Managing a merger is like pulling off a Band-Aid - it hurts less when it's done quickly, suggests Ron Ponder, executive vice president and CIO of Indianapolis-based WellPoint. And that approach has played itself out during the merger of WellPoint Health Networks and Anthem, a deal that was completed in November 2004, resulting in the largest publicly traded commercial health benefits company in the United States.
Ponder credits quick action on the part of executive management with minimizing the uncertainty during the merger and keeping his IT staff from feeling a loss of control. "When we announced the merger, we also announced the organizational leadership," explains Ponder. "Right out of the gate, people knew who they were working for and what role they would play in the organization. I won't say that there is no uncertainty today, but most of the shoes have fallen, and we make sure our employees know that."
Ongoing communications in the form of town hall meetings, videoconferencing, and voice mail and e-mail are critical to keeping staff engaged and focused on the future, believes Ponder. "We're always moving around and talking with the employees - the employees understand the long-term plan," he says. "We make things as stable as we can and keep people in the loop with constant communications."
With the people issues mainly under control, Ponder quickly turned his attention to consolidating "a reasonable number of claims engines," he relates. "Our strategy is to consolidate those engines to as few as possible, as quickly as possible, so we don't have to deal with the cost and the amount of resources it takes to maintain and nurture a number of claims engines," Ponder explains.
Consolidating With Layers
During the consolidation, Ponder is layering a robust enterprise application integration (EAI) layer from IBM (Armonk, N.Y.) over top of the remaining claims systems. "We're rapidly reducing the footprint of the legacy systems underneath that integration layer, but we're using the integration layer to allow things to operate very cleanly while we do that consolidation," he explains.
This isn't the first time Ponder has tackled EAI. When he joined WellPoint in 2002, he found a highly decentralized company and IT infrastructure. Each region had different systems and different processes, Ponder recalls. To achieve efficiencies and economies of scale, Ponder says he centralized whatever systems he could. He then used EAI software and services to enable WellPoint to consolidate the back-end systems yet customize systems as needed.
Not only has the EAI strategy enabled WellPoint to reduce operating costs, it enables the company to integrate acquisitions quickly, according to Ponder. In addition to the Anthem merger, WellPoint has acquired Blue Cross Blue Shield providers in Georgia, Missouri and Wisconsin, as well as several HMOs. And, at press time, WellPoint announced that it had agreed to buy New York-based WellChoice.
But integration hasn't been the only major initiative on Ponder's agenda. With much of the talk in CIO circles these days about being fiscally responsible to the business, it's surprising to hear Ponder say that one of WellPoint's largest and most high-profile technology investments has no ROI.
In 2004, WellPoint gave out hardware and software valued at more than $40 million to approximately 19,000 physicians in its network. Called the Physicians' Quality Technology Initiative, physicians could select either a Prescription Improvement Package that included a handheld electronic prescribing unit, a wireless access point and a one-year subscription to an e-prescribing service; or a Paperwork Reduction Package that included a computer, printer and Internet connection enabling them to submit electronic claims and view eligibility, claims status and medical policy requirements online.
According to Ponder, WellPoint's objective was "to jump-start a solution to our nation's health problems by providing physician connectivity and moving physicians a little higher up the technology learning curve." Eighty-six percent of the physicians who chose to participate in the initiative selected the Prescription Improvement Package and, as of July 2005, physicians in the program have written nearly 90,000 electronic prescriptions. By reducing pharmacy-related telephone calls and faxes, participating physicians' offices have saved as much as 75 percent of their administrative costs, Ponder notes.
Because the e-prescribing system is open, physicians can connect to any insurance carrier, including WellPoint's competitors. But that doesn't worry Ponder. "This project has no ROI - we didn't do it to save money," he stresses. "We just need more companies and more physicians to do this."
But a project without a clear ROI, such as the Physician's Quality Technology Initiative, is the exception. Ponder stresses that WellPoint has a strong IT governance process. In fact, Ponder formed an IT governance committee shortly after he took over the CIO job. It consists of Ponder, his staff, business unit presidents and department executives. "We have a monthly governance meeting where we discuss our projects and how we are going to invest our money," he relates. "We don't do technology that doesn't have business value - in today's world, you don't have the money to do that."
But selecting the right projects is only the first step for Ponder. "The challenge is being able to integrate the company, systems and processes successfully, while at the same time maintaining the stability and integrity of the daily operations and continuing to put in place and invest in systems for the future," he says. "You have to do all three of those things at the same time."
To accomplish this, Ponder believes a CIO needs to understand both business and technology. He also believes in surrounding himself with good people. "You have to be able to recruit and retain people who are much better than you are. You have to be a good communicator. You have to remember that you serve the business."
Ron J. Ponder
EVP, CIO, WellPoint (Indianapolis; $21 billion in revenue).
Size of IT Staff: Approximately 3,000.
Work History: Prior to joining WellPoint in 2002, Ponder worked in the telecommunications industry, holding executive-level positions at Cap Gemini, AT&T and Sprint. He also spent 17 years in senior management roles with Federal Express.
Education: B.B.A. from the University of Southern Arkansas; M.B.A. from Louisiana Polytechnic University; and a Doctorate in Business Administration from Mississippi State University.
IT Philosophy: "The challenge is being able to integrate the company, systems and processes successfully, while at the same time maintaining the stability and integrity of the daily operations and continuing to put in place and invest in systems for the future," says Ponder, adding that "You have to remember that you serve the business."
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