A story about a health insurance company’s RFP journey to the right vendor partner and 23% pricing relief on a ten-digit investment.
Craig Johansen
Sourcing and Vendor Management Consultant
Mitch Robbins ( Billy Crystal) was invited to speak at his son’s career day at school. A radio ad salesman, Mitch was in a bit of a midlife rut. Nonetheless, he showed up for career day. The classroom was full of students and parents. Of course, a lot was on the line for Mitch’s son. Dad needed to make a good impression. While Mitch initially appeared ready, he had the misfortune of following the construction worker who regaled the kids with a story about the time he was thrown into a crisis and had to use superhuman strength to lift a fallen crane off another man to save his life.
It was Mitch’s turn. He began explaining his work which quickly devolves into the conclusion that he basically sells air. As he realizes how ridiculous this sounds in contrast to the superhuman story shared with the kids, and given his already compromised state of mind about his life, he pauses and then hits the room with the following pearl of wisdom:
“Value this time in your life kids, because this is the time in your life when you still have your choices, and it goes by so fast. When you’re a teenager you think you can do anything, and you do. Your twenties are a blur. Your thirties, you raise your family, you make a little money and you think to yourself, “What happened to my twenties?” Your forties, you grow a little pot belly you grow another chin. The music starts to get too loud and one of your old girlfriends from high school becomes a grandmother. Your fifties you have a minor surgery. You’ll call it a procedure, but it’s a surgery. Your sixties you have a major surgery, the music is still loud but it doesn’t matter because you can’t hear it anyway. Seventies, you and the wife retire to Fort Lauderdale, you start eating dinner at two in the afternoon, lunch around ten, breakfast the night before. And you spend most of your time wandering around malls looking for the ultimate in soft yogurt and muttering, “How come the kids don’t call?”, “How come the kids don’t call?” By the eighties, you’ve had a major stroke, and you end up babbling to a nurse who your wife can’t stand but who you call mama. Any questions?”
So, what does this scene from the movie City Slickers have to do with managing an RFP for a health insurance company? In the frame of a dark comedy rant, this scene paints a compelling perspective of a life, multiplied by millions, in which chronic health issues become part of life.
While we can all use a little more humor these days, the reality of chronic health issues, and the cost we all incur to manage them, is no laughing matter. According to analysis of recent CDC data, Americans living with chronic physical and mental health conditions account for 90% of approximately $3.3 trillion the U.S. spends each year on healthcare.
And therein lies the explosive demand for Care Management and the analytics technology necessary for healthcare organizations to deliver on it.
Although technology for Care Management analytics is a relatively new thing, it is a mission critical effort for a health insurance company. So, finding the right technology partner is not only paramount, it’s tricky. Contrary to self-declared excellence in the space by the technology providers themselves, there’s really no clear benchmark for satisfying this business need.
For this health insurance company, the eventual vendor partner would indeed be a true partner, not only for today’s needs but also those of at least the next decade. And that demands a thorough vendor vetting process by way of the RFP.
So that’s journey we embarked on together. But why use a third party to manage the process?
With any mission-critical RFP project, it’s important to first evaluate if your organization is best positioned to self-manage the project or bring in a third party.
While no doubt some of the following information will come off as self-promoting for Seprio, it doesn’t make it less true or less valuable for you the reader or any organization that uses a third party to manage an RFP project. Now that we have that out of the way, let’s move forward.
In this particular case the head of health services management and the CIO were co-project champions. While ultimately the CEO owned the results, the co-project champions were jointly responsible for execution of the work necessary to achieve the results. Relying on past relationships and experiences may deliver the same result as reading yesterday’s newspaper; so, objectively selecting such a critical business partner was a project imperative. Thus, as a leadership team, they assembled early in the timeline to map out the strategy that would best enable evaluating and selecting the right vendor partner.
Here’s why they elected to tap into third party assistance to manage the RFP project:
1) Relief. While their team on the ground possessed the core business and technology subject matter expertise, the new and growing requirements for Care Management analytics were stretching everyone. This was a complex business need.
Add to that the necessity of effectively managing the RFP project. It would be overwhelming for the team. On its own, RFP management is a form of Project Management, which requires considerable bandwidth and a unique expertise that can span multiple disciplines to coordinate effectively with all the key areas of the client company directly impacted by a mission-critical, enterprise-wide project.
With a third party managing the project, they could reduce the increased workload (yes, you read that right “reduce the increased…”) and protect the team, the business, and the members from the sub-optimized results that often come from “decisions-under-duress”.
Decisions-under-duress is real because a best practice RFP project requires a minimum of 200 milestones within the following phases:
a. Understand the landscape.
b. Assemble the team.
c. Establish the priorities.
d. Set the strategy.
e. Collect information.
f. Select a partner.
Managing such a project in-house almost always creates an environment of duress for teams that are often already stretched thin. How can anyone be expected to achieve excellence in the outcome of such a project without the proper broad expertise and necessary bandwidth to deliver project objectives?
2) Value. To be frugal is to prioritize economic value wisely. To be cheap is to prioritize saving money regardless of the total cost. Business leaders understandably often feel boxed in by budget limitations. And because they fail to budget third party assistance for an RFP project, the budget limitation of today equals a cheap decision that proves costly for many tomorrows. Bottom line, the cheapest price does not equal the lowest Total Cost of Ownership (TCO), which thereby serves as a major contributor in achieving the highest value.
This team understood the importance of being frugal to achieve value with respect to making the right selection of their future vendor partner. They determined that economic value for such a mission-critical initiative required doing the first thing right: run a third-party managed RFP.
Before we take a look at the aforementioned complexity and the result of this particular RFP project, let’s cover additional reasons why an RFP is the correct choice, and why it’s wise to have an objective, third party manage it. These topics are covered in depth in past blogs and in SeprioU. For now, let’s review…
1) Objectivity. Objectivity enables competition. Competition fosters greater objectivity. Objectivity is the absence of bias or emotional interference. And objectivity is the most valuable mindset currency a business team can obtain when making mission-critical vendor partner selections. A best practice RFP project creates competition. With it, the probability of choosing the right vendor partner and succeeding with that partner increases exponentially.
2) Mitigation + Optimized Total Cost of Ownership (TCO). Choosing a third party to manage your RFP project is actually the ultimate play on objectivity. The best thing you can do for you and your organization is to remove yourself from the front line of the process. Doing so creates space for you to think with less emotional interference. This will pave the way to the mitigation of risk in terms and conditions and selecting a solution that delivers optimized TCO!
So, what made the Care Management analytics RFP project complex? A variety of regulatory, technology, and business factors highlighted by the following:
1) Deadline. A Medicaid Advantage Plan go-live deadline. This deadline made for a compressed timeline in which the organization must be ready to serve those members and be able to report on that service to get paid, while also meeting the needs of Commercial and Medicaid lines of business.
2) Agility. In an effort to compete, serve, and profit, the technology infrastructure for this initiative needed to leverage the cloud. The cloud ensured a best path for achieving agility to make integration with current and future enterprise systems fast and flexible.
3) Configurability. The team needed configurability without it being complicated. There is no off-the-shelf solution for this broad business need. Although they were working against a compressed timeline, configurability was absolutely critical to ensure “fast flexibility” for the ever-changing business need of Care Management analytics to support multiple lines of business. And that meant particularly high standards for production SLAs and Governance.
4) Security. In healthcare technology, security is a high bar. There are many contributing factors for this high bar including HIPAA, HITRUST, the physical site locations for the platform and implementers, use of subcontractors, and breach response protocols.
5) Cost. How could we have such a list and not include cost?! Because this solution would require much flexibility in configuration, ensuring proper cost controls would prove tricky for both parties. In enterprise-wide projects such as this there are two factors to consider, which are: (a) the recurring cost of the solution and b) the cost to implement it in a timely fashion without making compromises that may “sub-optimize” the utility of the solution in order to meet key strategic dates. Both cost factors needed to be addressed and balanced appropriately.
6) Relationship. All in all, the right vendor would need to be able to deliver not just on performance, but also relationship. In this kind of initiative, both parties are faced with a journey that includes a fair dose of “you don’t know what you don’t know”. A healthy, fair relationship is paramount in preparing for the “don’t knows”.
The RFP project, from start to finish, took 9 months. There were eight vendor partners invited. Four were down selected for orals, demos, and references. Each prospective partner delivered on a scripted demo defined by the Client focused on a key business process. Each then participated in a rigorous information security assessment. Finally, each vendor participated in a thorough pricing exercise.
Two made it to the BAFO (Best and Final Offer) round and an invitation to a “command performance”. A preliminary finalist was selected and engaged for final agreement negotiations.
Interestingly, a current partner providing enterprise technology for this health insurance company participated in the process. But they did not make it to the final four. Boom…objectivity.
In the end, the winning vendor partner was able to successfully navigate the RFP process and demonstrate credibility in all 6 areas of need. And they did it all for 23% less than the initially projected 10-digit price tag.
Now maybe Mitch Robbins can rest a just a little easier with the hope that his kids and grandkids will have access to a better healthcare experience in part because of investments like the one made here in Care Management analytics technology.
Curious what working with Seprio on RFP looks like? Click here.