Abstract
Claims operations are fast growing into a moment-of-truth customer experience. Statistics indicate that claims operations has transformed into the single largest business cost as well as one of the most visible customer experiences. This has in effect increased the popularity and relevance of the claims administration industry all over the world. As such, it has become increasingly necessary for the firms in the industry to explore ways to improve the customer claims experience through new level of sustained operational effectiveness & efficiency, and customer satisfaction. In this paper, we shall explore ways that Sedgwick CMS, the leading Third-Party Administration Company in the United States, can realize increased efficiency and effectiveness in its operations.
Integrative Learning Project in Operations Management
Organizational Setting
Introduction
Sedgwick Claims Management Services, Inc. (Sedgwick CMS) is a top North American provider of innovative claims together with productivity management solutions. The company first came into operation more than three decades ago with the aim of providing top-quality claims administration services for the increasing on-the-move companies in the United States.
Mission Statement
The company’s mission is “To be the premier provider of customized claims and productivity management solutions through:
• Customer-focused programs
• Efficient, quality-driven process design
• Stakeholder return on investment
• Support and empowerment of our colleagues to do the right thing at the right time” (Sedgwick CMS, 2012).
Vision Statement
Sedgwick CMS Vision Statement: “To become the world leader in delivering trusted innovative claims and productivity management solutions.”
Core Values
The core values of Sedgwick CMS are: delivering excellence; operating openly and with integrity; embracing change; growing as individuals; and operating as one company, one team.
In line with the strong mission and vision statements and its core values, Sedgwick CMS is reputed for designing and implementing customized programs on the basis of proven best practices that satisfy the needs of the client. Over the years, Sedgwick CMS has met the expectations of its stakeholders diversified our services along with refining ourapproach to offer unequalled claims management services to various employers across different industries. Indeed our company is not only a provider of custom-built but also value-added & cost-effective claims management services in the claims administration industry. We have a long running wealth of experience which gives top-notch services in terms of designing, implementing and management of our clients’ claim program.
Services and Products
Sedgwick CMS and its affiliates specialize in claims administration and other related cost management services in comprehensive claim programs namely: workers’ compensation; general, automobile and professional liability coverage; short- and long-term disability; Integrated Disability Management (IDM); FMLA claims;total absence management programs, warranty/credit card claims services, healthcare professional liability, captive programs, and risk retention groups. In addition, our company provides a host of value added services to our customers such as managed care services, internal call center, litigation management, risk management, Special Investigative Unit (SIU), and business intelligence.
External and Internal Customers
The company’s clientele base is comprised of industries such as administration & processing, insurance agencies & brokerages, health care, financial services, utilities, manufacturing, education, and retail.
At the moment, Sedgwick CMS serves its customers through viaOne – a suite of web-based tool that offer personalized online access to claims information, user-managed data management & reporting capabilities, program management, managed care, risk consulting, medical management among other related services. Furthermore, the company boasts of approximately 10,000 experienced workers in more than a hundred and fifty offices and services locations spread across the U.S. and Canada.
My role/contribution to Mission Statement
As a consultant for Sedgwick Claims Management Services Inc., I am tasked with improving its efficiency and effectiveness in the competitive claims administration industry. In its mission, Sedgwick CMS strives to leading provider of tailored claims and productivity management solutions. In my capacity, I stand to benefit Sedgwick CMS by bringing a professional-level approach to every client engagement. The company can rely on my counsel in line with its mission because of my strong understanding of the growing and immediate needs of its clients. I endeavor to work with my client in providing efficient and cost-effective settlement administration solutions that will guarantee stakeholder return on investment.
In addition, I am dedicated to undertake the colleagues of the company in an extensive training program so as they are ultimately best placed to meet the expectations of clients besides following best practices relating to claims administration. This I believe goes a long way in offering support and empowerment to Sedgwick’s colleagues in doing the right thing at the time.It is my belief that I am the right professional for this company considering my vast knowledge in matters of general insurance produces together with much experience in both Insurance Claims and Administration.
The 8 Key Concepts
Operations are an important determinant of the continued survival of a company in the competitive marketplace (Boyer & Verma, 2009). Managers of organizations such as Sedgwick CMS are confronted with key operations issues which ultimately have a significant impact on the success of their companies. These include: strategy, output planning, capacity planning, facility location, facility layout, aggregate planning, inventory management, materials requirements planning, scheduling, and quality control. In discussing the organizational setting of Sedgwick CMS, we shall integrate 8 key concepts in operations management. These are: Strategy, Six sigma, Process planning & design, Enterprise resource planning, Lean management, Outsourcing and Offshoring, Lean management, Supply chain management, Process design and planning, and Innovation.
Strategy, Operations, and Global Competitiveness
As an industry leader in the claims administration industry, Sedgwick CMS strives to be a highly-held and well-known service provider for self-insured clients, maintaining an unmatched track record, and a massive loyal client base. In addition to excellent service, Sedgwick CMS runs a business founded on trust and excellence. Working with Sedgwick CMS entails a consultative relationship characterized by mutual understanding, attention to detail, collaboration, and focus on attaining meaningful and valuable outcomes for our stakeholders and the company itself. The company has maintained and continues to bring on board experience and diligent claims administrators so as to realize a guarantee of daily smooth running of claims and risk environment.
Sedgwick CMS is among the few companies known to offer true partnership in the vast claims administration industry. The company has stepped its collaboration with its clients, realizing long-term partnerships together with genuine and enthusiastic recommendations on improvement.
Figure 1: Claims-Management Value Chain
By reviewing its strategy, Sedgwick CMS stands a great chance of setting itself apart from its nearest competitors in the industry. This can be achieved by utilizing the benefits of strategic thinking that is supported by specialized risk management knowledge along with powerful resources. It is highly necessary for the company to adopt an industry-specific focus backed by a comprehensive knowledge base. Sedgwick CMS should work towards having seasoned professional claims adjustor with solid comprehension of conducting investigations, drawing meaningful conclusions, examining risk transfer options, applying necessary loss reserving practices, negotiating proper settlements, participating in litigation management, and communicating with the right personnel.
In addition, it would do Sedgwick CMS much good if it committed its resources to providing the finest state-of-the-art risk management tool as concerns to the Third Party General Liability Claims Administration (TPA). There is need for the company to employ a strategy that ensures easy collection and retrieval of customer-specific data which claims professionals will use to resolve claims effectively and efficiently. In other words, the company’s proprietary system will be one that offers real-time access in an overly user-friendly format.
Process Planning and Design, & Project Management
Process planning and design deals with elements of selection together with design of the desired transformation process aimed to delivers such factors as low cost, improved quality, speed, enhanced functionality among others, in an efficient and effective way.
On the other hand, Project management deals with managing of organizational activities, where diverse activities are integrated and coordinated (Kerzner& International Institute for Learning, 2010).
The figure below represents a simplified claims department organizational structure at Sedgwick CMS:
Figure 2: Claims department organizational structure
The design of the process for claims processing at Sedgwick CMS can be significantly improved through a simple yet effective and efficient method. Generally, the claims adjustor would receive claims forms handed in by clients and then log the receipt that particular form into each particular client’s existing record within that specific settlement’s database. Such a dataset record would often stem from either the initial mailing data or from self-identifiers who contact the firm through phone call, or in person or through other correspondence (Heldman & Mangano, 2011). The connection of the form to the database record would be carried out through the use of identifiers which can readily be scanned upon receipt of the form and linked to an identified number associated with the particular claimant’s database information. This would serve as proof that the client’s claim has been received by Sedgwick CMS.
More often than not, documentation relating to receipt of a claim form is the only processing demanded at this initial stage. This is especially the case with settlements that have relatively small benefit amounts or those that lack variation of benefit amounts between claimants. However, in most cases at least some degree of data capture and analysis is needed as a part of the claims processing. The particular details of any such work would to a greater extent determined by the nature of the settlement in question (Heldman & Mangano, 2011). While some forms would require clients to select from a number of options, other forms call for narrative descriptions of the situations or attachments of different types of supporting documentation.
With the growth of Information Communication Technology (ICT) and Information Technology, online claims submission along with validation is increasingly becoming popular and effective ways of processing claims. This is an area that Sedgwick can explore more and more. However, challenges of using this platform come in the form of some claim processes that demand certain types of documentation and thus do not easily lend themselves to the new online processes. Similarly, Sedgwick CMS needs to plan and design a process of dealing with incomplete or technically deficient claims – a common occurrence with clients of the company. To this effect, the company needs a “cure” process to address all such deficiencies. Following a rolling structure or all at once, the claims adjustor would group claims into appropriate categories and them inform the clients of the deficiencies, and in so doing creating an opportunity to cure the deficiencies (Greer, 2010).
Six Sigma for Process and Quality Improvement
Owing to the increasingly competitive environment in the Claims administration industry, it is suicidal to have loopholes for any sort of error considering that clients are expecting quick and efficient access to services, products and information (Tarantino & Cernauskas, 2009). In this respect, it has become very critical and mandatory to effect some key changes in the ways by which Sedgwick CMS conducts its various business activities. The company has made efforts to meet the individual needs and expectations of its customers. The concept of Six Sigma plays a vital role to this effect because of its greater focus on “quality becoming a part of the organizational culture”.
Principles of Six Sigma
i) Engaging pro active thinking in attaining perfection
ii) Excellent service to customer is always top priority – focus is towards understanding the needs and expectations of customers and striving to fulfill them.
iii) Boundary less collaboration that is reinforced by date and fact driven management
iv) Failure is permitted but only through risk management techniques.
Objectives of Six Sigma
i) To provide good performance and reliability
ii) To offer value to the end customer
iii) Minimize or reduce defects in any type of process
iv) To do away with wasteful practices
v) Offer after sales service quality
vi) Step up the quality of product/service
vii) Satisfy external and external customers
Benefits using Six Sigma
i) Free from defect products/services
ii) Reduced production, inspection & warranty costs, and tension free working conditions
iii) Greater customer satisfaction – leading to better positioning and better reputation
iv) Achieving of excellence in the processes (Tarantino & Cernauskas, 2009).
Enterprise Resource Planning
An enterprise resource planning system (ERP) provides for better management of a company’s resources. Excellent management of resources is paramount for all companies in all industries, the claims administration industry being no exception (O’Leary, 2000). There are essential features to a comprehensive ERP, which serves to integrate the company’s functions and operations such as the internal & external management information, embracing accounting/finance, manufacturing, customer relationship management, sales and service, etc. In general, therefore, ERP serves to facilitate efficient and effective flow of information among all business functionalities both inside the organizations and management of connections to the external stakeholders of an organization.
A typical ERP system carries the following characteristics:
– A well integrated system with the ability to operate next to real time (if not in real time), without necessarily depending on periodic updates.
– A common database which supports all the entire applications of an organization
– A uniform look and feel across each module
– Installation of the system itself without requiring elaborate data/application integration by the organization’s Information Technology (IT) department (O’Leary, 2000).
A high valued company like Sedgwick CMS can utilize the benefits of ERP to streamline its work flow, provide enhanced support to its customers, real time availability of data relating to sales, reduction of significant amount of paper works, availability of raw materials and inventory, as well as assist the company in its global operations (Madu & Kuei, 2005). Sedgwick CMS can improve its efficiency and effectiveness through proper utilization of features of enterprise resource planning. These are:
1. Financial management – Corporate financial administration is a crucial task to Sedgwick CMS in its day to day operations. Being a claims administration company, it is open to scrutiny from its stakeholders and relevant monetary bodies that regulate the financial flow process. Through ERP, Sedgwick CMS would be able to utilize the good financial administration element. As such, the company would be able to customize the ERP to store much information relating its general ledger, invoices, receipts, budgeting and consolidation. This will go a long way in stabilizing the financial situation of Sedgwick CMS. Furthermore, through the ERP the claims administration company will benefit the real time tracking capability in cash flow as well as creation of timely financial reports.
2. Human resource management –Generally, the ERP system comes in handy in matters relating to employee administration, tracking of personal information of employees, payroll, benefits, training, recruiting, 401K, and diversity management.To a larger extent, the ERP system solves the traditional complex human resource management problems. In addition, Sedgwick will be able to customize the tools relating to collection and maintenance of information.
3. Supply chain management –One of the key tasks in the claims administration business is constant assessment of demand and matching the needs of clients, especially due to the increasing competition in the industry. Failure to collect and predict such information would have adverse negative effects to a leading company such as Sedgwick CMS and make its productivity to take a beating besides tainting its status in the economy. This is where the ERP system comes in handy to the company. Adopting an effecting ERP software would enable Sedgwick CMS to address a host of issues relating to the supply chain management i.e. order to cash, order entry, inventory, claim processing, and commissions.
4. Customer relationship management –CRM is at the core of a business because customers are the most valuables and operations are towards satisfying the needs of the customers. There is acceptable CRM is there is reliable and correct communication to the customer-related information to the company’s marketing team and sales team. Appropriate integration of the ERP system would greatly help Sedgwick CMS to align its customer contact, call center support, marketing and general services. In addition, ERP system offers the “self-service” interfaces for employees and customers alike.
In order to implement an efficient and effective ERP system, Sedgwick CMS would have to undertake considerable changes to its staff work process as well as practices. These changes will be attained after extensive consultations, customization, and soliciting for support from the affected personnel. There is need to thoroughly analyze the company’s business processes before undertaking implementation. The analysis would be towards identifying opportunities for the process modernization. Similarly, it would allow for assessment of the alignment of current Sedgwick’s processes with availed by the ERP system.
Another possible advantage that the ERP system will give Sedgwick CMS is the provision for extension with other third-party software. As such, the company stands to benefit from additional capabilities offered by extensions such as archiving, republishing, reporting, capturing transactional data, accessing specialized data, advanced planning & scheduling (APS), managing resources, facilities as well as transmission in real-time.
However, it is worth noting that ERP implementation for Sedgwick CMS, a decentralized organization, may prove rather challenging. This is because the company runs varied processes, operates on strict business rules, and has different data semantics, decision centers and authorization hierarchies (Harwood, 2003). As such, we may be forced to migrate some of the business units before others, customizing the system to meet particular needs, or delay implementation process so as to work through certain changes for individual units. There is always the danger of compromising the competitive advantage when adopting the “standard” processes. Given that Sedgwick CMS is a large organization, it can be estimated that the implementation period would take one and a half years.
Sedgwick CMS can incorporate best practices to the ERP system it uses to reflect the company’s interpretation of the most effective to perform functionalities relating to claims administration. These include reduced time-consuming tasks such as documentation, configuration, testing and training. This is especially the case because procedures can easily be codified with the ERP system and then replicated with confidence across all departments in the company.
Supply Chain Management
A supply chain refers to a system of organizations, technology, people, information, resources, and activities involved in providing a product or service to a consumer. On the other hand, supply chain management entails the planning and management of all operations involved in the sourcing and procurement, conversion as well as all logistics management activities (Madu & Kuei, 2005). It entails supply, movement of materials, storage, information, equipment, personnel, and finished products with the business and between its environments. Generally, supply chain management aims to integrate the whole process meeting the needs of the customer together with the supply chain.
The supply chain is made of a network of organizations designed to supply inputs to the whole business unit, and the customer network.
Figure 3: Structure of a Supply Chain
At Sedgwick CMS the supply chain strategy needed is one that is customized to satisfy the needs of the clients which may not necessarily be the lowest cost. The need for a more effective and efficient supply at Sedgwick CMS has grown because of the increasing global competition, outsourcing, e-commerce, and greater supply chain complexity in the claims administration industry.
In order to realize its mission, Sedgwick needs to transform the manner in which it manages the claims of clients. There is greater need to improve performance management and provide improved customer service while reducing the cost of their claims. Of greater importance, the company must address the chief sources of claims leakage by replacing manual processes and the guesswork currently experienced in handling of claims (Madu & Kuei, 2005). It is demanding of Sedgwick to address the problem of claim handlers lacking end to end visibility of the entire claims process which has rendered them unable to effectively respond to a customer enquiry. Efforts should be towards reducing administration costs and the many human errors that compromise the quality of customer service with its net result being clients turning to rivaling firms for their claims administration. If Sedgwick manages to significantly simply its supply chain process, there would be reduced claims handling costs along with increased customer satisfaction.
A new better supply chain process can be implemented at Sedgwick CMS in a number of phases. However, the most crucial change ought to focus on implementing the system relating to ‘household claims’ where there is high number of policy holders as well as multiple claims. This new supply chain process would give Sedgwick CMS a real-time end to end visibility of the entire claims process, beginning from the point at which the claims are received to last action and payment of it. Less time will be spent on tracking the status of the claims and collating management information. This improved claim handling controls practiced throughout the whole claim lifecycle would ensure the company attains better settlement planning along with negotiations resulting in dramatically reduced claim cycles times.
Innovation
Innovation refers to the creation of better, effective products, services, processes, technologies, or ideas which are readily available to the market, government, and society at large. Innovation is different from invention in that the former alludes to the use of a better, and resultantly, novel method or idea, whereas invention points more directly to the creation of the method or idea itself (Fischer, 2000). Likewise, innovation is different from improvement in the sense that innovation refers to the aspect of doing something different as opposed to doing the same thing better.
Innovation is a key catalyst of growth in any business including the claims administration business. The pressure to control costs whilst providing timely and fair service is continuously increasing of many property and casualty departments, and thus companies that specialize in those areas such as Sedgwick CMS. The constantly advancing technology is enabling claims professionals to better access more information, manage larger workloads, follow best practices as well as reach more consistent decisions (Fischer, 2000).
Accordingly, it has become mandatory for Sedgwick to consider more innovative ideas in its day to day operations so as to achieve efficiency and effectiveness. Such indispensable tools is the electronic claim folder that will enable the firm to better handle all claim-related information besides supporting core clam functions such as first notices of loss, automatic assignment of claims, policy/coverage processing, financial processing and workload management (Dick, 2007). In addition, there are many desktop capabilities that consolidate a wide range of software tool onto a single, Web-based user interface. With this, claims personnel are able to log in only once and gain access to varied software tools that handle litigation, evaluation of bodily injuries, determination of liability, and detection of fraud along with access to third-party information.
The following chart shows a high level architecture of the claims processing system that would effectively work for Sedgwick CMS. The call center is the primary area of interaction between the clients and the claims processing system. The other five modules in the center represent the core functional components of the business application, where data in the mainframe is accessed and updated, and interface with the View Star system through maps and custom workflow applications. The support modules will be used in defining the application parameters, create reports, make date backups, track system usage among other administrative functions.
Figure 4: Workflow chart for claims processing
Lean Management
The Lean concept is associated with the Toyota Production System (TPS) and is characterized by minimal use of resources together with elimination of all forms of waste in production or management. The essential ingredients of Lean concept include:
– Balancing flow through the process
– Pulling throughput to match customer demand
– Reducing waste and inventory throughout the production process
– Producing increased variety & complexity to that initially possible
In other words, lean concept strikes to deliver more value for the company and its stakeholders by increasing its velocity of throughput as well as reducing wasteful practices through balancing process flow.
Lean is both a business improvement tool and a philosophy that requires to be implemented from the top management down so as to generate needed levels of understanding and belief (Martin, 2006). It is my obligation as a consultant to ensure that Sedgwick CMS adopts a lean program that is not a ‘just another quick fix initiative’. Significant amount of time will have to be dedicated to attain widespread commitment to address the fundamental business performance issues currently faced by Sedgwick CMS. The lean program to be adopted is one that is in line with Sedgwick’s organizational structure, management performance reporting systems and culture so as to realize desirable long term results.
One of the most important elements in lean is the concept of value-adding. In principle, a value-adding activity is one considered as truly worthwhile by the customer, whether internal or external. Thus, value-adding activities either turn materials into products or sub-products, or contribute to producing valuable information or services payable by the customer. I plan to establish any and all non-value adding activities within Sedgwick CMS. These could include ineffective work though done with high utilization of resources.
Wasteful practices often happen in many functionally driven environments because of legacy habits which have become nature or culture of the company which are rather problematic for the workforce to see through, to an alternative new perspective. There are a number of waste types that Sedgwick CMS needs to take note of and adjust accordingly. They include: waiting time, delays and transportation.
There is also greater need to integrate the lean improvement initiative and Six Sigma program (commonly referred to as “Lean Sigma”)in Sedgwick CMS. This is because the two approaches can be employed to achieve a number of complementary objectives as relates to claims administration (Martin, 2006). The Lean Sigma concept can help Sedgwick CMS to effectively respond to the growing demanding customer needs thanks to its model of operational excellence which gives delivery agility.
Outsourcing and Offshoring
Third Party Administration companies are increasingly facing a confluence of challenges ranging from tight economic conditions, rising business costs and increased competition. This has necessitated adoption of new and innovative methods of gaining competitive advantage in the market for Sedgwick CMS. Outsourcing or business process outsourcing (BPO) is the process by which a company allots a section of its work to another organization/firm and holds it responsible for most of the applications together with the design of the specific enterprise business process (Davies, 2004).
Offshoring is typically an operational process mainly in manufacturing and supporting processes where a company relocated one or several of its business processes from one given country/company to another. In the recent past, offshoring has been pronounces in the sourcing of administrative and technical services that support domestic and global operations from without the home country/parent company through internal (captive) or external (outsourcing) delivery mechanisms.
The claims administration industry is mainly associated with services offshoring. Sedgwick CMS would need offshoring because of the immediate need to cut costs of operation. Given that the company handles relatively large volumes of claims administration cases, it would be highly cost-effective to outsource this function to other specialized firms in the country or beyond, for example India known for high quality service within remarkably short turnaround times. Some of the insurance claims processing services that Sedgwick can outsource to Indian firms include: insurance claim setup, insurance claim eligibility & estimation, claim document imaging, disbursement, full claim adjudication, fast track adjudication, claim support & auditing, account settlement, as well as legacy applications modernization.
Outsourcing and offshoring would be beneficial to Sedgwick CMS in a number of ways. These processes would save the company the huge operational costs, improve customer service, result in greater retention and high profit margins, and promote pricing flexibility along with creating new business opportunities. Of greater importance, though, offshoring and outsourcing will give Sedgwick CMS the opportunity to focus on its core business, realize faster time-to-market on new services and products, and improve its overall competitiveness and performance.
Conclusion
Efficient and effective claim management is significant to achieving customer loyalty, business growth and improved reputation. Claims management is thus critical to driving performance and results for a third-party service provider. Given that claims have unique own workflow-driven value chain, players in the industry have a relatively wide range for operational improvements. .
In view of the increasing competition and the uncertain economic environment, Sedgwick CMS would be better placed if it strived to reduce costs while meeting customer requirements. The company ought to invest more in technology especially IT so as to improve the speed, accuracy and efficiency of its handling of claims. The skilled claims adjusters must be supported by efficient and state-of-the-art claims management technology, strategies and other progressive business concepts such as lean six sigma and project management.
In general, therefore, Sedgwick CMS would only be able to transform its operations and attain effectiveness along with efficiency appropriately if it takes measures to integrate and implement the eight key business concepts discussed above.
Appendixes
Appendix 1
Figure 1: Claims-Management Value Chain
Appendix 2
Figure 2: Claims Department Organizational Structure
Appendix 3
Figure 3: Structure of a Supply Chain
Appendix 4
Figure 4: Workflow Chart for Claims Processing
Appendix 5: References:
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Davies, P. (2004). What’s This India Business?: Offshoring, Outsourcing, and the Global Services Revolution. London: Nicholas Brealey Publishing.
Dick, N. (2007). Choosing Innovation Over Cutting Costs: Market Opportunities and Challenges in the Insurance Industry. Munich: VerlagVersicherungswirtsch.
Fischer, L. (2000). Excellence in Practice: Innovation and excellence in workflow process and knowledge management, Volume 3. Florida: Future Strategies Inc.
Heldman, K., &Mangano, V. (2011).PMP: Project Management Professional Exam Review Guide. New Jersey: John Wiley & Sons.
Harwood, S. (2003).Erp: The Implementation Cycle. Amsterdam: Elsevier.
Kerzner, H., & International Institute for Learning (2010).Project Management: Best Practices: Achieving Global Excellence. New Jersey: John Wiley & Sons.
Martin, J. (2006). Lean Six Sigma for Supply Chain Management. New York: McGraw-Hill Professional.
Madu, N. C., &Kuei, C. (2005).ErpAnd Supply Chain Management. Fairfield: Chi Publishers Inc.
O’Leary, E. D. (2000). Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce, and Risk. London: Cambridge University Press.
Tarantino, A., &Cernauskas, D. (2009).Risk Management in Finance: Six Sigma and other Next Generation Techniques. New Jersey: John Wiley & Sons.
