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A basic axiom of workers' compensation computer systems is that examiners will always be able to figure out a way to get their job done (in spite of the weaknesses of a claims system).

A corollary to the above axiom is that examiners do not always use the system the most efficient way.

2. New claims systems are very costly to implement from a direct dollar perspective, along with the indirect costs of a loss of operational productivity, associated with the current system being frozen and of internal manpower requirements. These latter costs should not be underestimated and are typically a multiple of the direct costs.

3. You need to have a clear definition as to what is defined as "success." Success is not about going live, but rather about fully meeting your well-defined business objectives.

4. Do you have appropriate skills, knowledge and patience to carry out such an undertaking?

5. Do you have the appropriate staff with understanding of the claims operations and who can re-engineer the complex claims process?

6. Do you have an understanding of the data from a structural, usage and operational perspective?

7. Do you have a history of being successful in large IT projects?

8. The primary function of the claims department is to provide prompt, accurate benefits in a cost-effective manner to the legitimately injured workers of customers. The system is supposed to facilitate that function. Sometimes during conversions this bit of information is forgotten.

9. One of the most problematic parts of changing systems is having the right people in the right roles

10. I highly recommend that the claims system not be the ultimate repository of the data warehouse. Having a separate data warehouse will help simplify consistency of reports and simplify future upgrades of the claims systems

11. Data conversion is not as simple as plugging in data. Differences in structure will result in the need to redefine some of the data's definition. When poorly understood, this will affect the conversion quality, analytics and reporting. This task is complicated by the fact that the conversion team will be unfamiliar with the new claims system and its structure.

12. While the data in the new systems may be 100 percent accurate, it may in some instances differ from the prior claims system due to changes in structure and data definition.

13. There will be instances when old data will need to be "cleaned up" to meet the new systems integrity rules. In large databases typically a programmatic solution is sought. This will result in data differences similar to the structural issues described above.

14. Another challenging aspect of changing a claims computer system is the user adoption process and the difficulty of training an entire staff on the new system in an efficient manner while simultaneously managing claims.

15. Most implementations use the "train the expert" method where the early adopters within the claims operations are identified and trained as "expert users."

16. One problem with companies that have multiple sites is the lack of consistency in system usage because of the variances in training. One way to overcome this is to have regular events with the "expert users" from the various sites getting together to discuss "best practices."

17. Each interface between the claims system and other data sources that is needed increases the complexity of the implementation and costs.(and there are far more interfaces than one expects or realizes.

18. One of the largest, unbudgeted expenses in system conversion is the cost for the training of the staff.

19. The second largest unanticipated expense is the increased cost of claims as the examiners get used to the new system (keep your actuarial folks involved in measuring this potential impact).

20. A new claims system probably will require two screens and potentially more hardware on the examiners desks. If you want the examiners to be able to work from home, there will be additional connectivity technology required, all increasing the cost of implementation and the associated security issues.

21. The launch of a new system can either be the "tea bag" method or the "sugar' method. The tea bag method is when you "dunk" the entire company into the new system all at once into the hot water. The sugar method is "pouring" one office at a time into the hot water. The first requires more trainers, but is easier for the data conversion. The second is easier for training, but is much more difficult with regards to data integrity and reporting processes.

22. Another method of new system implementation is to run off the old files in the old system and only handle new files in the new system. This will require parallel and different operations structure and a common reporting data repository (data warehouse, data mart or similar).

23. The basic platform for most of the current off-the-shelf systems in the market are all at least 10 years old--LexisNexis, CSC, Ivos (Valley Oak), Guidewire--and they all have their strengths and weaknesses.

24. To immunize against any negative impact that the new system implementation may have, I highly recommend you keep your actuary involved with the whole process.

25. all systems should have standards for down time, speed and accessibility.

(Editor's note: Read Part 2 of "25 Things to Consider About Your Future Claims System" next month.)

BILL ZACHRY is vice president of risk management at Safeway Inc., a Fortune 50 retail company, co-chair of the California Chamber of Commerce Amicus committee, board member of the California Self Insured Security Fund, and frequent workers' comp advocate in the halls of state and federal capitols.

(Editor's note: This column does not express the opinion of the State Fund or its board.)

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June 17, 2011

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