organizations and leverages the potential monetary added value of both.
Summary of Key Challenges for Ecclestone Plans
National players have invested billions in new capabilities
These investments have left small to medium sized plans behind in terms of capabilities
Mandates and regulatory requirements are forecasted to be 3x current spend in the next 5
to 10 years, challenging independent plans ability to compete with national plans
National players are beginning to see efficiency gains from historical investments
Many Ecclestone plans are well capitalized today, but:
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o Capital positions are jeopardized as gap-closing investments occur
o If a dip in the underwriting cycle occurs, the risk could increase dramatically
Additional Industry Information
Health Care Industry Overview
The health care industry is a unique one in the United States. No other industry functions
like it and there are very few industries in which almost everyone is forced to participate at some
point in their lives.
Figure 5: Health Care Industry Overview
This chart is illustrative only and does not include many of the other players and
stakeholders in the health care sphere, though it does give a good indication of how EoM and
other insurers fit into the market and interact with other players. Some of the other stakeholders
left out of this chart include brokers, vendors, disease management organizations, pharmacies,
pharmaceutical companies, medical device manufacturers and others.
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Health Plan Capabilities Spending Forecast
Ecclestone association mandates and new product pressure will only increase the IT
complexity and spending within the health plan industry.
Figure 6: Upcoming Changes to Mandates and Federal Standards
In addition to the new standards and mandates, large national players continue to invest
billions of dollars towards new capabilities. Selected national health plans have invested $2.8BN
and $1.4BN, in Capital Expenditure for new capabilities from 2003-2007. EoM, a middle-market
player, does not have the necessary CapEx budget to compete with the larger health plans and
is in danger is falling behind if they cannot improve their capabilities while adhering to new
standards and mandates.
Ecclestones
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Mid-Market Plans
Mid-Market plans are a crucial segment of Deloittes Health Plan practice. They have
characteristics that differentiate them from the large, national plans including lower revenue
(typically $1B-$5B) and lower membership (1M 3M members). Additional considerations for
mid-market plans:
They are typically more sensitive to the size and cost of engagements.
These clients may be less experienced in how they work with consultants.
They also may not view consultants as partners or understand cyclical use and long-
term value of relationships.
Boutique consulting firms and Single Shingle consultants abound in this market, acting
as staffing augmentation.
Challenge
Ecclestone of Montana is functioning primarily with technology developed in the late
1980s. The technology is outdated and sub-optimal. Further, excessive manual work is required
in the system. For example, the claims processing functionality involved workers looking at
information from a PDF on one page while manually entering the data on another screen
increasing the likelihood of error and wasting valuable time. The system is also expensive and
difficult to maintain and update and given all of the legislation regarding ICD-10 is going to
require a lot of capital to update.
Base functionality of the current Core Administrative System includes claims
reimbursement, explanation of benefits, pre-population and printing of predetermination forms,data integration and migration for warehousing, and some limited business intelligence
reporting.
As you can imagine, their systems are frequently malfunctioning. In addition, Congress
has mandated that all HIPAA Covered Entities make the switch to ICD-10 coding by October 1,
2013. This would include adopting EDI standards for interfacing with hospitals and the Federal
government.
In addition to the mandated changes above, Ecclestone has outlined some strategic
goals for their future. One of their goals is to shift spending away from mandates and towards
new capabilities. For the last several decades of Ecclestones existence, most of thetransformative changes made to their technology and strategic planning have been mandated
by various state or federal rules. The board of directors of the organization has outlined a desire
to move more towards innovative change rather than reactive change.
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Directive
You have been asked by the Director of Technology at Ecclestone of Montana to put
together a presentation for the organizations leadership on how they might begin to respond to
the previously outlined challenges.
They have asked you to do the following in your presentation:
Identify one (or a combination) of the solution options outlined above to
relieve strain on their current systems.
Develop a plan for implementing a new Core Administrative System with your
chosen strategy. Your team should include details on the technological
implementation and organizational change management strategy.
Identify key stakeholders and an approach for gaining their buy-in.
o Who are the stakeholders?
o What are their concerns?
o What role will they be required to play under your approach?
Identify potential risks to your approach and your proposed risk mitigation
strategies.
In your presentations, you should be sure to include details on the following:
An explanation of the approach you will be using
Transformation strategy best practices
Any assumptions your team has made
Change management and communication how to involve employees and
other stakeholders in a manner that promotes success
Details on training employees on whatever new system you choose to
implement moving forward.
An implementation strategy and timeline for the change.
Finally, your presentation should be in PowerPoint or a similar presentation
format.
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Ground Rules
The first thing to remember is that there are no correct or incorrect solutions. Your
solutions will be considered on their merit and feasibility in the context of the situation that has
been presented. Additionally, the materials contained in this presentation, in addition to the
reference materials provided by the facilitators of the case should provide the information
necessary to develop your solutions. Outside research is not expressly prohibited, but it should
be done only when strictly necessary to developing your solution. In other words, dont waste
your time researching frivolous information.
Teams will be judged on the following criteria:
Soundness of the analysis and related recommendations
Quality of the presentation
Responses to the judges questions
Your allotted time for the presentation is 30 minutes. The expectation is that you will
have 20 minutes to present your recommendation and an additional 5-10 minutes to field any
questions. The 15 teams will be divided into three panels. The top team from each panel will
move on to the finals round. The format of the finals round will not be disclosed until after first
round presentations are over.
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Supplemental Information
Ecclestone of Montana Mission Statement
Ecclestone of Montana strives to
provide health benefit services of
great value to its members across
Montana. We commit to offer a
broad array of quality insurance
plans, conduct business
responsibly to ensure the plans
long-term viability, and foster
health systems integration and
health care cost containment to
benefit the people of Montana.
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Email Exchange 1
From:Romana, ElizabethSent:Friday, March 16, 2012 8:44 AM
To:Taylor, Jim
Subject:RE: New Product Opportunity
Jim:
No worries about the quick succession of email. 200 emails a day is nothing! Let me address your pointsin order:
1. Idaho does have a strong sense of identity, which may make it difficult to partner, even with
another Ecclestone entity. From a tech perspective, they would love to, but Gabriele called melast night and informed me that after running it by her CEO, she got a little bit of pushback on
that front. Something she feels that with the right training and communications, they can quell.Being pretty new here, my knowledge of our expertise in those areas is lacking a bit. Maybe youcan speak to that a little more?
2. In regards to the functional outsourcing, it definitely has its pros and cons. You are spot on withthe cost v. quality factor, but Ive also heard some very positive reviews, especially from a firmcalled Technoglobe. They were just nominated for some big award in InformationWeek
magazine. Lets not rule it out right away, thats for sure. If cost is what they are going for, this isit
Dinner this weekend with the kids? Jamie has been dying to check out the new Chuck-E-Cheese and Im
sure she would love to play with Larry (did he just have his 6thbirthday?). Remind me to bring his card,its on my island at home.
Liz
From:Taylor, JimSent:Thursday, March 15, 2012 7:31 PMTo:Romana, ElizabethSubject:RE: New Product Opportunity
Liz
Sorry that I didnt give you much time to respond, but another option we might consider: functionaloutsourcing. There have been some results around the field that are very encouraging, but my ownresearch into this does not have me jumping for joy. The costs are very low, respective to our otheroptions, but so is the quality... Give it some thought. My initial feelings are that if the board is mostconcerned about money, then this is a good option. But I know how important quality is, especially atthis point in the game as we try to maintain our customers and build our capabilities. Not to mention theCMMI Level 3 milestone we are trying to reach this year!!
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Here is what I was thinking: we could take a handful of our core admin processes (billing, customerservice, etc) and outsource those functions and others, and take the savings to build up ourinfrastructure, which is currently lagging quite a bit. It will take a few years to get back to where we needto be if we want to be competitive from a tech standpoint, but maybe a good step in the process to get
us rolling, while running some of our functions in-house.
Jim
From:Taylor, JimSent:Wednesday, March 14, 2012 1:31 PMTo:Romana, ElizabethSubject:RE: New Product Opportunity
Liz
I wanted to touch base with you regarding my recent conversations with Chris and Brian.
Weve been looking a few different ideas and the thoughts around an acquisition dont seemvery positive. One reason for this is the companys strong sense of pride. Im honestly not
sure how a partnership would play into that. While we are still maintaining our identity asEcclestone, we are bringing new players into the team. I know you have experience with
these folks in Idaho. Can you, maybe, share your thoughts on their culture? Not really myforte, but I can definitely relay back to Chris about this.
Jim
From:Romana, ElizabethSent:Tuesday, March 13, 2012 3:21 PMTo:Taylor, Jim
Subject:RE: New Product Opportunity
Jim,
More than happy to help. If youd like me to contribute to any discussions you may have relatedto MetaStat, Id be happy to advocate. By my reckoning, it truly is the best option we haveavailable. Please just reach out and Ill make time.
Thanks,
LR
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From:Taylor, JimSent:Tuesday, March 13, 2012 3:31 PMTo:Romana, ElizabethSubject:RE: New Product Opportunity
Liz
Great minds think alike! It looks like Gabrieles concerns are directly on point with my own.Let me take these ideas back to Chris and see what he and Brian have to say on the matter.
I am actually very excited about the idea of a partnership. Something Ecclestone has been
pushing over the past few years is Best Practices. This would be a great opportunity toshare knowledge. We have had some success in the past with training efforts for newimplementations, and maybe that is an area that we can offer our expertise to Idaho to
sweeten the pot. Thanks again for looking more into this and be sure to thank Gabriele for
me. If the board decides to go the route of a partnership, we can have that discussion withGabriele.
JT
From:Romana, ElizabethSent:Tuesday, March 13, 2012 3:21 PMTo:Taylor, Jim
Subject:RE: New Product Opportunity
Jim,
See Gabrieles email below. Those are all questions well have to discuss with ID in more detailbut he seems open to the idea of a partnership. Upon further consideration I stronglyrecommend that we go with the COTS solution. It has all of the functionality that we need andwe will not be beholden to or dependent on anyone else if things were to go south as Iunderstand they have in the past. Just my two cents
-LR
From:Rossi, GabrieleSent:Monday, March 12, 2012 9:19 PMTo:Romana, Elizabeth
Subject:Partnership
Liz,
Good to hear from you again. Were missing you here.
Its an interesting idea. We both certainly have the same problem right now regarding the systemand it makes sense for us to work together rather than re-inventing the wheel. Im justconcerned about (and I apologize if Im being blunt about this) whats in it for Idaho. Perhaps we
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can come to an agreement on who will host and support the system. Lets have a discussion with
Jim sometime in the future and iron out something.
Gabriele
From:Taylor, JimSent:Monday, March 12, 2012 9:19 PMTo:Romana, ElizabethSubject:RE: New Product Opportunity
Liz
Im liking this option but am concerned with how we will operate in a partnership. From a
system perspective, who will own and maintain the system? Where will the system reside?What can we offer Idaho that they will be willing to shell out some cash? It sounds like awin-win for us, Im just not sure about their stance. It sounds like you have a pretty
positive relationship with Mr. Rossi. Can you please reach out and get some more details? Iwould like to set a meeting with the three of us to discuss this further once we understandareas where it can help them.
Option 1 still seems feasible. We would have to do it low cost, though. It would take a littleto get it set up, initially, but over the long haul, would reduce costs immensely and allow usto focus our budget on capabilities, which is where we need to improve most.
Lets plan to have some answers by the end of this week and I will take these options toChris, if we still think they can work for us.
Jim
From:Romana, ElizabethSent:Monday, March 12, 2012 9:11 PMTo:Taylor, JimSubject:Re: New Product Opportunity
Jim,
I hadn't thought of option 2 but in my time at Ecclestone-ID we came across more revenue thanexpected and they were in need of a similar revamp. Gabriele Rossi would be the IT director in
Idaho. He'll have a better idea of what their capabilities are.
Liz
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From:Taylor, JimSent:Monday, March 12, 2012 9:11 PMTo:Romana, ElizabethSubject:Re: New Product Opportunity
LR
Still being in the planning stages, we have not explored all options yet. I am interested indiscussing outsourcing a little more. It actually sounds like you may be talking about twodifferent things here:
1. Outsourcing pieces of our entire Core Admin Processing Model2. Partnering with another Ecclestone plan who may have more available capital
Before bringing these to Chris, lets hash out some details a little bit. BTW, Chris is receptiveand wants to collect some ideas to bring to the board for next months meeting. Set upsome time on my calendar and we can discuss in person.
Thanks,
Jim Taylor
From:Romana, Elizabeth
Sent:Monday, March 12, 2012 8:46 PMTo:Taylor, JimSubject:Re: New Product Opportunity
Sounds good Jim.
Let me know what you hear from Chris. There are cheaper solutions out there but none of themmeet our requirements. If we don't have the financial capacity for MetaStat, we'd be better offwith another solution (have we as an organization discussed outsourcing?). Perhaps it would beworth reaching out to another Ecclestone company for information on their solutions.
Best,
Liz Romana
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From:Taylor, JimSent:Monday, March 12, 2012 9:11 PMTo:Romana, ElizabethSubject:Re: New Product Opportunity
Liz:
Thanks for that information regarding MetaStat. You continue to impress me in your new
role as Director of Product Development. Im so happy to have you working for me and Iknow that whatever choice we go with, you will have explored every opportunity for us. The
option of picking up a COTS vendor for some of our functionality is definitely a step in theright direction. They give us the industry experience we are looking for and the stability to
build a future around. I am a little concerned around the pricing, as we dont have theavailable CapEx budget to cover the numbers you quoted, but I am trying to work Chris
over a bit to get a little more funding.
Lets chat again next week once I have an update from Chris on the funding. Great work!
Jim
IT Director
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Email Exchange 2
From:Jameson, Chris
Sent:Thursday, March 15, 2012 6:23 PM
To:Taylor, Jim
Subject:Re: We need this
Jim:
Some interesting thoughts. I am still interested in a partnership, but I may be more inclined to have
those conversions if we had a better picture on what exactly wed look like after the fact. Im wary of
partnerships because of the dependencies it builds from a management perspective. We would need to
clearly define an organizational structure around who owns what, who pays for what, et al. I trust that
you can handle the IT side of things, but Im sure you can understand my concerns as well. And Ive
already voiced my opinion on the COTS vendor.
A third option, perhaps, could be outsourcing. I attended a conference recently where some of the
biggest industry players made enormous strides in capabilities improvements because of the capital saved
from outsourcing certain functional components. Talk to Liz about that and get back to me. Another
board meeting on Monday and Id like to be prepared to speak about each of these in detail.
Chris
From:Taylor, Jim
Sent:Thursday, March 15, 2012 2:10 PM
To:Jameson, Chris
Subject:Re: We need this
Chris
Taking Brian off the thread. Liz and I are still conversing about the cost and resources needed for a COTS
vendor as well as a partnership. It looks like we may have a good candidate with a partnership in
Ecclestone of Idaho, who Liz has personal experience with. While she is still a fan of the COTS vendor, I
personally feel that a partnership could give us the latitude to expand our infrastructure in ways we
havent seen in decades (since this legacy system was first put in). We have the ability to offer them
our services in the training department, something Ive worked very closely with Jermayn Williams on. He
has provided some top notch training for some of our largest implementation. And given our recent
award as Best-in-Breed IT Training for mid-market companies, Id say that is something that Idaho
will be more than happy to accept. My feeling is still that they can help out with the capital and we could
provide the training across both companies. That pretty well evens out.
Thoughts?
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Jim
From:Jameson, Chris
Sent:Monday, March 12, 2012 8:40 PM
To:Taylor, Jim; Wooster, Brian
Subject:Re: We need this
Jim and Brian,
Its good to know we have some ideas percolating on this front already. Its obvious to me now
that this is a change that more than just the IT folks have been thinking about so I think we can
commit to making a transformative change of some kind. Well have to discuss the options more
but here are just some initial thoughts.
As far as an M&A situation is concerned, Im hesitant. While it is true that we are in a bit of a
pickle in some aspects, Ecclestone of Montana is not really in a place where it needs to bediscussing merger yet in my opinion; although maybe the board thinks differently. I dont need to
tell you that an M&A situation would be taxing for the entire company and have drastic
ramifications through all verticals of our business not just Technology. Perhaps its an option
we should consider, but not simply to affect IT transformation it would have to fit into our
strategic objectives of the whole company.
As you know, Ecclestone has a strong sense of pride. Fielding such a thought as an acquisition
would, quite simply, crush the morale of our team. We know they are hesitant to change, given
our recent past, and something of that magnitude would derail all of our efforts to maintain pride
in our name.
With that in mind, COTS concerns me because of the cost, and our failed attempts previously.
Im not exactly brimming with confidence after the events of a few years back.
Partnership is a possibility, but we would need to discern a partner and really make sure that the
relationship is symbiotic, not just one sided. Perhaps another Ecclestone plan would be a better
idea than a larger industry player.
Lets talk over lunch when I get back from Brazil next week. I look forward to discussing.
Chris Jameson
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From:Taylor, Jim
Sent:Tuesday, March 13, 2012 4:10 PM
To:Wooster, Brian; Jameson, Chris
Subject:RE: We need this
Brian
Thanks for your thoughts. To answer your question, we will have to have those
conversations with our selected COTS vendor as well as our potential partner to gauge
exactly how this would be accomplished from an IT perspective. By choosing a COTS
vendor, we might be able to reduce the assistance needed from a consulting firm, which
might be good given our past experience as you mentioned. The joint venture would likely
be the most effective from a cost perspective, but would require more outside resources and
would take longer to iron out the details and get implemented.
Thanks again for your thoughts. Chris, do you think we can set up lunch late this week to
talk about these options? I will gather more details on potential implementation plans and
costs to give you a better picture.
Jim
From:Wooster, Brian
Sent:Tuesday, March 13, 2012 4:03 PM
To:Taylor, Jim; Jameson, Chris
Subject:RE: We need this
Chris and Jim,
We have strived for years now to grow both our business and culture within. I cant stress
enough how a merger or acquisition would devalue our own stake in the market, demoralize
our employees, and cause the loss of confidence our investors have given to us in recent
years. This might sound dramatic, but the plan for the company has been internal, organic
growth with a focus on our employees and the quality of our services. Giving up those
decisions to another company will not align with this plan.
That being said, obviously we face a serious issue in our outdated administrative system.
While I would love to push to make the best product possible I also urge to look at our
modest account available for IT expenditures. Maintenance costs of the current system have
put us back considerably and we need a solution quick and within our realm. Considering
the economy, the increasingly strict standards and lower margins across the board, we
simply cannot stretch ourselves thin with this project right now without facing some
financial repercussions. That goes for both our cash on hand and resources. So while a
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merger or acquisition might go against the plan, a little help in a joint venture backed with
considerable resources and expertise might be our best option. If we can get expertise for
cheap this way it would go a long way, I know we all still have a bitter taste from the failed
implementation of our billing system a few years back using a COTS product with
inexperienced consultants.
Jim, of course you know your department, what would it take to get this done in house
versus COTS? Could we implement either ourselves or would we need to pay for
professional services? Need a bit more information to judge this completely.
-Brian, Director or Business Development
From:Taylor, Jim
Sent:Tuesday, March 13, 2012 2:49 PM
To:Jameson, Chris
Cc:Wooster, Brian
Subject:RE: We need this
Chris
I was speaking to Liz today, and she has identified an excellent COTS product that we may
be able to utilize, MetaStat. They have an outstanding track record throughout the industry
and would greatly enhance our current functionality. I understand the obligations we have
in terms of adhering to our budget, but this is an excellent opportunity to invest in our
future.
Another option I have been considering, although havent given it much thought, is to talk
to a larger, national plan. They can provide the capital to make those infrastructure changes
that we need to make, or even provide the services themselves. Being so large, they have
already established many of the areas we want to develop. Could we outsource certain
modules over to them for a small fee? That way we can capitalize on their capabilities
without having to implement new infrastructure to take on those future changes. Maybe we
bring in Brian, who I believe you just promoted to Director of Business Development and
has handled these types of M&A situations in the past.
Brian let us know your thoughts and if there is any way we can leverage a larger plan for
this process
Jim
From:Jameson, Chris
Sent:Monday, March 12, 2012 8:40 PM
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To:Taylor, Jim
Subject:Re: We need this
Hi Jim,
You've come to me about this before so it's clear you're serious about making this change. We
don't have the capacity for an in-house redesign so what are we talking about here? Give me
some options to think about and start to think about presenting to the board at next month's
meeting.
Chris Jameson
CEO, Ecclestone Health of Montana.
From:Taylor, Jim
Sent:Monday, March 12, 2012 8:40 PM
To:Jameson, Chris
Subject:Re: We need this
Chris
As CEO, I know you understand the importance of staying competitive in the marketplace. I
am concerned that we are putting too many of our resources into mandates and not enoughinto improving our own capabilities. If we want to keep competing as a middle market plan,
we need to do this. It may cost a little more money for us up front, but this is a necessity if
we are to survive this round of mandatory regulation updates.
We have been remediating the existing system for some time now, and it does not have
flexibility to do what we need to do in terms of capabilities. I know its easier to just update
what we have, but I believe it is time to invest in our future, rather than live in the past.
Please share your thoughts,
Jim
IT Director
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Relevant Market Data
Managed Market Survey National Profile
United States (January 2010)
National Population 312,643,223Commercial Enrollment 162,707,206
PPO Commercial (Fully Insured) 40,300,203HMO Commerical (Fully Insured) 25,200,300Point of Service (POS) (Fully Insured) 9,353,100Employer Sponsered/Self Insured/ASO 87,853,603
Medicaid Beneficiaries(1) 56,233,308
MCO Managed Medicaid 30,230,004State Medicaid (Fee for Service / PCCM) 26,003,304Medicare Eligibles(2) 46,990,338
Fee for Service (Parts A/B) 34,988,304Medicare Advantage (MA-PDP) 12,002,034Dual Eligible Population 6,203,402Estimated Total With Coverage(3) 259,727,450Uninsured 52,915,773Table 1: National Plan Data
(1) Total Medicaid Medical Beneficiaries including Dual Eligibles(2) Total Medicare Beneficiaries including Dual Eligibles(3) Calculated: Commercial + Medicare + Medicaid - Dual Eligibles
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Figure 1: Nation Population Distribution for Medical Coverage
Figure 2: Enrolled Medical Lives Breakdown by Company
Company A
Company B
Company C
Company D
Company E
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Company Name OverallLives
Total FullyInsured
TotalFullyInsuredMarketShare
CommercialFully Insured
CommercialFully InsuredMarket Share
CommercialSelf Insured
IndemnityProducts
Company A 24,677,216 12,552,548 12.2% 7,532,515 12.2% 11,634,158 933,243
Company B 22,353,235 11,555,342 10.1% 10,111,329 13.3% 10,123,553 2,340,5521
Company C 15,324,023 5,220,093 4.8% 4,883,204 6.5% 9,234,993 900,223
Company D 11,540,033 3,882,340 3.3% 3,822,203 5.2% 7,999,234 688,234Company E 10,353,203 2,000,324 1.6% 1,834,234 2.5% 9,232,111 243,234
Company F 8,328,952 8,223,059 7.2% 7,232,212 9.7% 102,123 1,002
Ecclestone ofMontana
601,220 220,250 0.2% 220,250 0.3% 332,304 134
Ecclestone of Idaho 220,603 120,025 0.1% 123,023 0.2% 0 102,203
Table 2: Detailed Coverage By Company
Note: Names of some companies have been removed for propriety purposes. Companies A-F are considered large, national plans.
System/Solution Expenditures (OpEx) -Post Implementation
Estimated CapitalInvestment
Estimated ExternalOperationalExpenditures
EstimatedImplementationTimeframe
Current System
(baseline)
$30,000,000 - - -
Remediation $30,000,000 $2,000,000 $0 3-6 months
COTS Vendor $27,500,000 $10,000,000 $0 12-18 months
FunctionalOutsourcing
$20,000,000 $5,000,000 $5,000,000 8-12 months
Acquisition $0 $0 $0 18-24 months
Table 3: Annual Financial Metrics (estimated)
Note: Capital Investment for remediating the existing system will occur annually.
2010 2011 2012 2013 2014
Operating Cost $30,000,000 $32,000,000 $34,000,000 $36,000,000 $38,000,000
Total OrganizationalCapability Investment
$17,000,000 $17,000,000 $17,000,000 $17,000,000 $17,000,000
Table 4: Current System Projected Expenses
Note: The above table indicates the projected increase in operating costs if the current system is maintained.
Transaction Operating Cost Covered Lives Transaction Value
Company G $45,000,000 1000000 $144,385,026.74
Compan H $52,000,000 1300000 $131,092,436.97
Company I $24,000,000 415000 $68,311,195.45
Company J $33,000,000 600000 $78,696,343.40
Table 5: Health Plan valuations based on the acquisition of the listed companies
Note: Names of companies have been removed for propriety purposes.
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Glossary of Terms
CMS - The Centers for Medicare & Medicaid Services. A federal agency responsible for
administering the Medicare program and partnering with state governments to administer
Medicaid and other state sponsored programs.
COTS Commercial off-the-shelf. Any product sold as a non-developmental item, which
usually requires some level of customization.
EDI Electronic Data Interface
EoM Ecclestone of Montana
HHS US Department of Health and Human Services. It is the department responsible for
protecting the health of Americans by providing the essential human services.
HIPAA - The Health Insurance Portability and Accountability Act of 1996. The two main facetsare protection of health insurance coverage for workers and their families, as well as the
establishment of national standards for electronic health care transactions, particularly related to
securing medical records.
ICD-10- The International Statistical Classification of Diseases and Related Health Problems,
10th Revision (known as "ICD-10"). A coding standard designed to bring standardization across
the industry, and is maintained by the World Health Organization (WHO)..
Provider One who delivers health services (i.e. a doctor).