2014 Leadership Series Best Practices in Conducting an RFP and Selecting and Implementing a New Vendor
DMEC White Paper Series
August 2014
DMEC White Paper—Executive Summary, 2014 Leadership Series
Table of Contents About the Leadership Series—Sessions and Participants.....................................................................3 Executive Summary............................................................................................................................4 What Are the Challenges of the RFP and Implementation Process?....................................................5 How Are Participating Companies Dealing with the Challenges?.......................................................5 Table A: Panelist Overview of RFP Best Practices Identified by Participants..............................................................................................8 Best Practice 1: Make a strong business case for an RFP, prioritize criteria, and detail the RFP (best in class)........................................................................................................8 Best Practice 2: Communicate time and resource requirements to all stakeholders............................11 Best Practice 3: Include all stakeholders within the company, especially the IT team, and develop an RFP cross-functional committee..............................................................................11 Best Practice 4: Make on-site visits to finalist and ensure that the vendor understands the corporate culture and can handle specific scenarios.....................................................................12 Best Practice 5: Develop project plan for implementation that all parties can agree on, including specific milestones, weekly meetings, and a pre-implementation audit before the process goes live...............................................................................................................13 Additional Best Practices..................................................................................................................14 Conclusion.......................................................................................................................................15 Appendix: Presenting Employers and Panelists.................................................................................16
Copyright DMEC 2014. All rights reserved.
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About the Leadership Series The 2014 DMEC Leadership Series, sponsored by Liberty Mutual Insurance for the tenth consecutive year, explored best practices in conducting a Request for Proposal (RFP) and selecting and implementing a new vendor. Human resources managers, disability managers, health and productivity managers, and benefits managers from a variety of industries and companies came together to explore the most effective and efficient components of the RFP and implementation process. A panel was convened in Seattle, Washington, on March 25, 2014, with a follow-up webinar roundtable held on May 8. Topics discussed included:
The major reasons that support conducting an RFP and the importance of building a business case The extensive commitment of time and allotment of resources required in conducting an RFP and selecting and implementing a new vendor
The challenges that employers face in each stage of the RFP and implementation process Key components to successfully plan and conduct an RFP and analyze, select, and implement new vendors
Essential role of project managers to successfully implement and integrate the new vendor into the company’s culture
Important considerations during documentation, including performance guarantees and favorable terms for the client
During the presentations, attendees were encouraged to ask questions and relate their own experiences in their respective corporate environments. DMEC’s Executive Director, Terri Rhodes, CPDM, CCMP, MBA, served as moderator. Heather Luiz, CPDM, Director, Product Development for Liberty Mutual Insurance Group Benefits, attended as the Leadership Series sponsor.
Leadership Series—Session and Participants (see page 16 for detailed information on presenting employers and panelists)
In-Person Session, March 25, 2014, Seattle, Washington, Panelists: Katie Rautman, HR Operations Manager, Starbucks Coffee Company Jason J. Denis, MS, CRC, SPHR, Director of Absence Management at Providence Health & Services Lynn Soliday, CPDM, Leave and Disability Program Manager for Group Health Webinar, May 8, 2014, Panelists: Patrick Leary, Principal Benefits Manager, Genentech/Roche Joy-Lynn S. Tyler, Director of Employee Benefits and HIPAA Privacy Officer, Extended Stay America
The best practices developed through the collective experience of the panelists will highlight important considerations and steps to successfully and seamlessly conduct an RFP and select and implement a new vendor.
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DMEC White Paper—Executive Summary, 2014 Leadership Series
Executive Summary A variety of factors can influence the decision and timing of conducting an RFP, including but not limited to expiration of existing contracts, need for streamlined and consistent administration, potential cost savings and efficiencies, integration of programs, and enhanced services for employees. Whatever the catalyst for change might be, the RFP process can help a company benefit from competitive pricing, improved service, economies of scale, and integrated programs either with an existing provider or a new vendor that might be a better fit for the company’s current and future needs and plans. As Executive Director of DMEC Terri Rhodes reminded the participants, “The vendor landscape is changing all the time; there are new vendors entering the market and existing vendors who have enhanced the services they provide and overall are more advanced today.” As the chart below illustrates, the RFP process has four major steps: 1) Pre-Planning
Terri Rhodes of DMEC, said, “Going through the RFP process is very time-consuming and can be overwhelming. It’s important to understand
2) The RFP
the full process, as it will be
3) Analysis
critical to the success of your
4) Selection
company’s program.”
Each corresponding step has associated challenges and benefits. The 2014 Leadership Series was convened to explore the fundamentals of effective ways to conduct an RFP and select and implement a new vendor. This white paper will highlight the unique experiences of the featured speakers throughout each stage of the RFP and implementation process and provide proven best practices and procedures.
Step I—Pre-Planning
Step II—The RFP
Develop strategy Build timeline Develop RFP Pre-qualify and select vendor participants
Release RFP through ABC procurement Obtain intentions to bid/deadline Collect vendor questions Provide vendor question responses
Step IV—Selection
Step III—Analysis
Conduct finalists site visits Negotiate best and final offers Confirm business case and ROI Select vendor partner
Score responses Contact references Conduct security and background checks Select finalists
Source: Spring Consulting Group, LLC
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Continuous input/feedback with all involved parties
Best Practices Identified The experts agreed that an effective RFP process and selection and implementation of a new vendor are based on a number of major best practices:
Make a strong business case for an RFP, prioritize criteria, and detail the RFP (best in class) Communicate time and resource requirements to all stakeholders Include all stakeholders within the company, especially the IT team, and develop an RFP cross-functional committee
Conduct on-site visits to finalists and ensure that the vendor understands the corporate culture and can handle specific scenarios
Develop a project plan for implementation that all parties agree to, including specific milestones, weekly meetings, and a pre-implementation audit before the process goes live
A well-designed and well-executed RFP will position a company to maximize offerings of price, service, and partnership with an existing or new vendor and will help minimize the challenges of implementation.
What Are the Challenges of the RFP and Implementation Process? As with any major project, companies face inherent challenges throughout the RFP process, both internally and externally. However, an RFP is an excellent management tool that enables a company to maximize the value of services and cost efficiencies through a bidding process by selecting a vendor that will provide the most favorable terms while meeting both present and future needs of the company. Common challenges that many companies encounter during the RFP and implementation process include:
The huge commitment of time and resources required to manage this process and implement any changes
Planning the RFP design and/or policy changes Coordinating IT resources and confirming they are speaking the same language Supporting communication between providers Cross-functional communication within the company
How Are Participating Companies Dealing with the Challenges of the RFP and Implementation Process? The in-person and webinar panelists provided insight into the challenges employers face during the RFP, selection, and implementation process. Prompted by a variety of reasons to launch an RFP, these featured companies shared common and unique challenges during the process. Table A below provides a brief overview of the participating panelist companies.
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DMEC White Paper—Executive Summary, 2014 Leadership Series
Table A Company
Size of Company
RFI
Type RFP
#US Employees
Leveraged Consultant for RFP
#Vendors On-site Timing to for RFP Visit with Conduct RFP Finalists & Implement
*Starbucks
130,000
Yes, for start
Yes
LOA
12, 7, 4
Yes
Almost 2 Years
Providence Health & Services
70,000 cargivers; ⅓ Union; 3,000 physicians
Yes, for start Aon/Hewitt
No
LOA
N/A**
Yes
1 year
Group Health
7,000; 3 unions; contract with 1,400 doctors & clinicians
Yes, for full time Towers Watson
No
LOA, STD LTD
4, 2
No
LOA = First attempt in 2008 1½ yrs (second attempt in and implemented in 2011)
Genentech/ Roche
22,000
Yes, for start
Varies
All lines
Varies
Varies
On average: 4 months for RFP; 4-6 months for implementation
Yes
No
All lines
Varies
Varies
1 year
***Extended 10,000 Stay America
* Benefits offered to full-time and part-time partners (employees). ** Providence was already working with three vendors and felt they had info they needed based on direct experience. *** Only 4,000 full-time associates are eligible for H&W benefits.
Starbucks Coffee Company Katie Rautman, HR Operations Manager, discussed the challenges of managing an RFP within the context of critical timing issues and important criteria specific to Starbucks. Talks began in January 2012 before launching an RFI and subsequent RFP. Nine years had passed since the first outsourcing program, and the current contract was set to expire September 30, 2013. The RFP process offered a good opportunity to reevaluate the marketplace along with the current provider; however, with this hard-stop deadline, timing was essential. As Rautman said, “There was no option to not have a successful implementation. We needed to go live on October 1, 2013, or we couldn’t manage the 14,000 leaves per year internally.” Rautman stressed that getting all stakeholders involved early on was critical to the successful outcome of Starbucks’ RFP process and implementation of a new vendor. A primary goal for Starbucks is to always think of the partner experience. “We care for them, and they care for our customers,” Rautman stated. With a very young population of partners, Starbucks needed to determine “how to meet them where they are,” and leveraging technology differently to simplify the process and ease the administrative burden was a key element on the company’s wish list, especially since the existing process allowed only phone applications. Starbucks ultimately chose Sedgwick, and their partners/employees can send and receive text messages instead of calling during call center hours. “This helps create flexibility,” Rautman said.
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Providence Health & Services Jason J. Denis, Director of Absence Management at Providence, a not-for-profit Catholic health care ministry, discussed the challenges of integrating and administering programs within a dynamic corporation that is strategically growing through acquisitions and affiliations. “This was far from the traditional RFP,” Denis explained. Before September 1, 2013, Providence had nine different programs, 12 contact numbers, four contracts with three third-party administrators (“TPAs”), multiple data sources, 38 policies, and 77 forms/reference documents on its web portal. With such a fragmented and decentralized system for LOA administration, Providence needed better consistency in administration, communication, harmonization, standardization, data collection, and compliance. Providence chose Sedgwick to administer its leave-of-absence program. After implementation (i.e., from September 1, 2013, to present), Providence has one program, one contact number, one contract with one TPA, one data source, five policies, and only nine forms/reference documents.
Group Health Lynn Soliday, Leave and Disability Program Manager, discussed the unique challenge of changing from a self-administered absence program to outsourcing all LOA and STD claims (LTD and life insurance were already being managed externally by Aetna). Group Health wanted a fully integrated and consistent approach to the management of all leaves. In 2008, Group Health initiated the RFP process and came close to signing a contract with Matrix but then put everything on hold until 2010. Towers Watson was hired as a consultant in June 2010 to help evaluate the potential vendors in the RFP process. Key criteria for Group Health included TPA vendors with a local presence, 24/7 claims intake, and a demonstrated knowledge and understanding of Group Health’s company culture. Sensitivity was imperative, as some staff perceived this dramatic change from internal to external administration of leaves as something that had the potential to dramatically alter past practices with the development of a standard process. Group Health selected Matrix. Some unexpected hiccups and a two-month delay in launch occurred during the implementation phase due to challenges with data managed internally at Group Health. However, Soliday said, “Surveys have been done, and overall satisfaction of employees is good.”
Genentech/Roche Patrick Leary, Principal Benefits Manager, Health & Productivity, is part of the North American Center of Expertise consisting of seven people in Roche US managing the majority of Health and Welfare benefits. His responsibilities include absence, health management, and EAP & Work/Life programs. At any one time, two to three benefits RFPs can be in process. The procurement division plays a key role in each RFP. One of the challenges has been “learning to let go” and to let procurement take over the key processes of managing the RFP. However, Leary acknowledged, “Procurement knows the process. That group knows how to compile, provide all comments, and score.”
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DMEC White Paper—Executive Summary, 2014 Leadership Series
Extended Stay America As Director of Employee Benefits and HIPAA Privacy Officer, Joy-Lynn S. Tyler just went through an RFP for all lines of business that included 12 benefits providers, and the company also just launched an RFP process for internal systems. Key elements of planning and implementation phases are highlighted in the best-practices section.
Best Practices Identified by Participants Employers identified the following best practices that should be taken into consideration when conducting an RFP and selecting and implementing a new vendor. Detailed discussion of each best practice follows.
1. Make a strong business case for an RFP, prioritize criteria, and detail the RFP (best in class) 2. Communicate time and resource requirements to all stakeholders 3. Include all stakeholders within the company, especially the IT team, and develop an RFP cross-functional committee
4. Make on-site visits to finalist and ensure that the vendor understands the corporate culture and can handle specific scenarios
5. Develop a project plan for implementation that all parties can agree on, including specific milestones, weekly meetings, and a pre-implementation audit before the process goes live
Best Practice 1: Make a strong business case for an RFP, prioritize criteria, and detail the RFP (best in class) As Terri Rhodes, Executive Director of DMEC, said, “You need to be able to articulate, upon request, the business reason for undertaking this time-consuming process.” Before undertaking any huge project such as an RFP that requires a large investment in time and resources, presenting a strong business case is important and can help prioritize criteria and direct the design of the RFP. Several of the panelists emphasized the necessity of this best practice, including Katie Rautman of Starbucks, who said, “We had to make a business case. The Human Resources team has a structured process for any large projects requiring funding and IT resources.”
Leverage Expertise from Consultants Consider leveraging expertise from third-party consultants or brokers to provide current market insight, identify potential vendors, and share positive and negative experiences that they have had with these vendors. Almost all the panelists hired a consultant at some stage during the RFP process. Katie Rautman of Starbucks leveraged a consultant before the RFI process began for an initial marketplace overview, including insights into the reputations of the providers. Group Health contracted with broker Towers Watson, which provided industry data that helped build the business case. Towers Watson also did the pre-identification of vendors and provided side-by-side evaluation of vendors for easy comparison during the selection process.
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Although Group Health had a dedicated in-house project manager who managed the internal implementation process, the consultant played a key role in helping them understand the vendors’ capabilities in line with Group Health’s needs. According to Jason Denis of Providence Health & Services, Aon Hewitt helped collect all the policies to show the extensive variations across the system. This enabled Providence to narrow down what they wanted to offer their employees. In addition, Providence polled 18 colleagues in HR to get a sense for the intention of the different leave offerings, which guided the creation of the current system-wide policies. Patrick Leary of Genentech/Roche said, “Consultants know vendor capabilities—the good and the bad.” Leary mentioned that the company has great relationships with the consultants, but ultimately the success or failure of a program is with the Center of Expertise.
Define Clear Goals
Patrick Leary of
As part of the business case and RFP design, it is important to clearly define and prioritize goals. Different employers have different goals depending on their respective corporate cultures.
Genentech/Roche
Although Starbucks strives to be cost-effective, Rautman emphasized, “Look at organizational values and how to tie the goals of the project into what leaders care about.” She explained, “The leadership message at Starbucks is to ‘meet the partners where they are at.’ Although cost-effective measures are important to Starbucks, the goal was never the cost but rather the efficiency for our partners. We told stories about the experiences that partners had on leave and their frustrations, such as the fact that 30% of claims for denials that partners were appealing simply didn’t go through because paperwork had gone to the wrong place.”
know vendor capa-
said, “Consultants bilities—the good and the bad.”
With that in mind, Starbucks prioritized seven criteria in selecting its new vendor: operational excellence; vertical administration; partner who could fully understand and meet the implementation process plan and timeline; proactive partner with solid governance process; predictable and competitive fees; compatibility and capability of IT requirements and security; and partner’s ability to meet specific terms and conditions. Within the business case, Rautman provided statistics (i.e., that on an annual basis 14,000 people, roughly 10% of the U.S. partner population, take leaves). Jason Denis of Providence Health & Services wanted to “harness the power of data” and streamline all of the policies. A key part of that process was asking, “Are we saving money by doing this or at least coming out as cost neutral?” The answer was no. For Providence, this was considered a “cost avoidance” tactic to improve compliance and consistency. Patrick Leary of Genentech/Roche said that important criteria that the Center of Expertise used in determining new vendor selection included finding a partner that would stay on budget while providing excellent services that would enhance attraction and retention of employees. Group Health wanted to improve the leave-of-absence process to create administrative simplicity, reduce management confusion, reduce overall costs, increase program efficiency, and drive better outcomes for all stakeholders. When developing the business case, Group Health used IBI data to determine cost of disability, estimated to be around $23 million. By outsourcing via a well-managed program, Group Health projected savings of 20%, or $4 million. The actual gross savings in lost productivity totaled $5 million. The cost-savings data was a key factor included in determining the business case for outsourcing, as this projected a significant ROI. Integration, harmonization, and cost efficiencies were also key goals for many of the participants.
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DMEC White Paper—Executive Summary, 2014 Leadership Series
Discovery Session Joy-Lynn Tyler of Extended Stay America recommends convening discovery sessions consisting of all department heads from every line of the business before an RFP process even starts. “The sessions allow all departments to speak about their initiatives, needs, pain points, etc. Everyone can come out of their “silo” and see how all the departments work. You discover more about the company as a whole, and that’s when you start to know your company’s true story. Knowing who you are as a company helps you develop who you want to be as a company,” Tyler said. As a whole you can ask some important questions such as: “Where are we going now that we know our story? What do we need from our partners to help us get there? What and where is our pain? What initiatives are we looking to engage in over the next few years? What are the metrics, people, policy, and procedures to help us get there?” These questions are key to developing a strong RFP design. Tyler explained that each pain point should turn into a question in the RFP. Also take time to summarize your company into a three-to-four- page story in the RFP. Talk about the company itself, its culture, processes, people, etc. From the discovery meetings, Tyler suggests developing a strategic three- to five-year plan. This, too, will assist in developing a strong RFP so you can identify partners that will be engaged over the same period of time.
Detail the RFP (best in class) Terri Rhodes, Executive Director of DMEC, stressed the importance of preparing and designing the RFP and making sure you are asking the right questions and including the specific terms your company requires. Joy-Lynn Tyler of Extended Stay America emphasized, “You want to understand everything about the vendors, their services, quality, footing in marketplace, staying power, technology, call center, and communication. Don’t ask just template questions. Ask what the company is doing to improve itself, and outline all the reports you need.” Patrick Leary of Genentech/Roche highlighted the importance of following through with questions by vendors. “There are reasons for their questions,” he said, “and during the selection process, you can then see how the vendors took that information and used it to demonstrate their grasp of your business needs in the RFP.” It is also important to include “client-centric” terms for contracts and service level agreements within the RFP and confirm that vendors can support these requirements and deliver. Tyler reminded everyone that it is very important to review current contracts and service level agreements as part of the planning process and to ask if these contracts are working for you. Tyler said, “Many terms are ‘vendor-centric’ and not ‘client-centric.’ Make sure you put in every contract term you want the vendor to agree to in the RFP.” Tyler emphasized, “I cannot stress enough the importance of getting contract and terms out front and done first. If they sign up for it, then they have to deliver it.” Katie Rautman of Starbucks wanted to make sure a new vendor could agree with her company’s terms and conditions that had specific requirements.
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She explained, “We handcraft beverages and also handcraft specific contracts. Some providers are able to work with that and some aren’t.” Although Starbucks has historically used customized performance guarantees, they did look at best practices and standardized and measured those against the company’s values and made small changes. Providence, too, looked at standard performance guarantees and then looked at best practices, as did Group Health with Towers Watson.
Best Practice 2: Communicate time and resource requirements to all stakeholders As Terri Rhodes, DMEC Executive Director, reminded everyone, “Many employers get in a situation to rush the process. They think it will take six months, when really it is much longer than that. Don’t underestimate time and resources. Make sure you plan enough time for implementation.” Recognizing the huge time commitment and the hard-stop deadline due to contracts expiring, Katie Rautman of Starbucks estimated the actual manpower hours it would require during each phase and presented that in the business case. She made sure to loop in all the critical leaders early on and aimed business case for timeline. It was important to be transparent with all parties about what resources were needed for the RFP in addition to managing everything else happening in the business while this was going on. Rautman emphasized, “We had to go nitty-gritty on the timelines and what the phases would look like.” Patrick Leary of Genentech/Roche emphasized, “Overestimate the number of hours you will use your consultant. Something always comes up, and you will rely on them for things you planned to do yourself.” A timeline should be included in all business cases and understood by all stakeholders. As noted on Table A, the process from RFP to implementation can take as long as two years.
Best Practice 3: Include all stakeholders within the company, especially the IT team, and develop an RFP cross-functional committee Each panelist stressed the importance and efficiency of establishing a cross-functional committee for the entire RFP and implementation process. Joy-Lynn Tyler of Extended Stay America said, “Every line of business should be represented. Don’t leave anyone out. And assign a leader to the committee, someone with ‘skin in the game.’” For most companies, the stakeholders may include IT, Legal, HR, Procurement, Payroll, Employee Relations, Finance, Accounting, Call Center, and Consultants. Katie Rautman of Starbucks said, “We allowed all key stakeholders to have a vote. It worked well. Every team member ended up voting for the same provider.” Patrick Leary said Genentech/ Roche’s mantra is “Divide and Conquer.” For an RFP, the Center of Expertise assembles a cross-functional team to maximize talents. He said, “Bringing ‘customers’ into the process early is essential. It reinforces partnership, makes them vested, and establishes their role as champions of change to leaders and employees, and they can be a great focus group and sounding board.” He also emphasized, “Procurement knows process. Let them own it.”
Katie Rautman of Starbucks said, “We allowed all key stakeholders to have a vote. It worked well.”
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DMEC White Paper—Executive Summary, 2014 Leadership Series
IT Involvement The panelists agreed on the necessity to include IT during all stages of the process. Katie Rautman from Starbucks even brought the IT team to in-person meetings for the on-site visit with Sedgwick and arranged breakout sessions for the two IT teams. It was essential that the IT resources were speaking the same language. However, even with this extra effort of IT team involvement, Rautman realized that during the implementation process, the two IT teams had different understandings about the testing timelines and that a huge gap needed to be resolved because of a misunderstanding of what “testing” meant. Sedgwick came on board and helped the IT team get everything in sync. Lynn Soliday of Group Health also encountered some IT/data challenges during the implementation process that delayed the “Go Live” by two months. Since the leaves had been self-administered at Group Health, there were some hiccups with exchanging the data and file transfers.
Terri Rhodes emphasized, “It is important to include IT resources early on. They are often brought in too late, and they need to be aware of the project timelines so they can allocate resources to the project.”
Terri Rhodes emphasized, “It is important to include IT resources early on. They are often brought in too late, and they need to be aware of the project timelines so they can allocate resources to the project.”
Communication Strategy Cross-functional communication both internally and externally is an important element of the process. Starbucks worked very hard at developing a communication strategy for communicating changes to partners. They worked very closely with the generalist group and internal call center. It was important that there was a liaison between providers. Unum, the former provider, needed to get information to the new provider in order to ensure a seamless process. A triad agreement was put in place between Unum, Sedgwick, and Starbucks.
Best Practice 4: Make on-site visits to finalist and ensure that the vendor understands the corporate culture and can handle specific scenarios An on-site visit is important for the vendor to demonstrate it fully understands the company’s requirements and culture. In addition, it’s imperative that the company has an opportunity to observe the intake center, meet the case managers, and get a better sense of the vendor. An on-site visit provides an opportunity for the company to run specific scenarios and cases by the vendor. Katie Rautman of Starbucks asked Sedgwick to provide a recommendation of who would be assigned to the team. “Meeting the people with whom you will be working every day is very important in the finalist process,” Rautman said.
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Cultural Immersion Many of the panelists and attendees agreed that cultural immersion is an important best practice. Katie Rautman of Starbucks actually went with a senior LOA specialist to Sedgwick and provided a three-hour presentation of and deep dive into who Starbucks is as a company along with an immersion into its corporate culture. Starbucks even provided coffee tastings to share the excitement and knowledge with Sedgwick so they could understand who the partner is and know that caring for the partner is one of the key core values of Starbucks. Rautman said, “It was worth Joy-Lynn Tyler of the investment to do the cultural immersion.” Extended Stay America
Specific Scenarios Joy-Lynn Tyler of Extended Stay America includes specific scenarios in the RFP and stressed, “Everything agreed upon during the RFP you should see in action during the onsite visit.” Katie Rautman of Starbucks did four on-sites with vendors and remarked, “It was interesting to see how companies responded to the case scenarios and to see how they would lead through the process.” Several of the attendees shared their experience at onsites, and all agreed it was an important practice for companies to run specific scenarios by the vendor.
includes specific scenarios in the RFP and stressed, “Everything agreed upon during the RFP you should see in action during the on-site visit.”
Best Practice 5: Develop project plan for implementation that all parties can agree on, including specific milestones, weekly meetings, and a pre-implementation audit before the process goes live Terri Rhodes, Executive Director of DMEC, reminded everyone that it is important to leave enough time for implementation and to determine timelines so appropriate staff resources can be dedicated. Having managed over 17 vendor RFP and implementation processes throughout her career, Joy-Lynn Tyler of Extended Stay America shared that timelines are imperative for the implementation process. It’s important to set up a Project Plan and include every person needed to be part of the implementation so it executes smoothly. Tyler noted, “It’s short-term pain for long-term gain.” Within the Project Plan, establish what needs to be done, the policies and procedures, and the timeline on everything. In addition, Tyler recommended putting two-hour meetings on the calendar every week with the selected vendor and setting milestones and deadlines that must be met each week. She suggested that internal, smaller meetings must be happening, too, such as engaging the Treasury department for wire transfers and Accounting for reporting. Managing the implementation process is a huge undertaking, but the vendor can partner with you. Katie Rautman said that she was the Project Manager for Starbucks, but the Sedgwick Project Manager also did a huge amount of work for them. “Partnership was critical,” Rautman said. Providence couldn’t secure an in-house Project Manager, so Sedgwick and Aon/Hewitt served as combined Project Managers. Group Health utilized an internal Project Manager.
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DMEC White Paper—Executive Summary, 2014 Leadership Series
Pre-Implementation Audit Jason Denis of Providence Health & Services emphasized the importance of a pre-implementation audit and how key it was to the program before going live. “It’s imperative to see how things work and meet the operations manager who is overseeing the account along with the 19 full-time leave specialists dedicated to the company.” Denis also stressed the importance of staying connected and visiting even after implementation. “It’s a way to hold all parties accountable,” he said. Six months after the implementation process, Denis wishes that past practices of administering union leaves had been a bigger part of the discovery and discussion process. Providence and Sedgwick are still trying to stabilize that segment of the program.
Jason Denis of Providence Health & Services emphasized, “It’s imperative to see how things work and meet the operations manager.”
Additional Best Practices Discussions among panelists and participants regarding challenges and strategies for RFP and selection and implementation of a new vendor resulted in several other best practices for employers to consider.
Think forward In choosing a new vendor, consider what your company’s potential future needs might be. Are you looking to integrate health and wellness? What are your vendor’s potential capabilities should you want to expand your programs? A long-term goal for Jason Denis of Providence Health & Services is to move to a system-wide STD policy consistent across the board that Sedgwick would administer. Meanwhile, in 2014 Providence is consolidating its EAP providers from five vendor partners to one. With this, there will be increased opportunities for Sedgwick to play a larger role in driving referrals to the EAP benefit offering. Katie Rautman of Starbucks is looking at future integration opportunities that could possibly include partnering with Cindi West, head of Workers’ Compensation for Starbucks in the U.S. Rautman said, “Sedgwick stood out as someone who was hitting the criteria of what potential needs are in the future.”
Don’t have any big policy changes during the RFP During the RFP process, Starbucks intentionally held off on making any significant policy changes. Rautman said, “We didn’t want to muddy the water. We wanted to focus on a transitory program.”
Determine a metric for measuring success For Starbucks, an increased utilization rate has been a key factor for determining success. As a result of the new vendor’s technology, accessibility, and availability, Starbucks has already noticed an increase in the short-term disability claims rate, primarily with part-time partners. Prior to the implementation, many part-time partners never realized they had access to STD pay replacement. As Lynn Soliday of Group Health stated, “It is very important to have data to measure the success of your program.” Towers Watson provided a data analysis that showed Group Health’s incidence rate was 27 per 100 employees and that the duration rate was very low. That helped the company understand that although employees were taking leaves, they were not staying out long enough to get well.
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Group Health wanted to increase the duration rate, thereby increasing staff health and productivity, and worked with care providers to use their medical expertise in line with medical necessity to determine appropriate duration time frames. In addition, Group Health provided the MD Guidelines to all physician practices as an additional tool in assessing frequency and duration. Historically, utilization rates have been difficult to measure at Providence Health. With the new vendor and stabilized programs in place, the company will have a baseline after the first 12 months. “We will finally have the data for benchmarking how much leave we use as an organization,” Denis said. For all presenters, “customer feedback” is another metric for success. Starbucks developed an electronic survey with Sedgwick to send to partners who took leave, and any feedback from the call center gets looped back to Sedgwick. For Providence, a combination of surveys of managers and employees are sent with questions such as “How easy or difficult was the process?” In addition, individual escalations are handled through the HR center, and there are weekly calls with the operation team at Sedgwick. Every issue is thoroughly investigated. Denis said, “This way you can see if it is one-off or indicative of a processimprovement opportunity.”
As Lynn Soliday of Group Health stated, “It is very important to have data to measure the success of your program.”
Conclusion Although the RFP process can be very time-consuming and overwhelming, it is an excellent tool for employers to use in evaluating the current marketplace. It provides a framework to assist employers in deciding whether to hire a new vendor or retain an existing one to administer programs in an optimal way to achieve specific company goals. Making a business case for the RFP and tying it into the goals of the company can help management understand the reasons for the change, the required allocation of resources, and the timeline for each phase of the process. It is imperative to include all stakeholders, especially IT resources, early on in the process and to detail the RFP with best-in-class, customized questions and specific requirements. Contractual terms should be “client-centric” rather than “vendor-centric.” The vendor should fully understand your company’s culture and your expectations of service. On-site finalist meetings are highly recommended, and employers are encouraged to present specific scenarios to observe the intake center and operating plan of the vendor. On-sites will also provide an opportunity to meet members of the team who will be handling the account. Once a new vendor is selected, it is important to develop a project plan for implementation that all parties can agree on. Timelines with weekly meetings scheduled to reach specific milestones should be established.
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DMEC White Paper—Executive Summary, 2014 Leadership Series
Appendix Presenting Employers and Panelists Extended Stay America Headquartered in Charlotte, North Carolina, Extended Stay America operates 684 hotels with more than 76,000 rooms nationwide in 44 states under the brands Extended Stay America®, Extended Stay Canada®, and Crossland® Economy Studios. Extended Stay America is determined to be a world-class leader within its economic price point within the industry by striving to provide excellent customer service. The company employs a workforce in the United States and Canada of over 10,000 associates, of whom 4,000 are full time and eligible for H&W benefits. In addition, the remaining population is eligible for retirement savings benefits and other programs. Fifty percent of associates are Spanish-speaking. Joy-Lynn S. Tyler Director of Employee Benefits and HIPAA Privacy Officer
[email protected] Genentech/Roche Roche is a leader in research-focused healthcare, with combined strengths in pharmaceuticals and diagnostics. Roche is the world’s largest biotech company and the world leader in in vitro diagnostics and tissue-based cancer diagnostics and a front runner in diabetes management. Roche’s personalized health care strategy aims at providing medicines and diagnostic tools that enable tangible improvements in the health, quality of life, and survival of patients. Roche repurchased Genentech and provides services to all U.S. affiliates of the Roche Group. The company has over 20,000 U.S. employees. Patrick Leary Principal Benefits Manager
[email protected] Group Health Group Health Cooperative was opened in 1947 by a community coalition dedicated to making quality health care available and affordable. What began as a small, pioneering community venture more than 60 years ago has evolved into a nationally acclaimed organization that was recognized as a model for national health care reform. Currently Group Health provides medical coverage and care to more than 600,000 residents in Washington state and North Idaho. Group Health employs over 7,000 total staff. Over half of the total staff belong to one of three bargaining units. Group Health contracts with Group Health Physicians, an American Medical Group Association headquartered in Seattle, Washington, with 1,400 doctors and clinicians. Lynn Soliday, CPDM
[email protected] Providence Health & Services Providence Health & Services is a faith-based health care system whose vision is “Together, we answer the call of every person we serve: Know me, care for me, ease my way.” With a total net operation income of $10.6 billion and a geographic reach of five Western states (California, Oregon, Washington, Montana,
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and Alaska), the company employs 70,000 employees and 3,000 physicians. One-third of the population is unionized, with 60 CBAs. The company generously supports $1 billion in community benefit/charity care. Jason J. Denis, MS, SPHR, CRC
[email protected] Starbucks Coffee Company Established in 1971, Starbucks has over 7,000 stores in the U.S., with 130,000 employees/partners in the U.S. There are 20,000 stores in 64 countries. Katie Rautman, PHR
[email protected]
Special thanks to the following for their participation and support, which made this program possible: Heather Luiz, CPDM Director, Product Development Liberty Mutual Insurance Group Benefits Terri Rhodes, CPDM, CCMP, MBA Executive Director DMEC – Moderator Margaret McSweeney Editor
Program Organizers Disability Management Employer Coalition (DMEC) The Disability Management Employer Coalition (DMEC) is a nonprofit organization that advances strategies and resources to improve workforce productivity by minimizing the impact of absence and disability. The primary goal of DMEC is to assist employers in developing cost-saving programs and returning employees to productive employment. Visit www.dmec.org for more information about educational publications and events. Liberty Mutual Insurance “Helping people live safer, more secure lives” since 1912, Liberty Mutual Insurance, a diversified global insurer, is one of the largest property and casualty insurers in the U.S. and is consistently ranked on the Fortune 100 list of largest U.S. corporations based on revenue. Liberty Mutual offers tailored insurance and risk management solutions to businesses of all types and sizes. From commercial auto, general liability, and property to workers compensation, group benefits, multinational, and specialty coverages, Liberty Mutual’s products and services help protect businesses and their employees. Liberty Mutual (www.liberty mutualgroup.com) employs over 50,000 people in more than 900 locations throughout the world. As of December 31, 2013 Liberty Mutual Insurance had $121.2 billion in consolidated assets, $102.2 billion in consolidated liabilities, and $38.5 billion in annual consolidated revenue.
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DMEC White Paper—Executive Summary, 2014 Leadership Series
The Disability Management Employer Coalition (DMEC) is the only association dedicated to knowledge, education, and professional networking in integrated disability, absence management, and return to work solutions. DMEC and its network of local chapters provide companies with trusted information, strategies, tools, and management resources to minimize lost work time and improve workforce productivity. For more information on DMEC, including upcoming conferences, seminars, virtual education webinars, chapter activities, and member news and resources visit www.dmec.org or call 800.789.3632.
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