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Supporting an Empire

On the Record with Kenny Klepper, SVP, Systems, Technology & Infrastructure, Empire BCBS.

Health insurance companies are facing many challenges, including rising medical costs and complying with HIPAA regulations. At Empire Blue Cross Blue Shield (New York, $2.2 billion in assets), IT is being used to reduce operational and healthcare costs and to increase customer service. But, according to Kenny Klepper, Empire's senior vice president, systems, technology and infrastructure, technology is not an end in itself and all projects must meet rigorous ROI standards.

I&T: What are some of Empire Blue Cross Blue Shield's most pressing business challenges, and how does information technology support those challenges?

Kenny Klepper: There are a variety of business challenges that the healthcare industry is confronted with today. One is the continuing evolution towards more consumer-driven healthcare, meaning there is dramatically improved information consumers have to support their decision making. Consumers also have a higher need for customization, and this need creates its own unique IT challenges.

There are also increased regulations being passed, such as HIPAA, that require a higher percentage of IT resources be devoted to regulatory requirements.

I&T: Many experts are saying there is a crisis in the healthcare industry. In what ways is Empire BCBS using IT to improve its processes? Is information technology reducing costs for you and your customers?

Klepper: Empire is leveraging technology to help reduce the cost of healthcare. Specifically, we have been able to show 10 percent productivity increases year over year. Some of that is through increased auto-adjudication rates for claims payment, which takes less labor and improves consistency and accuracy. Also, we have done outsourcing that, combined with offshore resources, has reduced our fixed operating expenses for supporting existing IT infrastructure. Lastly, we continue to evaluate and implement new technology where there is a good return on investment that creates value for our business and consumers.

I&T: Many health insurance companies are hoping to drive insureds to self-service over the Internet. What is the success of Empire's site? Is the number of users on the site as high as anticipated? Can you estimate the cost savings that the site is producing?

Klepper: We have delivered fairly extensive self-service to our user groups and have had good responses. It takes time for people to transition to the use of the Web, and to get comfortable with using the Web for their healthcare needs. We deliver substantial employer services, and adoption and use has been very high in that group.

On the broker services Web site, we continue to see high utilization and a continued increase in the amount of business brokers who are enrolling via our Web services. Brokers benefit from improved productivity and can spend more of their time on the phone in the process of selling and gathering information, and less on the paper-intensive administrative process. We have enhanced the broker site with a click-to-talk feature, so even if they are on the Internet they can click a button and we will have an agent to talk with them on the phone.

Member services utilization continues to grow, too. We're pleased with the adoption rates we have. We have a robust set of services, from online adjudication of claims to benefit information for an extensive set of information for our physicians. The biggest issue for the physicians, which is not a surprise, is that all payors are facing difficulty integrating Web services to the physician desktop—their practice management system—which makes it more complicated for front-end office staff to maximize the potential benefits of this useful technology.

This is a space all payors, Empire specifically, continue to work on so that ultimately it will be seamless with practice management systems, so there's no double keying, and it's a good user experience.

I&T: How do you measure the success of information technology projects? How do you make sure that IT projects show a strong ROI? Can you provide examples of recent projects that have shown a good return on investment?

Klepper: There are two keys to success here. Rule number one in IT is: 'Production is top priority.' Things in production are priority (of services) over everything. We do extensive measurement of mean time between failure (MTBF). We have been able to show between 15 to 35 percent improvements in mean time between failure year over year over the past four years. So average improvement of mean time between failure means we continue to reduce the impact of production on staff and continue to minimize the effect of information technology outages on external customers. We measure MTBF on every sub-system, and meet three days a week and go over system events and outages we've had. The emphasis is heavy not just on problem solving, but on prevention. The last question everyone has to answer after a system event is, "What have you done to prevent this from occurring in the future?" It's led to a proliferation of checklists and documents we use to minimize not only human error, but also errors in design—so we're extremely proud of that.

Rule number two is that, from a return-on-investment standpoint, the key to being able to understand ROI for capital projects is to be able to forecast cost and savings out more than one year. For large capital information technology projects, if you're on a 12-month budget cycle, by the time you're really yielding savings, you're on an out year.

So we forecast on a 36-month basis, and that allows us to book savings that are an "IOU," if you will, associated with investments made in the current budget cycle. That's made a nice tie-out in accountability on financial return to projects that goes directly into everyone's budget.

I&T: The HIPAA (Health Insurance Portability and Accountability Act) deadline is rapidly approaching. In order to comply with HIPAA, has Empire had to install or develop newer technologies? Is HIPAA compliance more of a process change, or a technology change—or a little bit of both?

Klepper: HIPAA compliance is definitely both. We've found that the legacy systems did have certain fields that are now HIPAA requirements. As a result, there have been required software enhancements, enhancements with external customers and in the kind of information we exchange with them. It's also required additional procedures, scrutiny and reviews around security policies and procedures for privacy and privacy compliance. We now have a corporate privacy officer to provide a single point of accountability and oversight of all privacy elements, which is a major piece of HIPAA.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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