Explains the real, practical advantages healthcare payer organizations can experience by using CRM technology to streamline and minimize paper-based processes.

1. B u s i n e s s
P a P e r
The Paper shuffle:
What is it really Costing You?
executive summary
Despite a relentless rise in premiums well beyond the rate of inflation in the last
decade, the return for the money spent on health plans is not resulting in better service
or better coverage for members. Health plans are facing unprecedented pressure
to deliver new value that is defined in terms of lowering medical costs, decreasing
administrative waste, and improving the medical outcomes of the members they serve.
However, inefficient, paper-based administrative processes carried over from the last
decade threaten the future success of health plans—they can no longer afford to base
their profits on premium hikes.
This paper highlights an exclusive Pivotal CRM Web event in which Dr. Dennis
Schmuland, Global Industry Manager for Health Plans at Microsoft, and David Self,
General Manager of Healthcare Solutions with the Pivotal CRM team, explained the
real, practical advantages healthcare payer organizations can experience by using
CRM technology to streamline and minimize paper-based processes.

2. The Market Expects More from Future Profit Sources for
Health Plans Healthplans
It’s becoming clearer every day that today’s market So what are the implications for health plans if the market
demands more value from health plans. Why? Because demands more value from them? They can no longer
stakeholders realize that, despite a relentless rise in afford to base their profits on premium hikes. Future
premiums well beyond the rate of inflation in the last profits must come from the following:
decade, the return for the money spent on health plans
• Improving productivity
is not resulting in better service or better coverage.
Consider these facts: • Enhancing decision making
• The United States still spends more on healthcare— • Offering superior customer service
in both real dollars and as a percentage of GDP— • Increasing retention rates
than any other nation in the world.1
• Ensuring healthier members
• Healthcare costs now constitute 14.9% GDP; on track
• Establishing better medical outcomes
to hit 18.4% by 2013.2
• While the United States ranks number one in the world This, we believe, is the emerging new economy
for healthcare spending ($1.7 trillion), it ranks only 48th for healthcare. The shift in market demand toward new
in life expectancy.3 value means that the inefficient paper-based processes
carried over from the last decade now present a signifi-
Employers and consumers who purchase healthcare ben- cant threat to the future success of health plans faced
efits in the United States see a widening gap between the with adopting consumer-focused business models.
high costs of healthcare benefits and the results they’re
getting in return for their healthcare dollar investments. Amazingly, 90% of the 30 billion healthcare transactions
that take place each year are still conducted by phone,
And when it comes to customer service, employers and paper, or fax. Through the last 10 years, moreover,
consumers seldom experience the same or better level administrative costs have not dropped significantly. Most
of service—both online and offline—that they’ve come to of these administrative costs arise from manual, inefficient
expect from the travel, retail, and banking industries. paper and phone based processes that have yet to be
automated.
As a result, health plans in this decade are facing
unprecedented pressure to deliver new value that is
defined in terms of lowering medical costs, decreasing The Threats Posed by
administrative waste, and improving the medical out-
comes of the members they serve. Administrative Inefficiency
Administrative process automation is now assumed; it is Inefficient administrative processes that have been carried
a sunk cost of doing business that is no longer optional— over from the last decade threaten the future success
it is a requirement for health plans that hope to compete of health plans. These manually intensive tasks rely on
successfully in meeting the demands of the market. paper-based communication. As a result, they:
• Cost Too Much – administrative inefficiencies are labor
Health plans that figure out how to automate their busi-
intense and introduce needless delays; these costs
ness processes and focus on customer needs, rather
effectively consume the capital and labor resources that
than pure cost avoidance, will gain market share and
health plans need to meet new business demands and
increase profits. However, these new profits will not come
deliver new products to market.
from premium increases; they will come from improved
customer acquisition, increased retention rates, and the • impede Growth – administrative inefficiencies rob
ability to provide new, consumer-friendly products to the health plans of the capital they need to deliver new
market more quickly than the competition. value efficiently: better medical outcomes and healthier
members at lower costs.
By reducing administrative drag, health plans that become
• increase service Failures – administrative
more competitive will also free more capital to support
inefficiencies increase service failures because
initiatives designed to improve member health and
paper-based processes are far more prone to error. In
medical outcomes, closing the gap between high costs
contrast, automated processes can be programmed
of U.S. healthcare benefits and the return on healthcare
to catch and correct errors, which prevents delays and
premiums in terms of life expectancy, customer service,
mistakes.
and healthier members.
1. For details see, “Building a Better Health Care System: Specifications for Reform”. The National Coalition on Health Care, 2004.
http://www.nchc.org/materials/studies/reform.pdf
2. For details see, “Now Can We Talk About Health Care?” Clinton, Hillary Rodham, New York Times, April 18, 2004.
3. For details see, “Now Can We Talk About Health Care?” Clinton, Hillary Rodham, New York Times, April 18, 2004.
Pivotal CRM | Business Paper 1

3. Is Going Paperless Realistic? You can quantify value by first measuring, and then
reducing the number of times employees have to touch
Is it realistic to believe that paper can be completely or handle paper for every transaction, whether it’s a new
eliminated from all of the business processes taking application or an enrollment form. In reducing touches,
place in healthcare organizations? Of course not. you reduce costs significantly by becoming more efficient
and effective. Health plans that learn how to improve
One reason why paper can’t be eliminated quite yet is their internal processes and productivity by streamlining
the requirement for a physical signature on business paper-based transactions will outperform competitors,
documents. To many legal departments, and in many gain market share by reducing churn, and retain more
states, a “wet” signature is required to authorize a employees and members.
contractual agreement. Federal legislation, however,
does allow electronic signatures in many transactions,
so it is increasingly possible that a company’s policy— Unnecessary Paper Touches
rather than state or federal law—can be the barrier
to eliminating requirements for a physical signature. Cause Delays
In a very simple example, let’s assume that five
We’re a long way away from eliminating paper, but there
stakeholders are usually involved every time a new
are some compelling ways to address this issue today in
member joins and is enrolled in a health plan. The broker,
order to become more efficient and effective in the future.
sales executive, sales assistant, and underwriter move the
Intuitively, most of us would agree that excessive volumes group or individual along the enrollment process—from
of paper related to any business process creates suspect to prospect to member. The process is presented
problems. Paper is expensive. Paper takes up a lot of visually in the diagram below.
space. Paper can get lost. And most importantly for health
The prospective member fills out an application and gives
plans, paper makes automating business processes more
it to the broker, who passes it on to the sales executive,
difficult and inefficient because it must be transferred
who hands it off to the sales administrator. Three touches
physically—from the member, to the broker, to the sales
into the transaction, nobody has yet done anything to
rep, to the underwriter, and so on.
actually enroll the prospective member.
The obvious question to the idea of slowly eliminating
As part of the enrollment process, it’s likely that the
paper from a paper-intensive process is this: if we know
sales administrator will enter information manually about
that paper can’t be eliminated completely, how can
the prospective member, which is then passed along to
we quantify the value of incrementally decreasing our
the underwriter.
dependency on it?
There is an answer.
1
BROKER
MEMBER
2
RECEIVED
RECEIVED
RECEIVED
UNDERWRITER 4
3
SALES
SALES ADMIN
Diagram 1: Information Flow From Member to Underwriter
Pivotal CRM | Business Paper 2

4. The underwriter’s role is to evaluate the prospective As a result, the underwriter has to set the application
member’s information, classify it according to a rating aside until the information can be obtained, which means
system, and then determine how the prospective member that no business has been transacted.
qualifies for a given benefit plan relative to any potential
risk involved and at what price. It is at this stage of the Now the process gets bogged down. The underwriter
process where time-consuming and costly complications passes the form back to the sales administrator, who
are likely to begin—and escalate. sends it back to the broker, who actively pursues the
prospect to get the missing information. Once the
In this example, we introduce a common problem: the information is obtained, the broker takes the form back
prospect forgot to enter required information on the form, to the sales administrator, who passes it back to the
something as small as the date of birth of a dependent. underwriter. The process takes at least ten touches,
which is illustrated in the following diagram.
1
7
8
BROKER
MEMBER
RECEIVED
2
RECEIVED 9
6
RECEIVED
RECEIVED
10
5
4
3
UNDERWRITER SALES
SALES ADMIN
Diagram 2: Information Flow Back to Member
Let’s expand this example further and say that this Future profits or increases in operating margins cannot
application is for a small group, with ten employees be driven simply by increasing premiums anymore. The
and a couple of dependents per employee for a total market will not tolerate it. Health plans must find better
of about 30 individual applicants. Here, with a single ways of conducting business every day.
application, with one missing piece of information, the
sales administrator cannot complete the transaction
and must touch the application at least twice without Quantifying Employee Costs
processing it. During this delay, which could take days, To better understand the implications of being a more
the prospective member is free to consider applying efficient and effective healthcare payer, it’s good to start
for competing health plans. by quantifying employee costs.
This is an inefficient—and costly—way to conduct Consider the cost of an administrative employee; a
business. In the preceding example only one piece fully-burdened, full-time employee (FTE). How much does
of information is missing. The problem can grow it cost your company to have an employee at a desk
exponentially if other mistakes occur during the touching paper? This includes the employee’s salary,
application process. overhead, and benefits.
Pivotal CRM | Business Paper 3

5. Once you calculate the cost of your administrative
employees, calculate the cost of your sales employees,
Quantifying Transaction Costs
and then your underwriting employees. These numbers The next step in quantifying the value of streamlining a
provide a framework for quantifying the total employee paper-intensive process begins by measuring transaction
cost of touching paper. costs. The following diagram highlights some benchmark
numbers to use when considering these costs. While
there are many “flavors” of determining transaction costs
throughout the healthcare industry, the figures here offer a
conservative starting point.
= $30 = $10 = $0.25
Diagram 3: Transaction Costs
For our example, a paper transaction costs approximately process inside the average healthcare organization.
$30, a telephone costs approximately $10, and an In making these calculations, consider how they might
electronic transaction (for example, entering someone's be applied to improve the processes in your organization.
information directly to the underwriting division on
an electronic form) is 25 cents. These are dramatic The following basic equation can be used to calculate
differences that can have a huge impact on both your transaction costs:
costs and your profits. To read more about the costs
(Touches x Time) x Cost = Full Time employee Value
associated with web-based transactions visit: www.
healthcare-informatics.com/issues/2000/06_00/dejesus. For the purpose of the following discussion, assume
htm that stakeholders along the application and enrollment
process touch a small group application approximately
Calculating the Total Cost of eight times in total. In the preceding example, remember
that it took 10 touches just to get one piece of missing
Enrolling New Members information, so eight touches is conservative. Let’s also
assume that one touch takes approximately 15 minutes.
It’s worthwhile to see if someone in your organization has Using these numbers, if an administrative employee
already quantified the actual cost of a transaction in your processes 50 applications per month, the costs of a
company today using similar numbers. It’s likely that the fully burdened employee will be $50,000—a reasonable
results would be close to the figures used above. What estimate. The calculation looks like this:
would this potentially mean for your organization?
(8 touches x 15 minutes) x 50 applications = 6,000
Once you determine how often an employee touches minutes = 100 hrs = 12.5 days
an application, you then need to find out how many
applications that person processes each month. An average employee works approximately 22 days per
While it’s relatively easy to determine the number of month, or 250 work days per year.
applications processed per month, it’s more difficult to
calculate exactly how many touches are required for each In this example, the administrative employee costs $200
transaction. The overriding fact when dealing with paper, per day. The calculation for full time employee value looks
however, is that you’re often going to end up with missing like this:
information, or illegible information at some point.
Time x Cost = (12.5 days x $200) = $2,500
In the following calculations, we’ll build on earlier
examples to determine the total costs of a manual paper For the average administrative employee to process 50
applications, the cost is $2,500.
Pivotal CRM | Business Paper 4

6. Reducing Costs by Reducing of your enrollment divisions. Think about the implications
of reducing the number of times all of these people
Touches have to touch paper applications—enrollment forms,
applications, statements—just to quote and enroll
The preceding calculations provide a general idea of new members.
enrollment costs for the average healthcare organization.
In the equations we used, what would the implications The savings add up quickly. Suddenly, it is possible
be if you could reduce the number of times that your to quantify the value of investing in smart technology.
administrative employees touch applications by half— However, let’s keep in mind that investing in technology is
from eight times to four times? Consider the equations not only justified by cost savings but also by productivity
again: gains. Things like time savings, the ability to redeploy
employees to more value-added duties and increased
(4 touches x 15 minutes) x 50 applications = 3,000 customer satisfaction are important when considering
minutes = 50 hours = 6.25 days your return on investment.
Time x Cost = (6.25 days x $200) = $1,250.00
For every 50 applications processed, the time saved
Building Value by Building
would be 6.25 days and the costs saved would be Relationships
$1,250.00. Remember, this reflects the savings for just
one administrative employee. Consider the same type of The following diagram illustrates exactly what occurs
savings with sales executives and underwriters across all in healthcare payer organizations when an individual
becomes a prospective member. The individual is usually
identified by a broker or through a marketing campaign.
SUSPECT PROSPECT PROPOSAL
ENROLL
R E N E WA L
MEMBER
M AT E R I A L S
E D U C AT I O N &
I N F O R M AT I O N
ACCESS
BENEFITS
Diagram 4: The Relationship Development Process
The broker solicits the prospective business and then As the prospect goes through the enrollment process,
approaches a handful of companies for proposals to he or she eventually becomes a member who is entitled
evaluate their healthcare coverage. At this point the to receive member materials, such as summary plan
person becomes a prospect. descriptions, benefits summaries, benefits booklets,
membership cards, and so on.
The sales executive then becomes involved with the
broker and they begin gathering information from the new Once members begin to use their health coverage—
prospect. The information comes into the company and a they visit a physician, they go to the dentist, they visit
proposal is generated. the emergency room—they are officially accessing their
health benefits. Once members access benefits, they
If the rates are favorable and the coverage is what have claims. They have a reason to call your customer
the prospect is looking for, the prospect begins the service representatives or your nursing staff. At this point
enrollment process. your organization pushes information out to members
and pulls information in from their interactions with you.
This evolving relationship is characterized by education
and information.
Pivotal CRM | Business Paper 5

7. When your relationship with the new group reaches the
11th month, a renewal usually takes place.
Conclusion
Eventually, all healthcare organizations will have to
Unfortunately, this is the time when healthcare compete on the basis of improved efficiency and better
organizations go back to their members and say “we customer service. The current system is simply being
value your business so much that we’re going to raise crushed under its own weight. Those that move early will
your rates by 25%!” Sounds facetious. However, this have the advantage of improved outcomes, increased
tends to be the reality in today’s market. market share, growing membership, and an increasing
bottom line. When you streamline a paper intensive
If you haven’t built value during the time an individual
process, you receive all of these benefits, but you also
has progressed from being a suspect to a prospect to
receive something else: improved employee morale.
a member, by the time the renewal comes up there is a
When people are more efficient and effective, doing less
much higher probability of losing the member. This means
“busy work,” it has a powerful impact on how they feel
losing the opportunity to recoup the cost of sales, losing
about their jobs.
market share, and allowing your competitors to get into
your book of business. Specifically, this offers the following benefits to healthcare
organizations:
Improving Customer Service to • Paper and manual touches are reduced, which
streamlines paper-intensive processes.
Increase Loyalty • Membership increases—members receive information
When a health plan raises rates continuously without more quickly and more accurately, with better outcomes
improving service, the first members to leave are typically than your competitors.
those who are healthier risks. They have more options. • Member data across sales, underwriting, enrollment,
So during the first 11 months of this cycle, it is critical to and renewals is unified. Critical areas such as new
build value. And smart technology tailored for healthcare business enrollments or renewals become more visible.
payers allows you to build this kind of value. The best way
to do this is by gathering information early and putting • Members get better service—it’s faster and more
it into a single database where everyone can access it efficient, which is a competitive advantage. Happy
to get a complete picture of the individual’s needs and members are more likely to renew their health plans.
preferences. For example, putting renewal alerts into • Your employees are happier and are working smarter.
place well before the 11th month provide employees with They’re able to think more about critical components of
visibility, while building your competitive edge before their job.
renewal season begins.
• Time and administrative dollars are saved—the time
When the prospect becomes a member, he or she is and costs saved are even higher for underwriters.
treated uniquely—no matter what the touch point with your Putting underwriters in control of electronic information
company is. Suddenly you have a very complete picture, enables them to spend time more effectively, which
a 360-degree view of your members. The better the service improves underwriting outcomes.
is, the less likely it is that someone will leave, even though • Brokers are more loyal because they are given the
rates may have to increase from time to time. right tools for success. They are able to process more
business and reduce costs inside the brokerage as
Price sensitivity in the marketplace is something we all well.
have to live with, but poor customer service is likely to
drive people away. Great customer service builds loyalty • Management has powerful reporting tools that improve
and increases the likelihood that members will stay decision making.
with your organization when rates increase. This is also A paperless system allows you to capture information in
important to your broker distribution channel because they a single database, extract that information in standard
want to build their book of business with reliable carriers. formats, and present it in management reports that
make everyone’s lives easier. Critical areas such as new
You can create an outstanding customer experience by
business enrollment, renewals, who you’re losing, and
giving everyone inside your company the ability to know
why you’re losing them become more visible to your
exactly what individual members prefer and expect from
executives and management team. Strong management
your organization.
reports ultimately improve decision making.
Pivotal CRM | Business Paper 6

8. The examples in this paper highlight ways of giving With operations around the world and over 1,700
everyone in your organization a unified, 360-degree view customers, including healthcare organizations such as
of your members. This is a simple thing to say, but it is Premera Blue Cross, WellCare, and Blue Cross Blue
not simple to do. However, once employees have a more Shield of Michigan, the Pivotal CRM team offers industry-
complete view of members, everyone in the company specific CRM solutions tailored for vertical markets. In
has a better understanding of the overall business, the particular, our healthcare solutions are tailored specifically
entire membership, and the information required to boost for the healthcare insurance industry.
revenue growth. By taking advantage of smart technology,
your organization can begin to deliver more value to your Our simple, pragmatic solution can also be extended
members without increasing costs. easily, which enables health plans to integrate Pivotal
CRM solutions into their larger strategic CRM vision for
the enterprise. By driving costs, delays, and errors out
Pivotal CRM and Microsoft’s of the selling process, and by improving the broker and
member experience, Pivotal CRM solutions free up scarce
Healthplan Blueprint resources to deliver the value that purchasers demand:
The Pivotal CRM team has been around since 1994 and better outcomes, service excellence, and healthier
has proven its competency in the best implementation of members.
Microsoft technologies. Vendors such as Microsoft have
developed their healthcare solutions around the specific
issues healthcare organizations face today. In particular,
About the Speakers
Microsoft’s blueprint for health plans enables healthcare Dennis schmuland MD FAAFP, Global Industry Manager
organizations to close the gap between the value that for Health Plans, is Microsoft’s senior executive and chief
the healthcare system provides and the value people strategist responsible for driving Microsoft’s thought
need—quickly and cost-effectively. The blueprint includes leadership and strategy for the health insurance industry
three elements: within the 5-10 year horizon.
• An agile organization that uses the most familiar David self, General Manager of Healthcare Solutions
productivity and collaboration software that adapts to with the Pivotal CRM team, is responsible for our vertical
the way people and teams work. operations in the healthcare insurance market, including
• Customer-focused service framework that extends the sales, marketing, and research & development. He has
call center across every channel—such as self-service more than 15 years of experience working in, and with,
portals, speech recognition and IVR, and the connected healthcare payers and the technologies specifically
home and connected devices—to ensure that custom- designed to address their requirements.
ers know they are the highest priority.
• An end-to-end platform that enables plans to deliver
actionable knowledge anywhere to empower brokers,
employers, and consumers to make better informed
and more timely decisions.
Through partners like the Pivotal CRM team, Microsoft
is committed to helping health plans deliver more value
to every constituent faster, with fewer resources, and
with less complexity. In becoming a gold-level certified
Microsoft partner, the Pivotal CRM solution passed
independent compatibility and benchmarking tests,
which place it in the top one percent of all vendors in
the Microsoft partner program. The Pivotal CRM team
maintains the training requirements that keep its products
current with the latest technologies.
For more information or a complete list of our worldwide offices, please visit www.pivotal.com.
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