Cutting Costs by Improving Process

Opportunity

As part of its corporate strategy, a top 5 US health insurance (payer) company set out to reduce operating costs. However, the company was unsure of which functional areas to focus on to reduce costs. It did not have complete visibility into its business processes and lacked metrics to measure business value. The sequence of key events, roles, responsibilities, accountabilities, and supporting technology was not clearly understood or well defined. Functional leadership could identify low value cost savings, but struggled to connect the dots across functions to realize greater cost savings.

Solution

The company engaged with consultants to define their end-to-end business process across core functions. Consultants interviewed various stakeholders and functional experts to understand the people, technology, and information used to execute business processes. Ownership and handoffs were documented. Volumes were gathered. Process waste and rework points were identified. Process value and efficiency were calculated. As a result, a new operating model was developed which included revamped processes, with metrics to effectively manage the new operation.

Outcome

The new operating model led to a 34% reduction in operating expenditures due to:

• Process simplification (eliminating/reducing rework, optimizing the sequence of core activities, etc.)
• Automating manual business processes
• Pushing low value work to lower cost resources

Upon completion the company was positioned to realize further cost savings from managing business processes across functions and towards metrics targets.