ecommerce proposal

(1)

eCommerce Enablement

at CareFirst

Revised Approach and Proposal

August 6, 1999

(2)

 How can I grow both my top line and my bottom

line with the internet and eCommerce?

 How can we use it to enable my business

strategy of growth and consumerism?

 What are my competitors doing?



What happens if I don‟t get a stake in the ground

soon?

 What investments will I have to make?

 What will the political ramifications be?

 Where do I start in order to get the highest

value?

Many eCommerce questions are core to CareFirst’s business

strategy.

(3)

eCommerce Overview and Dynamics

11 Proposed Timeline and Team

50 Potential Benefits and Cost

57 Context and Project Objectives

29 Proposed Approach and Deliverables

33 Why Partner with Andersen Consulting?

60

(4)

Conservatively estimated, CareFirst’s potential annual cost

savings and revenue enhancements exceed $100MM.

Enhance

Revenue

Reduce

Costs

Reduce Non-Care Related

Costs

Reduce Care Related

Costs

Potential

eCommerce

Benefits

Attract/Retain More

Members

Expand Share of Each

Customer

eCommerce Economic Value Tree

(9.1)

Value Potential ($MM)

(90.0)

$ 22.0

$ 16.5

($ 99.1)

$ 38.5

(5)

CareFirst's Current Positiong

CareFirst has significant work to do to move up the curve of

eCommerce capabilities. Many health plans are ahead, yet few

are personalized.

Healthcare eCommerce Service Spectrum

Information

Commerce

Personalization

Inquiry

Transaction

ILLUSTRATIVE

Oxford BS CA Aetna Cigna Kaiser Well point UHG Care First

High

Low

High

Low

Degree

of Buyer

Focus In

Customer

Service

(6)

©Andersen Consulting 1999 July 30, 1999

Objectives

5

This project is designed to begin rolling out eCommerce

capabilities to constituents as quickly as possible in 1999.



Choose the highest-value eCapabilities



Design the high-level business, technical and security

architectures



Lay out business case and implementation plan



Understand business, technical and political implications

(7)

Approach and Deliverables

Andersen Consulting has worked with CareFirst to design a

two-phase approach which will deliver capabilities to the

marketplace by 4Q99.

Set eVision

Quickly determine the highest-value opportunities considering impacts on business value, cost, technology, business strategy and constituent politics

Phase 1 Approach

= Scope of this proposal

3 Weeks

Design

eArchitecture

Design short- and long-term development and run-time environments 6 Weeks Plan Rollout Develop business case and plan rollout timeline and approach 3 Weeks

Phase 2

 Prioritized set of

eCapabilities

 Market assessment of

potential consumer/

provider uptake of

eCapabilities in

CareFirst‟s markets

 Summary of competitors

and potential alliance

partners

 eVision prototype

demonstration

 Conceptual design

for eCommerce

environment

 IT strategy and IT

Blueprint implications

 eCommerce

organization chart

 Executive-level

business case

 Assumptions,

technical risks and

political risks

documents

(8)

The CEO’s role is critical to selecting the right eCapabilities

and partnerships to pursue, addressing any board or

constituent concerns, and setting the tone for cultural change.

During the project, Bill Jews should play a critical role in several areas,

dedicating a recommended one to two hours per week. Suggested

areas for participation include:

 Participate in steering committee meetings

 Provide input on prioritization criteria and lead the selection of

eCapabilities

 Provide guidance on political considerations regarding CareFirst

constituents (providers, members, legislators, brokers, purchasers)

and work with these constituents as necessary to set direction

 Choose and approve any recommended partnerships for either

eCapabilities or content

 Make resource decisions regarding CareFirst team member priorities



Set tone for CareFirst‟s overall cultural change by becoming more

(9)

Why Andersen Consulting?

Andersen Consulting is uniquely qualified to assist with this

work. Our price for this work will be $700,000 plus

out-of-pocket expenses.

 Alignment

• We understand your business strategy intimately from its genesis

• We quantified the benefits CareFirst can achieve with eCommerce

 Commitment

• We worked with your team to scope and structure the work

• We developed a vision prototype aligned to your strategy

 Capability

• We have invested significantly in developing our eCommerce assets

• We are the largest eCommerce consultant in the business

• We have worked with 8 out of 10 of the largest health plans

Why Andersen Consulting?

(10)

Why Partner with Andersen Consulting? E-Commerce Strategy Formation Electronic Marketplaces Customer Insight Intentions Value Networks

New Business Models

Commerce Transformation

Electronic Distribution

Virtual Corporation

Enterprise Process Virtualization

New Product Introduction Generate Demand • Selling Effectiveness • Internet Commerce Fulfill Demand • eProcurement

• Customer Self Service • Internet Ordering

Plan & Manage

• Virtual HR

Technical Architecture

• Net Centric Architecture

• Architecture Assessment Information Mgmt Program Management

Solution Enablement

eCommerce Infrastructure Development Website Creation • Planning / Design • Construct/ Prototyping • Integration / Delivery REPRESENTATIVE

We place a strong emphasis

upon developing leveragable

assets to support our clients

with advanced thinking in

several key areas…

(11)

eCommerce Overview and Dynamics

11 Proposed Timeline and Team

50 Potential Benefits and Cost

57 Context and Project Objectives

29 Proposed Approach and Deliverables

33 Why Partner with Andersen Consulting?

60

(12)

eCommerce Overview and Dynamics Nature of Demand

Product

Intentions

Virtual

Access and Delivery Method

Physical

Seller- Driven Model Customer- Centric Model Buyer-Driven Model

Business models are expected to evolve from seller-driven to

buyer-driven as the electronic marketplace matures.

 Buyer-Driven

• Hybrid Product and Market dynamic, defined by buyer‟s intention and measured by wallet share captured

• Virtual delivery of a network of alliance-sponsored products and services represents a generally leading edge approach to market

 Customer-Centric

• Market focused segmentation and differentiation strategies generally characteristic of competitive, near commodity markets

• Multiple touch points with a bundled product set generally represents today‟s mainstream market strategy

 Seller-Driven

• Product-focused market strategies generally characteristic of unique, high margin offerings

• Physical delivery of

seller-controlled products and services represents a generally traditional approach to market

(13)

eCommerce Overview and Dynamics

Old Assumption Strategic Principle

1. Create a business model with several business partners around a single value proposition

eEconomy Assumption

Fewer economic constraints on size, complexity and scope of enterprises and enterprise networks

Consequence

High interaction and

collaboration costs drove high levels of vertical integration Low interaction and

collaboration costs drive “best of breed” specialization and networked-based value delivery

3. Gain first leader advantage

Early market share leadership, once achieved, can lead to dominance

Fast followers could leverage learnings of leaders, since diminishing returns to scale limited optimal size of enterprise

Increasing returns to scale enables unlimited size of enterprises focused on information components of offerings and channels 2. Generate greater

returns on intellectual property and

relationship assets

Competition is

heightened for capturing information and owning customer relationships Return and valuation were

derived from bundles of physical assets, intellectual property and customer relationships, but primarily driven by physical assets Return and valuation are

derived independently from asset components, with returns primarily driven by intellectual-property and customer relationship assets

Strategic Principles in the eEconomy

As a consequence, new strategic principles are emerging,

changing the old economic assumptions that we have relied

upon in the past.

(14)

Old Assumption Strategic Principle

4. Don’t rely on returns based on information asymmetry

eEconomy Assumption

Margins based on imperfect markets will erode

Consequence

Returns by producers could be protected by high search and comparison costs incurred by customers

Fewer opportunities by producers to capture returns based on price differences for similar goods and services

6. Expand rapidly into markets, in particular, through

disintermediation

New entrants and fast-moving competitors emerge quickly and capture market share without expanding to build distribution channels

Cost and time of entry into markets required creation and coordination of physical assets, means of production and distribution points Virtual presentation of

goods and virtual points of sale enable inexpensive and rapid entry into new global markets

5. Expand product diversity and broaden value propositions to buyers

Companies, products and business models will cater profitably to smaller customer bases Variety was limited by a

segment-level understanding of buyer preferences

Declining information and communication costs enable more granular understanding of buyer preferences

Strategic Principles in the eEconomy (cont’d)

As a consequence, new strategic principles are emerging,

changing the old economic assumptions that we have relied

upon in the past (cont’d).

(15)

Emerging eCommerce Roles

New eCommerce roles are forming and competition to be a

recognized player is intense. Large companies are also stepping

out of their traditional roles to position themselves in new ways.

Access

e.g., Netscape

Buyer Agency

e.g., Amazon.com

 Search and Evaluation

 Needs Assessment and

Product Matching  Product Information Dissemination  Purchase Influence  Aggregation

Buyers

Sellers

Financial/Risk e.g., VISA Fulfillment e.g., FedEx Seller Agency e.g., Equifax Market Making e.g., eBay Access

e.g., US Web __{Integration of Producer}

and Consumer Needs

Market Management Information About Customers Customer Service Aggregation Quality Assurance

 Product and Service

Distribution

 Customer Service

Payment Clearing and

Settlement Risk Management Seller Process Support  Buyer Process Support

(16)

The current structure in the healthcare industry presents

tremendous opportunity for value creation by moving to an

eCommerce-based model.

 Healthcare is fundamentally an

information business

• Account and member data

• Network and benefit data

• Encounter data and clinical history

• Diagnostic information, treatment paths

• Medical and pharmaceutical research

 Information, money, and services must

be exchanged across fragmented

entities

• Many diverse participants, including

thousands of niche players

• Dramatic variations in practice patterns

and utilization among entities and

regions

• Fragmentation and specialization

• Complex financial interdependencies

1 _{Milliman & Robertson, 1998 data}

Large number of entities must exchange

information, services and money...

...which has proven difficult to do well

 Healthcare entities still exchange

substantial information on paper

• Reliant on closed, inflexible legacy

systems

• Few information exchange standards

• Nearly half of health claims are still

processed manually and a quarter are

so delayed that the claims are filed

again

1

 Healthcare entities are confronted with

overwhelming amounts of data and are

struggling to glean insight

• Limited ability to understand and

segment consumer wants, needs and

behaviors

• Limited ability to compare providers

meaningfully and develop care paths

• Lack of flexible, evidence-based

standards by which to aggregate

clinical data and evaluate patient

outcomes

(17)

eCommerce Overview and Dynamics Abaton.com Access Health Avicenna Systems Axolotl Healtheon Daou Systems iTrust

Health Desk Corp. Patient

Infosystems

Shared Medical Systems

Status One Health System

Manage Internal Operations Process Transactions Deliver Care Manage Care Manage Provider Network Manage Customer Relationships Manage Products & Risk Market and Acquire Customers Develop Products and Services Advanced Health Covation Claimsnet Kinetra Healtheon Melophis Quadra Med Proxymed Pointshare Officemed.com MEDE America Araxsys Ariba Technology Concur Technologies Envive IndX Software Luminate Software BroadVision Calico Technology ChannelPoint InsWeb Corporation Siebel Systems Xyber Net @Outcome Caresoft Enact Health Mgmt. Systems KnowMed Systems Cerner Network Alchemy Neoforma TIBCO Software

A large number of new internet-focused companies are moving

quickly to populate the healthcare eCommerce space.

(18)

These internet-based players are exploiting the eEconomy

opportunities by providing eCommerce capabilities in many

aspects of the healthcare value chain.

Sample of Enablers’ Offerings*

*A comprehensive list of new entrants can be found in the Appendix

InsWeb

Now offers extensive advice and comparison capability for life and auto policies and is expected to add healthcare

Covation

Facilitates exchange of healthcare information over the internet, e.g., patient enrollment, claims, and medical data

Caresoft

Offers web-based disease management solutions

Shared Medical Systems

Offers groupware to streamline workflow across health enterprises iTrust Offers web-based physician practice management solutions Abaton.com

Employs web-based software to automate transactions across all classes of healthcare participants Manage Internal Operations Process Transactions Deliver Care Manage Care Manage Provider Network Manage Customer Relationships Manage Products & Risk Market and Acquire Customers Develop Products and Services

(19)

Portals

Full Service sites

Physician Advice sites

Physician-Targeted Sites

Type of Online Community

Companies

 Healthfinder  HealthGate  Medical Networks  Medisite  Accent Health.com  A HN.com  iVillage  On Health.com

 Americas Doctor Online  BestDoctors.com

 Sapient Health Network

 American Health Consultants  Medical Economics Company  Medical Networks Mediconnect

 Intelihealth  Mediconsult.com  Mylifepath.com  Third Age  Do not contain content per se but instead

function as targeted search engines for health information

 Offer a variety of services including chat rooms, recent medical discoveries, health policy

information, product offerings, personalized newsletters and health risk assessments

 Physician-targeted sites: Contain information of interest to providers, including continuing education courses and journal articles

 Designed to fulfill a specific informational need for a targeted audience

A number of healthcare online communities have surfaced to

serve a spectrum of audiences, ranging from general

(20)

For example,

iVillage is an online community for women that

provides healthcare information through betterhealth.com as

one of its many product offerings.

Interact

 Hosts health chat rooms and

live health discussions

 Allows members to send

emails to health experts

 Allows members with

similar interests and health

concerns to locate one

another through a member

Publish

 Healthcare library

 Weekly newsletter

 Access to MedLine

 Information for women on

many non-healthcare topics

(21)

Transact

 Online bookstore for medical,

nursing, and health-science related

textbooks

Interact

 Journal scan

 Email service

 Medline searches

 Career center

 Continuing Medical Information

Publish

 Clinical practice guidelines

eCommerce Products

Medscape specializes in providing peer-reviewed clinical

articles and is an example of an interactive website community

for clinicians and consumers.

(22)

Current Health Plan eCommerce Activities - Admin. Cost Reduction

Manage Internal Operations Process Transactions Deliver Care Manage Care Manage Provider Network Manage Customer Relationships Manage Products & Risk Market and Acquire Customers Provide website self-service health plan rate calculation Provide rate quotes for brokers and consultants Enable electronic annual enrollment Use sophisticated data mining/ analysis for pricing and product development Set up recredentialing process on the Internet so paperwork can be submitted online Set up network to disseminate administrative, financial and clinical patient data with providers Post a searchable provider directory on website Order ID cards, change address or PCP on the website Enable member self-service with online access to account information Provide online expert to help physicians resolve claim problems Schedule appointments through the website Communicate health info to physicians and members through the Internet Enable real-time referrals mgmt. Expand electronic claims submission Provide an automated claims adjudication system Enable provider self-service (e.g., referrals, eligibility, claims status) Send payments electronically to providers Enable online purchasing of insurance Use automated antifraud solutions to reduce suspect claims and run fraud audits Install a coherent enterprise management system Post employment listings on the web Publish internal policies and procedures on an intranet Develop Products and Services

Health plans are starting to use these enablers, especially to

reduce administrative costs.

(23)

Current Health Plan eCommerce Activities - Care Cost Reduction

Profile providers Use triage systems

in conjunction with an EMR for demand management List clinical guidelines online Offer an online physician newsletter (e.g., info on disease management programs)

Use data mining to

identify people who are susceptible to certain illnesses Provide healthcare information to members Provide risk assessments and wellness advice to members Provide an online drug formulary Manage Internal Operations Process Transactions Deliver Care Manage Care Manage Provider Network Manage Customer Relationships Manage Products & Risk Market and Acquire Customers Develop Products and Services

In addition to administrative cost reduction, health plans are

also leveraging eCommerce technology companies to reduce

the cost of care.

(24)

Current Health Plan eCommerce Activities - Revenue Enhancements

Offer marketing and enrollment information on websites Engage in data mining to target appropriate customers Provide tailored risk assessments and advice on website to maintain loyalty Provide customized health related web pages for Members

Offer Internet solutions to sell and distribute health insurance online Create cross industry destinations and portals (e.g., mylifepath.com) Manage Internal Operations Process Transactions Deliver Care Manage Care Manage Provider Network Manage Customer Relationships Manage Products & Risk Market and Acquire Customers Develop Products and Services

Although revenue enhancement is the major play, there are

only a few health plans currently implementing initiatives to

achieve this objective.

(25)

Features

 Personalized health and wellness information on fitness and nutrition, parenting, women’s health, pregnancy, and alternative health  Discounts on mylifepath alternative health and

wellness services, such as nutrition counselors, massage, yoga classes, acupuncture, exercise classes, etc.

 Reference materials and screened site links to health and wellness information

 Savings on health and wellness products (baby supplies, books, etc.)

 Interaction with Blue Shield of California

Blue Shield Role

 Content provider — provide

consumer-focused information and content organization  Integrator — partner with BabyCenter, Barnes & Noble, Fogdog Sports as well as numerous alternative and traditional healthcare

practitioners to provide intentions-focused experience

Blue Shield of California’s mylifepath.com offers consumers

personalized health information.

(26)

Website

 Offers customized lifestyle appraisals  Provides a searchable provider directory  Plans on expanding website capabilities by:

 Creating customized web pages for members based on their specified interests  Enabling members/benefits managers

self-service with online access to account information

ChannelPoint

 Piloting a ChannelPoint product to automate process of selling health insurance

 Will handle price quotes, underwriting, rating and other tasks with ChannelPoint solution Back Office

 Uses data mining to identify members susceptible to certain illness and to identify unusual healthcare utilization patterns  Will install computer workstations that enable

customer services agents to quickly access membership information

 Plans to offer an automated adjudication system

eCommerce Activities

United Healthcare is using eCommerce to streamline

(27)

Approximate eCommerce Position of Health Plans*

With few notable exceptions such as United and Aetna, no one

has made a major entry into the eCommerce space; however,

all are poised to do so.

Humana Principal Oxford Cigna PacifiCare FHS WellPoint Aetna United HealthAxis Conservative Aggressive

(28)

Nonetheless, most healthcare players have not formed a

coherent eCommerce strategy.

 Large plans and provider organizations are distracted by

operating concerns and are experiencing unprecedented

financial difficulties, due in part to acquisition integration

challenges and difficulty sustaining earlier gains in

controlling medical costs

• Companies are focusing on “doing the basics right” to regain

profitability and improve service performance

• Health plans and providers are also increasingly absorbed with

dissatisfied stakeholders, including more demanding

members/patients, more sophisticated purchasers and more

activist legislators

• IT staffs are distracted by Y2K and overwhelmed by demands

to absorb new technologies

 Health plans are reacting to the opportunities and

competitive pressure presented by the advent of

eCommerce and have not taken the time to chart their

course in the future market environment

(29)

eCommerce Overview and Dynamics

11 Proposed Timeline and Team

50 Potential Benefits and Cost

57 Context and Project Objectives

29 Proposed Approach and Deliverables

33 Why Partner with Andersen Consulting?

60

(30)

Context and Project Objectives

Several business issues drive the need to accelerate

eCommerce capabilities.

 CareFirst has developed an eCommerce strategy overview

and white paper which describe desired eCapabilities

 This project is designed to take that work to the next level



There is a strong need for customers to perceive CareFirst‟s

innovation capabilities and differentiation through eCommerce

 The newly-developed business strategy requires eCommerce

capabilities to support geographic dominance,

consumer-centric focus, and to more quickly integrate acquired

businesses



There is a desire to “productize” technology capabilities and

link them with marketing messages

(31)

Context and Project Objectives

This project is designed to begin rolling out eCommerce

capabilities to constituents as quickly as possible.



To confirm and augment the concepts of the existing

eCommerce strategy and to choose the highest-value

eCapabilities



To design the high-level business, technical and security

architectures required to support eCapabilities and scale them

up as demand increases



To lay out a business case and game plan for quickly rolling

out eCapabilities to each constituent (members, providers,

brokers and purchasers)



Understand the business, technical and political implications of

the strategy

(32)

Context and Project Objectives Business Processes Information Applications IT Infrastructure

IT Architecture

Business Enables Drives Information Technology

IT Alignment with Business

The eCommerce strategy touches many components of the

overall IT blueprint.

Overall IT

Strategy

eCommerce

Strategy

IT Management & Delivery

Leadership Sourcing Structure & Governance Processes

(33)

eCommerce Overview and Dynamics

11 Proposed Timeline and Team

50 Potential Benefits and Cost

57 Context and Project Objectives

29 Proposed Approach and Deliverables

33 Why Partner with Andersen Consulting?

60

(34)

Proposed Approach and Deliverables

Winning requires a different strategy from traditional

investments.

1999

2000

2001

2002

eC

om

m

erc

e

Perf

orm

an

c

e

2

 Minimize risk of disruption to cost containment, merger integration and Y2K efforts

 Demonstrate proof-of-concept

 “Reserve the right to play” where major uncertainty exists  Introduce simple, quick experiments

Start Small

 Scale quickly to protect existing customers  Leverage new enablers alongside current

technology

 Acquire customers through new value

propositions, speed and excellence of execution  Exploit new technology mid-ware to connect legacy

applications

3

 Determine implications of possible market outcomes  Identify actions to move market

to preferred outcomes and to make the best of other outcomes  Develop a flexible roadmap

1 Years

(35)



Piecemeal efforts by marketing

(website) and IT (EDI)



Director-level commitment



Cross-functional strategic initiatives



Aligned incentives



Executive team commitment



Months planning the “best” solution



Safe bets only



Funded from operating budgets for

same-year payback



A portfolio of experiments



Mix of quick hits, capability builders and

option plays



Shareholder value, return on investment



Focus on automating current

business processes



Local market autonomy



Re-invention of administrative processes,

care management processes and revenue

generation



Corporate franchise development

Typical

Winning



Existing business units



Entrepreneurial ventures that can grow

rapidly and be owned flexibly

New management approaches are also needed to win in the

eCommerce space.

(36)

Design

eArchitecture

Design short- and long-term

development and run-time

environments

We propose a two-phase approach which will deliver

capabilities to the marketplace by 4Q99.

Set eVision

 Pinpoint eCommerce implications from business strategy

 Identify successful external eCapability examples to supplement existing eStrategy  Identify potential external content or

eCapability alliance partners

 Assess CareFirst‟s market demographics and constituents‟ potential use of the eCapabilities defined

 Perform data and call volume analyses to gauge value priorities across providers, consumers, brokers and purchasers  Adjust existing eStrategy documents

based on emerging ideas and business drivers

 Enhance eVision prototype demonstration to showcase potential eCapabilities  Develop and use evaluation framework to

prioritize eCapabilities based on business value, cost, technology implications, business strategy linkages and potential constituent political implications

 Develop conceptual design of development, execution and operations environments in the context of existing infrastructure (short-term and long-term)  Identify scalability constraints in the execution environment  Design high-level security

architecture for short- and long-term execution environment

 Identify implications to overall IT strategy and IT Blueprint

Phase 1 Approach

= Scope of this document

Plan Rollout

Develop business case and plan rollout timeline and approach

 Specify organization, skills and sourcing strategy required to launch and sustain both the

eArchitecture and selected eCapabilities

 Develop business case for investments (including high-level FTE and capital budget estimates for FY99 and FY00)

 Develop implementation plan and timeline for eCapability rollout

 Develop assumptions and technical risks documents

3 Weeks 6 Weeks 3 Weeks

Phase 2

Launch Pilots

Begin delivering capabilities while laying critical infrastructure

Adjust Speed

Continuously evaluate progress and adjust speed of investments

Scale Fast

Assure that infrastructure can support unexpected growth

(37)

Set eVision

Design eArchitecture

Design short- and long-term development and run-time environments

Deliverables include choosing priority initiatives, developing

the conceptual design of the new architecture, and planning

the rollout.

 Prioritized set of eCapabilities,

including business drivers,

constituent input and key

issues to be addressed

 Market assessment of potential

consumer/ provider uptake of

eCapabilities in CareFirst‟s

markets by segment or product

 Market scan summary of

competitors and potential

content or eCapability alliance

partners

 Enhanced eVision prototype

demonstration

 Conceptual design for

development,

execution and

operations

environments,

including security

architecture and

scalability constraints

 IT strategy, IT

blueprint and business

architecture change

implications

discussion document

Phase 1 Summary Deliverables

Plan Rollout

Develop business case and plan rollout timeline and approach

 eCommerce

organization chart, list

of key skills required,

and sourcing strategy

 Executive-level

business case,

including timeline,

resource requirements

and high-level costs

and benefits

 Assumptions, technical

risks and political risks

documents

(38)

 Pinpoint eCommerce implications from business strategy  Identify successful external eCapability examples to

supplement existing eStrategy

 Identify potential external content or eCapability alliance partners

 Assess CareFirst‟s market demographics and

constituents‟ potential use of the eCapabilities defined  Perform data and call volume analyses to gauge value

priorities across providers, consumers, brokers and purchasers

 Adjust existing eStrategy documents based on emerging ideas and business drivers

 Enhance eVision prototype demonstration to showcase potential eCapabilities

 Develop and use evaluation framework to prioritize eCapabilities based on business value, cost, technology implications, business strategy linkages and potential constituent political implications

Key Activities

Key Deliverables

 Prioritized set of eCapabilities and key functionality that will be delivered to the marketplace. These will be shown as capabilities linked to each constituent (providers, members, purchasers and brokers)

 Market assessment of potential consumer/ provider uptake of eCapabilities in

CareFirst‟s markets by segment or product  Market scan summary of competitors and

potential content or eCapability alliance partners

 Enhanced demonstration to showcase eVision capabilities

Phase IA will identify the highest value opportunities.

Set eVision

(39)

Design eArchitecture

Design short- and

long-term development

and run-time

environments

 Develop conceptual design of

development, execution and

operations environments in the

context of existing infrastructure

(short-term and long-term)

 Identify scalability constraints in the

execution environment

 Design high-level security

architecture for short- and long-term

execution environment

 Identify implications to overall IT

strategy and IT Blueprint

Key Activities

Key Deliverables

 Conceptual design for development,

execution and operations environments,

including security architecture and

scalability constraints

• Architecture component analysis

• Physical environment blueprint

• Interface and connectivity diagram

• Application component diagram

• Component interaction diagram

• Technical architecture requirements

 IT strategy, IT blueprint and business

architecture change implications

discussion document

Phase 1B will create the conceptual design for CareFirst’s

net-centric architecture.

(40)

Plan Rollout

Develop business

case and plan

rollout timeline and

approach

 Specify organization, skills and sourcing

strategy required to launch and sustain

both the eArchitecture and selected

eCapabilities

 Develop business case for investments

(including high-level FTE and capital

budget estimates for FY99 and FY00)

 Develop implementation plan and timeline

for eCapability rollout

Key Activities

Key Deliverables

 eCommerce organization chart, list

of key skills required, and sourcing

strategy

 Executive-level business case,

including timeline, resource

requirements and high-level costs

and benefits

 Assumptions, technical risks and

political risks documents

(41)

Phase 2

The scope and plan for Phase 2 will evolve as eCapabilities are

identified; some potential components are shown below.

 Develop and launch initial

eCapability projects with

60- to 90-day debuts

 Experiment with some

eCapabilities to test value

or sustainable

differentiation

 Pilot the eCapabilities with

select groups of

members, purchasers,

physician offices, and/or

administrators

 Begin laying critical

infrastructure components

to prepare for required

eEnablement and

scalability

 Set specific timelines for

project value

assessments, as drug

companies do in their

research projects

 Stop projects which

haven‟t proven out;

speed up others that

show promise

 Continually innovate

with new capabilities

 Continue infrastructure

investments to enable

further automation and

interactivity

Launch Pilots

Begin experimenting with

capabilities while laying

critical infrastructure

Adjust Speed

Continuously evaluate

progress and adjust speed

of investments

 Continue infrastructure

investments to enable

further automation and

interactivity

 Over-size to stay ahead

Scale Fast

Assure that infrastructure can

support unexpected growth

(42)

Identify Opportunities

(“Stretch your imagination”)

Employers/ Groups Members Providers Trading Partners Federal & State Government Brokers & Agents

Evaluate Opportunities

(“Balance the assessment”)

 Alignment with Business Strategy  Quantitative criteria (e.g.,. revenue

potential, ROI)

 Qualitative criteria (e.g., competitive threat, customer need, sustainability)

Classify Opportunities

(“Make tough decisions”)

Sustainable Differentiation V a lue to Con s tit uent

 Think in terms of communities rather than value chain activities

 Assess today’s realities and try to envision future possibilities

 Understand where others inside and outside the industry are heading

 Strategic eCommerce Opportunities impact with:

• Members, Providers and Partners • Administrative Staff • Consumers • Etc. Current Business Models Enhanced Business Models New Business Models Value

Potential Investment Risk . . .

Opportunity 1 Opportunity 2 Opportunity 4 Opportunity 3 I II III IV . . . eC

Opportunities will be identified and evaluated using proven

frameworks.

(43)

Low

High

Long-Term

Contribution

to Strategic

Direction

.

Framework for Prioritizing eCommerce Initiatives

. .

.

. .

.

Our approach will deliver a strategy that is logically integrated

with CareFirst’s business strategy which we are jointly

developing, not just a set of initiatives.

More Aggressive Strategy More Conservative Strategy

.

Initiatives

Sample Deliverables

(44)

Communication Fabric

Transport Services

Massage Transport Transport Security

Packet Forwarding/ Internetworking Network Address Circuit Switching Allocation Quality of Service

Network Media Services Physical Media Media Access

Communications Security Environment Runtime Services Language Interpreter Virtual Machine System Services System Security Profile Management Environment Verification

Task & Memory Management Application Services Application Security Error Handling/ Logging State Management Active Help Other Common Services Component Framework Operating System Codes Table Services File Services App. Integration Interface Base Services

Web Server Services

Batch Services Workflow Services Push/Pull Services Report Services Presentation Window System Desktop Manager Form User Navigation Web Browser

Report & Print

Direct Manipulation Input Device Business Logic Interface Application Logic Data Abstraction Information Database Services Document Services Replication/Synchronization Versioning Access Security Indexing Storage Messaging Encryption email Core Specialized Virtual Resources Fax Terminal File Sharing Printing Paging Audio/Video Phone Authorization Authentication ORB CTI EDI Legacy Integration Directory Services Domain Name Communication Transaction Resource Management Transaction Management Transaction Partitioning TP Mo n it o r File Transfer RPC Msg Oriented Streaming email Database Access

Illustrative Net-Centric Architecture

A net-centric technical infrastructure is complex and requires

significant new technology; this project will deliver the

conceptual design for this architecture.

Sample Deliverables

(45)

CareFirst’s security architecture will be developed in the

context of Andersen Consulting’s Security in eCommerce™

implementation guide.

• Applications

• Components

• Menu of Choices

• Product Mapping

Sample Deliverables

(46)

A conceptual technical architecture design identifies the

architecture components and technologies required to support

a given solution.

Requirements / Assessment Architecture Assessment: _{Technical Architecture}

LAN/ WAN/ Internet LAN/ WAN Unix Server 1. AIX 2. TransAccess 3. U to A 4. Entera 5. MQ Series 6. CORBA 7. Web Server 8. SNA Server 9. RDBMS IBM ES/9000 Mainframe 1. MVS 2. CICS 3. IMS 4. MQ Series 5. TransAccess 6. Database (DB2,VSAM, IMS) NT Server 1. Windows NT 2. TransAccess 3. NT to A 4. MSMQ 5. CORBA 6. Web Server 7. MQ Series 8. RDBMS Relevant Systems UNISYS A-Series Mainframe 1. MCP 2. COMS 3. A to U 4. U to A 5. A to A 6. NT to A 7. Falcon MQ Client 8. Database (DMSII) Windows Workstation 1. Windows 95/NT 2. Entera 3. CORBA 4. MSMQ 5. Browser NT Gateway Server 1. Windows NT 2. Falcon MQ Bridge 3. Falcon MQ Server 4. MSMQ 5. SNA Server LAN/ WAN LAN/ WAN/ Internet

Illustrative Technical Architecture Design

Sample Deliverables

(47)

An interface and connectivity diagram presents underlying

protocols and interface technologies employed.

Requirements / Assessment Architecture Assessment: _{Interfaces & Connectivity}

NT to A MSMQ NT Server TransAccess CORBA Web Server A to U Falcon MQ Client U to A UNISYS A-Series Mainframe COMS DMSII Database RDBMS Interface Legend Available Under Construction Future MSMQ Windows Workstation Entera CORBA Browser Entera RPC MSMQ DCOM/ ActiveX IIOP HTTPS MSMQ DCOM/ ActiveX IIOP HTTPS BNA Terminal U to A Entera MQ Series Unix Server TransAccess Database CORBA Web Server RDBMS Entera RPC DCOM/ ActiveX IIOP HTTPS U to A RPC ODBC MQ Series TransAccess RPC A to A NT to A TransAccess MQ Series IBM ES9000 Mainframe CICS DB2 VSAM IMS DDCS (DB2) Cedar/LU6.2 MQ Series TransAccess RPC 3270/LU2 IMS NT Server Falcon MQ Server SNA Server MSMQ Falcon MQ Bridge MS RPC ODBC MSMQ TransAccess RPC MS RPC ODBC U to A RPC Falcon MQ MQ Series MQ Series

Illustrative Interface and Connectivity Diagram

Sample Deliverables

(48)

A physical environment blueprint communicates the physical

topology including computers and network components.

Workstation Scan Station Producer Desktop Gateway Server IBM ES/9000 Mainframe Unix Server NT Server UNISYS A-Series Mainframe User Workstation LAN/ WAN/ Intranet LAN Integration Framework Server

Conceptual Design Infrastructure & Application Blueprints: _{Physical Environment Blueprint}

Application Data Center Server Relevant Systems Producers (External) Remote Sites Company A WAN Application Server (Master) WAN Firewall Internet LAN Fax Machine WAN LAN/ WAN Application Server (Slave) LAN/ WAN

Illustrative Interface and Connectivity Diagram

Sample Deliverables

(49)

A process and information flow diagram shows how data and

processes supporting business operations flow through the

solution architecture.

Process & Information Flows:

Release 1 Process Flow

Requirements / Assessment Legacy Systems Broker Scan CP Employer Application & Member Enrollment L2 L1 Case Installation & Member Enrollment Group Installation Sales Reporting Scrub Medical Underwriting Install Case Producer Application Member Enrollment DB2 DMSII File/Report Database User Input Memory Cache L3 New Producer Processing Census DB2 Rating Engine L4 Interface Services Interface Engines Rating Engine Faxback Proposal Proposal Generator Process RFP Integration Framework Internet Framework

New Producer Application Update Rate Tables

Manual Processing

Network Match Engine Scrub

Group Structure Manual Group Entry H

H

RFP Fax

Enrollment Upload Producer Info

Note: All flows from the Integration Framework have a corresponding confirmation feedback loop to Internet Arch. . These feedback loops are not

J

Illustrative Process and Information Flow

Sample Deliverables

(50)

eCommerce Overview and Dynamics

11 Proposed Timeline and Team

50 Potential Benefits and Cost

57 Context and Project Objectives

29 Proposed Approach and Deliverables

33 Why Partner with Andersen Consulting?

60

(51)

Proposed Timeline and Team

The project will take between 11 and 12 weeks to complete,

based on level of detail of the architectures developed.

High-Level Project Workplan

1 2 3 4 5 6 7 8 9 10 11 12 Week:

Worksteps Phase 1A

• Pinpoint eCommerce implications from business strategy

• Research external eCapabilities / partners • Assess CareFirst’s eMarket demographics • Perform data and call volume analyses • Enhance eVision prototype

• Prioritize eCapabilities

Phase 1B

• Design high-level architecture

• Design high-level security architecture • Identify IT Blueprint implications

Phase 1C

• Specify organization, skills and sourcing strategy

• Develop business case & implications • Develop implementation plans & next steps

(52)

At each project checkpoint, there may be separate business

and technical reviews with different audiences.

2

3

4

1

Set Business Context

• Refine project scope, timeline and

business resource commitments

• Review eMarket demographics for

CareFirst‟s markets

• Brainstorm prioritization criteria

Review Business Analysis/Partners

• Review eMarket research and

eCapability options identified to date

• Review and set direction on potential

eCapabilities and partners

• Set preliminary business priorities

Confirm Priorities & Business Case

• Confirm and set final priorities

• Review business case

Business Reviews

Set Technical Context

• Refine project scope, timeline, deliverables

and technical resource commitments

• Identify potential target technical

environments to address

Refine Technical Architecture

• Review design options and determine straw

model architecture to design further

• Refine straw model architecture with input

from broader IT team

Finalize Architectures

• Perform technical review of chosen

architectures, tools, etc.

• Identify initial IT Blueprint implications

Technical Reviews

2

3 1

Approve Implementation Plans and Next Steps

• Review and adjust implementation timelines, costs and benefits

• Approve overall strategy and set business and technical roll out plans in place

Joint

Review

(53)

Project Organization

Project Executives

 TBD (CareFirst)  Michael Palmer (AC)

Key Content Experts and Management

 Key Architect (CareFirst)  Jay Phillips (AC)

 Healthcare Manager TBD (AC)

Design, Analysis and Business Case Team

 Access to CareFirst‟s customer service,

information technology and other business executives

 IT analyst (CareFirst)

 Consultants (Andersen Consulting)

Project Sponsors & Steering Committee

 Bill Jews (CareFirst)  Dave Astar (CareFirst)  Tom Rekart (CareFirst)  Jim Hudak (AC)

Expert Advisors

 Kedrick Adkins (AC)

 Joe Marabito (AC)  Brian Johnson (AC)  Bill Milleker (AC)

The project would be a joint effort between CareFirst and

Andersen Consulting.

(54)

We would drive the results of the project through a small staff

who would be responsible for all architecture development,

research and business case development.

Key Content

Experts and

Management

Design, Analysis

and Business

Case Team

Expert Advisors

 Design future conceptual architecture

 Conduct interviews  Ensure delivery of analysis  Provide direction and input  Manage issue identification and

resolution

 Develop detailed designs  Conduct interviews  Draft written reports

 Formulate and conduct analysis  Research issues and hypotheses  Develop business case

Role

 Lend direction, experience  Provide in-depth point expertise  Challenge thinking, assumptions

 Full time  30 days  Full time  Full time  2-3 days/week  Full time  Full time

Time Commitment

 Brainstorming sessions  Ad hoc, as needed  Jay Phillips (AC) -

Architect, Lead Manager  1 AC Application Expert, Manager  1 CareFirst Key Architect  1 CareFirst IT Applications Analyst  1 CareFirst End-User Analyst  1 AC Tech Consultant  1 AC Business Analyst

Staffing

 As needed and available

Project Staffing

Project

Executives

 Provide overall project direction  Lead strategy development  Lead business case design

 Four days/week  2-3 days/week  Michael Palmer - Project

Leader

 1 CareFirst Project Leader

Project

The CEO’s role is critical to selecting the right eCapabilities

and partnerships to pursue, addressing any board or

constituent concerns, and setting the tone for cultural change.

During the project, Bill Jews should play a critical role in several areas,

dedicating a recommended one to two hours per week. Suggested

areas for participation include:

 Participate in steering committee meetings

 Provide input on prioritization criteria and lead the selection of

eCapabilities

 Provide guidance on political considerations regarding CareFirst

constituents (providers, members, legislators, brokers, purchasers)

and work with these constituents as necessary to set direction

 Choose and approve any recommended partnerships for either

eCapabilities or content

 Make resource decisions regarding CareFirst team member priorities



Set tone for CareFirst‟s overall cultural change by becoming more

(56)

 James B. Hudak

Name Comments/Areas of Experience

 Kedrick D. Adkins

 Brian A. Johnson

 Michael E. Palmer

• Global Managing Partner for Andersen Consulting’s Health Services Practice • Directed engagements for clients to develop overall business strategies,

consumer-focused strategies, eCommerce strategies, growth strategies and operational improvement strategies

• Americas Managing Partner for Andersen Consulting’s Health Services Line of Business • Led several infrastructure consolidation and new age architecture projects

• Expert in managed care systems and architectures

• Partner in Andersen Consulting’s Financial Services practice

• Led engagement to assist very large health plans develop eCommerce strategies and implementation plans

• Associate Partner and East Coast Leader of Andersen Consulting’s Healthcare Strategic IT Effectiveness Line of Business

• Led several engagements in developing eCommerce strategies and architectures for several major health plans and provider organizations

• Expert in IT management and delivery in traditional and net-centric environments

* Subject to availability

Andersen Consulting is prepared to deliver some of our most

experienced and talented individuals to participate in the

**project*.**

 Jay Phillips • Manager in Andersen Consulting’s Financial Services Solution Center

• Led several architecture development initiatives within healthcare, banking and insurance

• Expert in net-centric architectures (CORBA, CJB, etc.) including integrating mainframe back-end systems

(57)

eCommerce Overview and Dynamics

11 Proposed Timeline and Team

50 Potential Benefits and Cost

57 Context and Project Objectives

29 Proposed Approach and Deliverables

33 Why Partner with Andersen Consulting?

60

(58)

Potential Benefits and Cost

The right strategies can yield significant economic benefits

along with service improvements.

I

LLUSTRATIVE

• 0.5-1.0% savings in medical costs through profiling and channeling • 1-2% reduction in drug spend through using online formulary • 0.5-1.5% savings in medical costs through use of proven pathways • 10-20% savings on high-dollar cases with early detection/ intervention • 10-15% improved outcomes with patient therapy compliance

(on base of 17% of hospital costs)

• 3-6% decrease in voluntary disenrollment through customized service • 1-3% increase in commissioned sales

• $3-4 per member per month increase in revenues for 20-30% of membership

Enhance Revenue Reduce

Costs

Reduce Non-Care Related Costs

Reduce Care Related Costs

Reduce G&A and Purchasing Costs Reduce Network Management Costs Potential eCommerce Benefits Attract/Retain More Members Channel Utilization Through “Best” Providers

Provide Electronic Formulary, Pathways, etc.

Perform Real-Time Disease/Case Management

Improve Patient Compliance & Self-Care

Expand Share of Each Customer

Participate in Virtual Networks & Tailor Individual Offerings Improve Sales Success Rate Through Real-Time Quotes

Enable Member Self-Service

Enable Provider Self-Service (Eligibility, Claims, Referrals)

Expand Range of Products & Services

Expand Value Delivered to Lower Marketing, Selling

& Distribution Costs Lower Enrollment Cost

e Commerce Economic Value Tree

• $?? Launch an eBusiness to exploit current assets (information, • 12-35% reduction in cost of group processing

• 3-6% reduction or elimination of commercial commissions

• 10-15% fewer employer/member service phone calls

• 30-40% increase in professional electronic claims; little investment • 50% reduction in referral processing cost; improved service • 30-40% fewer provider service phone calls

• 3-15% savings in supply spending through eProcurement • 2-3% claims cost savings for using common claims infrastructure • 30-40% savings of recredentialing costs