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DELOITTE CONSULTING PRESENTS
Tanushree Chellam Inez Foong Anthony Lorubbio Carlos Gil Neel Nadkarni Nishant Kondamudi
Ecclestone Association, Montana
AGENDA
¢ Background ¢ Proposed Solutions ¢ Changes Made
¢ Conclusion
- Background Analysis Solution Benefits -
ECCLESTONE HEALTH OF MONTANA
¢ Core Administrative Processing System
¢ ICD-10 standards
¢ Capabilities – gauging operating level
STAKEHOLDER ROLES
- Background Analysis Solution Benefits -
Board of Directors • Cost savings to
firm
Clients • Better products
Banking institutions • Better outlook for
EoM • Easier to obtain
loans
Government • Concerned about
loss of jobs • Compliance with
new regulations
October 1, 2012
• Must meet 80% parity criteria in • Customer • Network • Medical • I/T
February 1, 2013
• Must meet 80% parity criteria in • Sales • Product • Billing • Claims
June 1, 2013
• Must meet 80% parity criteria in Leading Ecclestone plans
June 1, 2014
• ICD-10 Compliance
- Background Analysis Solution Benefits -
CRITICAL DEADLINES - UPDATED
PROPOSED SOLUTIONS
Short Term: Functional Outsourcing
Long Term: Functional Outsourcing + Merger with Idaho
• Will allow EoM to meet deadlines on time with minimal cost and optimal improvement in Capabilities
- Background Analysis Solution Benefits -
ASSUMPTIONS FOR SHORT AND LONG TERM PLAN ¢ Time taken to reach first internal mandate ≈ 8
months ¢ Idaho will agree to the merger. ¢ Worst case scenario still includes two month
buffer.
- Background Analysis Solution Benefits -
Today 10-1-12 2-1-13 6-1-13 10-1-13
Only 3 out of 8 capabilities above 80% threshold.
First 80% deadline
Second 80% deadline Third 80% deadline ICD-10
Compliance deadline
- Background Analysis Solution Benefits -
ORIGINAL TIMELINE
Career transition assistance , emphasize openness and trust, support innovation, outsourcing starts.
12-6-12: Begin talks with Idaho for Partnership (8 months)
4-6-13: Finish Outsource
6-2-13: Finalize merger terms with Idaho
6-1-14
6-1-13 8-1-13 10-1-13 2-1-14 4-1-14
Second Phase of Outsourcing
1: Analyze both Internal and vendor culture
2: Analyze cross-culture with Idaho
Checkpoint for merger
- Background Analysis Solution Benefits -
CULTURE TIMELINE
Risk: if cultural assimilation fails – analyze competing firms for egs
6-1-14
ICD-10
Risk: if cultural assimilation fails – Remediation
ASSUMPTION
¢ Cultural transformation strategy financed from the savings through outsourcing
ANALYZE CULTURE – PHASE 1 (INTERNAL + VENDOR)
¢ Due diligence ¢ Learn from success stories
ANALYZE CULTURE – PHASE 2 (CROSS-CULTURE)
¢ 3-day Project Manager Swap � Happy hours
¢ Duplicate role outing � Reduce job insecurity
MITIGATE CULTURAL RISKS
- Background Analysis Solution Benefits -
¢ Phase 1 (Internal + Vendor): � Analyze competing firms for role-model examples
¢ Phase 2 (Cross-culture): � Fall back: remediation – if proposed merged culture
not assimilating � Small initial investment – low cost of failure
MITIGATING RISK IN 3 AREAS – ORIGINAL PLAN
¢ Outsourcing Risk
¢ Partnership Risk
¢ General Risk
- Background Analysis Solution Benefits -
LONG-TERM PLAN
Innovative Change
Partner with Ecclestone
Idaho
Culture Component
Enhancements
EoM University
PARTNER WITH ECCLESTONE IDAHO
¢ Opens doors to: � CAPEX Resources to
be used throughout company ¢ $2.3 million
¢ Good Fit between companies
¢ EoM university
- Background Analysis Solution Benefits -
• EoM • EoI
• EoM • EoI
Bad I/T Improved I/T
Low CAPEX
Higher CAPEX
*At time of merger
BENEFITS OF OUR SOLUTION
¢ Improved product � Propelled by improvements in processes and structure
¢ Increase market share � Gain traction by merging with Idaho
¢ Attract more clients � Larger company therefore better able to handle
clients
¢ Better IT � Greater IT resources $
¢ Attract new talent
- Background Analysis Solution Benefits -
CALL TO ACTION
QUESTIONS
CAPABILITY AREAS Functional Area Does EoM meet audit
criteria?
Sales Force and Broker Distribution Channel
Network Management – Provider Network
Product
Medical Benefits Management
Sales, Marketing & Underwriting Operations
Enrollment & Billing
Claims Processing
Customer & Provider Service
Network Management
Information Technology
- Background Analysis Solution Benefits -
Savings after Merge
Montana IdahoTotal Organizational Capability Investment (millions) $17 $8.50Overall Lives 601,220 220,250Cost per person $28 $38.50
0
0.5
1
1.5
2
2.5
Savings (millions)
Outsourcing model
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
2011 2012 2013 2014 2015
Current Operation costs
Outsourcing cost
Savings
Investment
Projected Profitability
-15
-10
-5
0
5
10
15
20
25
30
35
40
2012 2013 2014 2015
Cost
Outsourcing Savings
Merger Savings
Total Organizational Capability Investment
Projected Profits (millions)
FUNDS ALLOCATED TO CHANGE MANAGEMENT
¢ $1.5 million ¢ EoM University to support our forward-thinking technological
initiative => attract young talent in a sustainable way ¢ Internally, employees and externally, clients will be affected.
Change will happen over a 5 year period – many solutions in place to mitigate negative reactions to change by focusing on the benefits of the change and will serve as communication, training plan and change management.
¢ Build a guiding coalition. ¢ Strong communication strategy => brown bag lunches,
anonymous index card approach ¢ All employees should be involved => bottom-up projects ¢ Measure the progress of key soft factors by keeping track of
time, cost, quality, and flexibility. ¢ Reinforce the pertinence of the change vision and strategies -
CTA
LONG TERM PARTNERSHIP
Divestiture
Due Diligence Integration
Strategy Target Screening
Transaction Execution
- Background Analysis Solution Benefits -
TERMS OF MERGER
¢ Terms – � After thorough valuation analysis, the numbers
were negotiated between board of directors � Estimated increased CAPEX valuation: $2.3 million � Estimated increased cost of I/T: $6.1 million per
year (covered by EoI’s existing I/T budget)
CULTURE COMPONENT ENHANCEMENT
¢ Allocate resources from Idaho partnership to team-building events
¢ Team-building events: � Brown-bag lunches � Monthly outings � Site visits to partner
company
MENTORSHIP PROGRAM
¢ Option for retirees to use last 2 years of employment to capitalize on enhanced retirement benefits in exchange for knowledge transfer to new hires
06-02-15 06-02-17
Mentorship Program
ANALYSIS OF OPTIONS
- Background Analysis Solution Benefits -
Remediate Current Systems
Implement Package
Functional Outsourcing
Affiliation or Merger
STAKEHOLDER ROLE IN MERGER
- Background Analysis Solution Benefits -
Employees of EoM • Openly
communicate • Understand
reasons behind changes
Board of Directors • Promote
Innovative change
EoM Consumers • Use improved
online system • Critique, provide
feedback
Government • Advocate job
security – keep employment rate high
STAKEHOLDERS
- Background Analysis Solution Benefits -
Stakeholder Concern
Employees of EoM Job security, salary, company culture stability
Board of Directors ROI, Merge Terms
EoM Consumers Product Quality
Government Employment
CURRENT CULTURE
Weaknesses Strengths
Embrace change Commitment to Results
Openness & Trust Formalization
Structural/Consistency Control Focus on Consumer
Support Innovation
- Background Analysis Solution Benefits -
FUNCTIONAL OUTSOURCING – VENDOR SELECTION
¢ Technoglobe � Based in India � Highly skilled employees � Low cost � Follow-the-sun � Good infrastructure � Tier 2 IT Outsourcing company
¢ Ensure that EoM is treated as an important client
- Background Analysis Solution Benefits -
“The biggest industry players made enormous strides in capabilities improvements because of the capital saved from outsourcing certain functional components”
- Chris Jameson, CEO
EOM UNIVERSITY
¢ Supports forward-thinking technological initiative
¢ Sustainable Talent Acquisition � Attract young, tech-
driven talent
- Background Analysis Solution Benefits -
$8 Million, 2015
MITIGATING OUTSOURCING RISK
¢ Maintain level of quality ¢ Maintain control over key functions ¢ Diversify outsourcing vendor ¢ Workforce reductions ¢ Communities of Practice (COP) ¢ Knowledge Transfer
MITIGATING RISKS WITH PARTNERING
¢ Back up plans 1. Look into merging with other Ecclestone branches 2. Remediation
¢ Achieving Consistency between branches � Decision making � Client database management system
GENERAL RISK
¢ Career Transition Assistance � Ensuring job placement for employees
¢ Transferring Knowledge in 2 ways: � Outsourcing � Retirements
¢ Culture Clash
MITIGATING OUTSOURCING RISK
¢ Maintain level of quality ¢ Maintain control over key functions ¢ Diversify outsourcing vendor ¢ Workforce reductions ¢ Communities of Practice (COP) ¢ Knowledge Transfer
MITIGATING RISKS WITH PARTNERING
¢ Back up plans 1. Look into merging with other Ecclestone branches 2. Remediation
¢ Achieving Consistency between branches � Decision making � Client database management system
GENERAL RISK
¢ Career Transition Assistance � Ensuring job placement for employees
¢ Transferring Knowledge in 2 ways: � Outsourcing � Retirements
¢ Culture Clash