Blue Cross Blue Shield of North Carolina Plant Tour
Table of Contents
Introduction……………………………………………………………………………………..…3
Operations Strategy……………………………………………..…………………………………4
Value Measurement……………………………………….………………………………………5
Product and Service Quality………………………………………………………………………7
Process Design……………………………………………………….……………………………8
Location…………………………………………...………………………………………………9
Capacity……………………………………………………………….…………………………11
Layout……………………………………………………………………………………………11
Operations Management…………………………………………………………………………12
Forecasting……………………………………………………….………………………………13
Planning and Supply………………………………………………………..……………………15
Suppliers and Outsourcing……………………………………………….………………………16
Globalization……………………………………………………………..………………………17
Project Portfolio………………………………………………………….………………………17
Recommendations………………………………………………………..………………………17
Conclusion…………………………………………………………….…………………………19
Appendixes………………………………………………………………………………………21
Introduction
The supply chain management plant tour was an excellent opportunity for students to visit high-status agencies that help us visualize and apply what we are learning at UNCG. This activity also allowed us to work on improving our social skills and professionalism, as social graces and etiquette are often fine-tuned via experiences.
Our group, which consisted of Dennis Martinez, Ngan Tran, and Karin Willet, completed our plant tour at the headquarters of Blue Cross Blue Shield (BCBS) in Durham, North Carolina on April 1st, 2018. We spent the day with Robert Gofourth (business card attached), Vice-President of Operations Management, who offered us a chance experience first-hand the differing levels, departments, and functions involved in the operations behind BCBS. This tour was a beneficial way to show us how the company has grown into the extremely successful business they are today.
In 1933, Blue Cross Blue Shield started their business with three major Operations centers in Durham, Fayetteville, and Winston-Salem, and a small sales group in Charlotte. Five thousand employeesserve more than 3.9 million customers. Twenty-seven hundred of these employees work in the Operations Department alone. Included under Operations are: strategy, innovative reporting, analytics, portfolio, and business advisory. In the 85 years BCBS has been standing, they have claimed 80% of the current insurance market. They handle approximately 14 billion claims quarterly.
Operations Strategy
Blue Cross Blue Shield is non-for-profit organization whose strategy aligns to the mission of the organization. While the organization is non-for-profit, that also means: no margin, no mission. The Operation division focuses on the following components: operational efficiency, business intelligence, continuous improvement and quality, service delivery, and customer engagement and talent development.
In order to utilize those operation functions to compete in cost differentiation and response, BCBS must deliver sustainable value by combining an optimized operational core delivered with investment in new, experience-focused capabilities. The emphasis is to deliver flawless basics at all levels. The company has been working efficiently and effectively thanks to their stated initiatives.
There are 13 core initiatives that Operations is focusing on in 2018 to align with the overall enterprise strategy. These initiatives are observed and worked on each day by every employee in Operations. The project management department drives and tracks progress weekly. The project lead enforces the deliverables and moves the project forward each week. There is also a dashboard that is updated with the critical success measures, as well as basic project management elements such as a project calendar and stated deliverables.
A recent new strategy implemented is See it, Own it, Solve it, Do it (Appendix 3). This new model focuses on each employee being empowered to handle every situation properly and gives them responsibility to own any issue they see. This strategy includes BCBS’s 2018 top priorities as far as improvements, and also where their main focuses lie (Appendix 3).
Value Measurement
Value has become a key topic in health care. It is derived from perceived needed and expected services. Internally, value is measured by health scores via internal and independent third parties that measure and validate results. In details, value has to be defined from the perspective of the consumer. The question is, are its customers internal or external? While Blue Cross Blue Shield considers both, the true customers are their members. Being a non-for-profit, the company’s focus can primarily be on their members and can deliver health and wellness to them.
Blue Cross Blue Shield has been structuring new payment models, adopting technology, and making better use of data in order to satisfy customer’s needs. BCBS classifies those needs into five measurement systems regarding customer satisfaction. Firs, there is the option for an after-call survey. When a customer calls their customer experience center, they have the option to opt in to the survey and rate the service given by the Operations employee. Also, most calls are recorded to improve customer experience.
Second, twice a year Blue Cross Blue Shield sends out a Net Promoter Score postcard survey to all employees.The employee Net Promoter Score (eNPS) is a simple way to measure loyalty and an employee's willingness to recommend working at the company. It tracks employee's answers to questions such as: “On a scale from 1-10, how likely are you to recommend working at Blue Cross Blue Shield to a friend?” Scores for a company can range from -100 to 100, and anything between 10-50 is considered a good score. Blue Cross Blue Shield's Employee Net Promoter Score is currently at 19.
Third, a third-party called SQM is hired to survey members on any issues they experience and then rate the outcomes and resolution. This will help BCBS see where their biggest holes are and where they can improve.
Fourth, company member focus groups occur quarterly. Random members are selected and asked to come in for meetings where they are surveyed and brainstorm regarding common member issues.
Last, the federal government has a measurement system and independent body called the Centers for Medicare & Medicaid Services (CMS). They independently survey members with a sophisticated survey on their relationship with primary care, insurance companies, and health scores. The CMS star rating system considers 53 quality measures, such as: success in providing preventive services, managing chronic illness, and minimizing consumer complaints. Moreover, there are four sources that help CMS define each plan’s score: CMS data on plan quality and customer satisfaction, the Consumer Assessment of Healthcare Providers and Systems, the Healthcare Effectiveness Data and Information Set, and Health Outcomes Survey.
Product and Service Quality
Insurance is typically used as a tool to avoid financial risk. However, health insurance by its nature has a different focus. The focus is for health and wellness of North Carolina. Because the company is non-for-profit, they are mission-driven rather than driven by profit. The quality of products and services assessed in the company are their customer satisfaction as well as health outcomes. They are measured by the five measurement systems discussed above. Blue Cross Blue Shield also puts processes in place to ensure provision of quality products and services. Blue Cross Blue Shield measures escalations internally from the NC Department of Insurance and from the federal body. This workflow configuration shows all the various sections that that BCBS focuses on providing value in.
Process Design
The company does use design-thinking, but overall utilizes LEAN and either Six Sigma or Design for Six Sigma. These are documented processes. In addition, the company uses value stream mapping and value stream management in order to identify impediments of value delivery, and to identify the process of mapping value streams that require inter-departmental engagement. Value streams are a sequence of activities required to design, produce, and provide a specific good or service, and along which information, materials, and worth flows.
Blue Cross Blue Shield does not use a formal ERP system, which is a shared database that supports multiple functions used by different business units.. However, data is harnessed for supply and demand modeling, and driven off of value streams which are mapped and published.
There are four value streams within the organization. First, value streams begin and end with the external customer who is actually paying the bills. Second, value stream maps must explicitly include customer "touch points," depending upon their industry. Third, value stream maps should reveal all "hand-offs" between and among functional areas or departments across the entire value stream. Finally, value stream maps should make it possible to exceed the awareness of internal customers, providing everyone in the organization with a "line of sight" to the real customer.
The company doesn’t use a formal inventory management system, but uses more informal systems governed by value streams.
Location
Blue Cross Blue Shield headquarters is currently located at 1965 Ivy Creek Blvd in Durham, North Carolina. There are many reasons why the company made a regional decision to select North Carolina as their headquarters base 85 years ago. One large reason for this location choice was because the state of North Carolina was offering them a very good deal on property taxes, as the state wanted to bring more jobs and opportunity to the area. Originally, in 1972 the headquarters was located in an older building in Chapel Hill. It was architecturally stunning as an all glass building, but the building was too costly, inefficient, and wasted too much energy to keep it running.
Original headquarters in Chapel Hill.
The company then decided to move their headquarters to Durham in 2016. The state again offered benefits if they picked Durham, and the area of Durham has grown around the company. Because of the geographic location in regards to being between the beach and mountains., since they were rather “in the middle”, BCBS was able to build two other locations, one near the beach and another near the mountains. They were able to save over half of their utility bills by moving to the new Durham headquarters. There are eight buildings located on this large, impressive campus.
Capacity
There are two perspectives in how Blue Cross Blue Shield approaches their capacity planning. These perspectives are excess and reduction, based on the company’s annual sales, which in term causes their demand to flex. Since we chose an insurance company as our plant, their demand is not regarding a tangible item like a normal factory or warehouse would manage.
Regarding the company’s department of Operations, the work translates into employee demand.
BCBS does their best to avoid problems with demand exceeding capacity and vice versa. They do not have a seasonal workforce or a large part-time force. Over 80% of their employees are full-time and the rest are either part-time are interns. Although, during peak times in December and January, the company uses temps to assist through those busy seasons.
The company offers a two year rotating program for new hires. This is primarily for recent graduates, but allows a new hire to pick three departments they would like to “try out.” During this two year period, the employee rotates within the three departments, and at the end of the time frame, the employee chooses their favorite department to stay with. This is a very beneficial opportunity for those wanting a job with the company who are unsure which department they would fit with best.
Layout
The company’s layout has changed significantly over the years due to the relocation from one campus to another. Blue Cross Blue Shield of North Carolina is a single state plan, which means the company primarily serves people in the state of North Carolina, but there are other minor markets served as well. For convenience and financial reasons, the company sold its well-known headquarters in Chapel Hill to the state and relocated to one large campus in Durham. By moving onto this campus, they were able to lay out the eight different buildings into the arrangement they deemed best for them.
The Operations building that we toured has each floor of the building dedicated to certain sections. The building has three floors: the first floor is dedicated to the call center, the second floor is dedicated to the internal process of the call center and the command center, and the third floor is dedicated to the high level executives and their teams. On each floor however are several subsections that all make up the original sections handled under Operations. Across from this building is the IT center for the company. See Appendix 4 for a layout of the Operations building.
Operations Management
The organization has used Six Sigma and Leaf for about the last ten years. Per our contact Robert, “Six Sigma is a quality program that, when all is said and done, improves your customer’s experience, lowers your costs, and builds better leaders.” The company has moved some practices into Agile over the last couple of years in order to actually be agile and they are currently in the midst of moving into Block-Chain.
With each of these, their approach of value stream mapping is applicable. Many of their employees are a Black Belt in Six Sigma and provide Six Sigma courses to some of their employees as well. Our tour leader Robert Gofourth is a Black Belt in Six Sigma. When we toured the plant, many of the employees we met and spoke with had Six Sigma plaques hung up on their walls or displayed on their desks.
Forecasting
Accuracy of forecast is performed every month and is generally accurate within 10% at Blue Cross Blue Shield of North Carolina. This is performed for staffing, as well as any outsourced operational volume. Forecasting is used to determine estimated volume of enrollment, received claims, and call volume. Those numbers are then used to determine staffing levels. BCBS doesn’t have a typical output like a manufacturing plant or warehouse does. Output to them includes how many claims they need to settle, how many calls to process, how many cubicles to fill, etc.
They specifically use a formula called Erlang C. This helps them know how many employees they need in their call center to handle call intakes. They have to look at how many calls are received in an hour, the average duration of those calls, and the average delay tolerated in answering calls. This data is something we witnessed in the Command Center. On one particular claims line, over 1000 calls had already been answered by 11am, and that was on a slow day!Their forecasting is reconciled monthly with a 90 day outlook.
The call center command center displaying all calls currently being handled.
Planning and Supply
Planning is done via membership countsand historic volumes, which determine demand. By keeping track of new members and also consistently observing current and past member numbers, they can compare demand to help them judge what future numbers will and should look like. They have 3.9 million members currently.
Supply is calculated by using history volumes, production per hour, and service level agreements and targets. Again, they watch demand to see how much supply there needs to be to meet their goals. Service level agreements and targets will help employees stay on track as far as what those goals for supply are. Production per hour is watched to see if they’re meeting the supply targets.
All planning starts in Reporting and Analytics. Demandis forecasted by the business and supply is calculated by support functions. This allowsseparation of duties and independence among different departments. It also creates accountability between teams and departments. It requires a staff of five teammates to handle these different aspects. Supply and demand scheduling is a continuous process that is produced weekly.
Suppliers and Outsourcing
During peaks and unexpected spikes, the company has relationships with outsourcers around the globe that can give assistance and help to the members at all times. Claims issues are sometimes handled by agents stationed in India, and there is a contact center in the Philippines. This allows insurance companies and members to reach a BCBS agent at any hour of the day or night. A demand forecast is given to the vendors, who then in turn determine their staffing needs. There hasn’t seemed to be a huge issue with this outsourcing among the company. It’s especially helpful due to the time change so that members and providers can still reach someone even after the office is closed.
Suppliers are selected using a RFP (Request For Proposal) bid, and the selection process is performed every 3 – 5 years. The company evaluates the performance of the suppliers by observing targets and service level agreements. These are typically governed by BCBS member’s contracts, and then those goals are outlined in the vendor contracts. Performance is
measured daily to ensure appropriate work is being done, but they are also typically managed monthly.
Globalization
The shrinking of the Affordable Care Act book of business is a tremendous environmentalchallenge to the organization and the industry. With the current administration un-doing existing healthcare, it can be in a precarious position. As far as competing globally, they are already involved in other businesses around the globe. A good amount of their claims handling is in India and call centers are in the Philippines.
Project Portfolio
As discussed in class, we were able to see the difference between a project and a program. A project has a beginning and an end. The Project Portfolio section handles the supply chain for starting a new project and the steps that ensue. See Appendix 5 for all the steps involved that include the checklists, the strategies that are necessary for the project to succeed, and the various project types. Whenever there is a new project that needs to be put in place, the Project Portfolio team is responsible for it.
See Appendix 6 for an example of the Portfolio Prioritization. This describes step-by-step how to handle and prioritize the process of a portfolio.
Recommendations
There are some areas in Blue Cross Blue Shield that do need improvement. Such a large company appears to run smoothly, but there are always holes and areas that can be improved upon. The instability of the Affordable Care Act brings great volatility to the organization. With health care in such a disarray and constantly changing, it’s hard to feel stable with their plans. In 2016, there was a system failure which caused quite a loss of members and profit. There have also been issues with incorrect coding in new systems that have been incorporated. Another hindrance to Blue Cross Blue Shield is that claims must be filed within 180 days, or interest will be charged by payers. This can cause difficulties.
A recommendation that could potentially help the company improve is to develop an easier processing system for claims. We were told that currently for a member to visit an out-of-state health center, the hospital being visited first needs to contact another BCBS department to inform them the situation, then that department contacts the North Carolina offices and someone at the headquarters has to handle it. They decide if the out-of-state claim will be processed and approved, or denied. Next, BCBS has to rule on what the payment would be. The middleman then contacts the initial location and finally that location notifies the patient what the outcome would be. This is very involved and confusing and could be performed in a much more streamlined manner.
A better solution for this situation would be that the employees at the North Carolina center could reach the out-of-state hospital or health center and handle the claim to enable a solution for the customer much faster. This will remove the middleman and be a much more efficient way to come to a resolution.
A graph displaying quality errors
A graph displaying the process of reporting issues and errors
Conclusion
The opportunity our group had to visit the Blue Cross Blue Shield of North Carolina headquarters was so appreciated. BCBS is such an enormous company, it was fascinating being able to witness behind the scenes of how this company is run. We were given the chance to talk to the heads of each of the main subsections under Operations Management, which we thoroughly enjoyed.
Often, it’s believed that only businesses with physical products can really utilize supply chain. This clearly isn’t true as BCBS doesn’t manage anything like that, yet they still have a very solid Operations department. Witnessing the vast amount of employees, and hearing from a variety of them who stated how fantastic the company is, was certainly encouraging to hear.
This tour plant showed us that subjects from class such as forecasting, Six Sigma, strategy, and the process of supply chain truly is relevant regardless of the type of business. Students learn about these topics, but having the chance to witness and actually see how they are utilized in “the real world” was incredibly beneficial to us.
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