Staying Ahead of the Pack

In 1996 regional health insurer Vytra Health Plans ($316 million in revenues) hired Russ Esposito away from his job as CIO of the State University of New York at Stonybrook to transform the Melville, N.Y.-based carrier's IT organization. Esposito's Internet savvy helped the carrier to an early entree into the wired world. One of the first insurers to provide transactions on a Web site-in 1998-Vytra continues to focus on cutting-edge technology to serve its 200,000-and-growing membership.

---

I&T: Vytra's avowed vision is to understand customer needs and "deliver adaptive solutions that exceed expectations." How is technology supporting that aim at Vytra today?

Esposito: We've experienced tremendous growth with ASO (Administrative Services Only plans) business, where the party is self-insured and we essentially provide claims processing and administration of the plan. For this environment you need to have systems that are very flexible to support the great variety of demands of this self-insured customer base. It's been a strategic initiative for us, and it's something we've been able to keep pace with because of the technology we have.

I&T: Consumer-directed healthcare is a market approach that also requires flexibility and intense customer focus. Does Vytra intend to capitalize on that trend?

Esposito: We think consumer-directed healthcare has a market, and we're examining it very carefully with a view toward gearing up our systems. That will probably require a combination of internal development and vendor software purchases. I don't think anyone knows how deeply it will take root in the industry. But we do see some significant success stories, in particular from some smaller start-up companies-such as Lumenos (Alexandria, Va.) and Definity (St. Louis Park, Minn.)-that have addressed flexible spending accounts or self-directed accounts. So it's something that makes sense to add to our portfolio because Vytra has the ability to quickly change its systems-which we've proven in our ASO business. We believe we'll have the ability to quickly get the technology in place to accommodate the self-directed plans. We also think that our strength in document and workflow management will give us the ability to accommodate whatever the challenges are going to be in this new market segment.

I&T: What are you doing to make your document management capabilities state-of-the-art?

Esposito: As part of our move toward becoming a paperless organization, we're in the process of replacing our existing (SunGard-owned) Macess document management system, and we are implementing the next-generation Softheon (Hauppauge, N.Y.) offering. This will take us to a new level. Softheon is an XML-based, open-architecture document management solution through which we can tie our capability that can be integrated to any system in the enterprise. Macess-a good system that may fit some organizations' needs very well-provided some templates and workflow criteria we could change, but we really had to work within the application.

I&T: You're an advocate of Six Sigma process improvement. How have you driven its implementation at Vytra and what kind of success have you enjoyed?

Esposito: We calculate that since we began implementing Six Sigma in 1999, we've saved at least $12 million throughout the Vytra Health Plans organization. Also, owing to Six Sigma in combination with our systems, we pay 95 percent of our claims within 15 days. One of the key features of Six Sigma is that it gives you a common set of tools and a common vocabulary throughout the organization. This is different from having a handful of experts in the corner who drop a report on you and say, "This is how you should change." We've taken Six Sigma to another level with a program we call Axia. We hired a company called Communico Ltd. (Westport, Conn.) to help our call center act consistently and professionally, and we've found that's had a tremendous impact on customer service. We combined Six Sigma with Communico's program, called MAGIC (Make a Great Impression on the Customer), and together they form Axia, which is focused on making us a data-driven, learning organization, both internally and in a customer-facing way.

I&T: How do you balance cost management with investment targeted at competitive goals?

Esposito: I think the two things are related. One of the big challenges to stay competitive is to manage your costs. The way we approach that challenge is to very carefully focus on our strategic initiatives and invest in the technologies that will support them. We're a midsized company, but I think this is a good strategy for any company. Even if you have very deep pockets and don't need to exercise as much care with your budget, you get caught in the trap of distractions.

I&T: How much of a challenge was it for Vytra to prepare for HIPAA compliance?

Esposito: The transaction piece of HIPAA-as in the case of Y2K-wasn't all that costly for us, owing to the inherent flexibility of our systems. Our database gives us the ability to have variable fields, and we can change a record length without impacting other parts of the system. We have a policy management system from CSC (Austin, Texas) that we've heavily customized over the last decade. The product has an IBM (Armonk, N.Y.) quasi-relational UniVerse database, which gives you the ability to change your database without impacting your legacy applications. Not that getting ready for HIPAA hasn't been a challenge, but it certainly hasn't been a multi-million dollar, all-time-consuming project. I also joined the Gartner (Stamford, Conn.) best practices group about four years ago, so we had a very early awareness of what we had to do.

I&T: How does Vytra compete with other companies in attracting and retaining quality technology professionals?

Esposito: We've had a lot of success building a talented team. Through leveraging connections we have with technology companies and area universities, we have been able to cherry-pick some talented people. The way we compete is we offer people the ability to learn new technology, we offer challenges, enough room to be creative, and we have competitive salaries and benefit packages.

I&T: What wireless technologies do you have in place or are considering deploying at Vytra?

Esposito: For our executives we've implemented (Research in Motion, Waterloo, Ontario) Blackberry models with built-in e-mail and telephone. We also just implemented the Verizon (New York) wireless card for laptops. The card enables an executive to have full Internet connectivity at a very reasonable speed, whether they are in an airport, hotel, taxi cab, or whatever, for less than $100 a month. They can go virtually anywhere in the country. There are well over 200 major metropolitan areas that support the card. For executives who travel a lot, it's less expensive than paying hotel charges for using their wire, and it saves them worrying about changing settings for local dial-up numbers. It uses the same service as voice communications, with data transmission.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio