Project Management Institute

Implementing Project Management in Managed Care

Opportunities and Challenges

Introduction

In this paper, we describe implementation of a formal system of project management in a managed healthcare company in the United States. We cover the following topics:

  • A brief description of managed care and the health insurance industry;
  • A discussion of the typical types of projects encountered within the industry, and the issues that arise in project management in the industry;
  • A case study discussing the impetus for implementing project management within the company, AMERIGROUPSM Corporation, including development and implementation of the methodology;
  • Successes realized from implementation of project management;
  • Ongoing challenges to the use of project management techniques;
  • Recommendations for other companies considering implementation of formal project management.

What is Managed Care?

Managed Care is a term used in the U.S. to refer to organizations that primarily administer payment and delivery mechanisms for healthcare. Consumers of health care services typically pay a monthly insurance premium to these organizations, joining a health plan, and receive some level of guaranteed health benefits for that premium. Managed Care Organizations (MCOs) fall into a number of categories depending on the general organization and types of benefits they provide. For this paper, we are most interested in the Health Maintenance Organization (HMO). These organizations typically require that the member select a Primary Care Provider (PCP) as their personal physician to direct their care. The member must first call or visit the PCP when she has a health complaint. If the PCP cannot address the problem directly, he may refer the member to a specialty provider, or admit the patient to an hospital or other institutional setting. These referrals and admissions may require special administrative authorization from the HMO, depending on the HMO's rules. This is called a gatekeeper plan since the PCP functions as the controller for access to all other services.

HMOs generally operate in one of two primary models. In a staff model, the HMO directly hires doctors to perform the necessary services, and may build and own its own hospital facilities. Kaiser Permanente is an example of this model. In a network model, the HMO subcontracts with individual doctors, physician practice groups, and hospitals to provide services. This is a much more common model in the U.S. Some HMOs do operate in a mixed model, where some services are directly provided by the HMO, and others are contracted. The key issue: if the member visits a doctor or other service provider not part of the HMO's network or staff, then the services are not covered unless the HMO has granted a special exemption for that service.

Doctors, hospitals, and other health service providers submit claims to the HMO. The HMO checks these for compliance with the contract and with the member's covered benefits schedule, makes adjustments as necessary, and pays the service provider accordingly.

Current U.S. estimates (2003 data, StateHealthFacts.org) are that:

  • Over 156 million individuals are covered by some kind of employer-sponsored health insurance, whether provided through an MCO or more traditional health insurance such as indemnity coverage. This insurance may be paid for wholly by an employer, by the employee, or as a cost share between the two.
  • Nearly 14 million are covered by individually purchased health insurance policies.
  • Over 34 million are covered by Medicare, the U.S. health coverage program for the aged.
  • Over 38 million are covered by Medicaid, the U.S. state and federally-funded program for those in poverty.
  • Nearly 45 million are uninsured – meaning they do not have employers-sponsored or individual coverage, and do not qualify for or have not sought coverage under either the Medicaid or Medicare programs.

More information on the U.S. Medicare and Medicaid programs is available at www.cms.gov.

Normal business functions within an HMO include the following:

  • Enrolment and billing, which tracks members of the health plan, bills them or their employee for the monthly premium payments, and receives and logs the payments
  • Claims Processing, which receives claims for services rendered from health care service providers, verifies that the member is eligible, the provider is contracted, and that the service is covered, and pays or denies the claim accordingly
  • Medical Management, including:
    • Utilization Management (UM), which processes requests for preauthorization or continued authorization of specified services
    • Disease Management (DM), which targets members having specific diseases for more intensive management
    • Case Management (CM), which provides higher levels of service coordination for members needing more intensive health care services
    • Quality Management (QM), which measures health care outcomes and creates and manages specific initiatives to improve those outcomes
  • Marketing and Sales, which sells the health plan to employers and individuals
  • Executive Management, responsible for daily and long range management
  • Legal
  • Regulatory and Compliance, responsible for ensuring compliance of the health plan's operations with state and federal agencies
  • Facilities Management, responsible for office construction and maintenance
  • Information Technology Services (ITS), responsible for the information infrastructure and services
  • Systems Configuration (may be part of ITS), responsible for configuring benefit plans and health care provider information in the business information systems
  • Finance/Accounting, responsible for bookkeeping, financial reporting, and financial planning
  • Actuarial/Underwriting, responsible for assessing actuarial risk and setting premium rates
  • Member Services, responsible for answering member questions and responding to complaints
  • Provider Services, responsible for educating providers, answering questions, and responding to complaints
  • Provider Contracting, responsible for negotiating contracts with health services providers
  • Human Resources
  • Purchasing
  • Training

Typical Projects

Projects in the managed care industry are similar to those one might encounter in other information-technology rich industries such as telecommunications, retail, or banking. However, the amount of data and complexity associated with the industry is staggering. For example:

  • An HMO might have contracts with thousands of individual service providers and each contract may have a unique pricing schedule, even for the same services.
  • There are just under 10,000 codes available in the Current Procedural Terminology (CPT) system, only one of the several systems used for recording services rendered
  • An HMO with a million members may process upwards of 4 to 5 million claims for service each year – about half or more arrive via electronic data interchange; the rest on paper which must be scanned and entered

In addition, due to the economies of scale available by centralizing back-office administration functions, HMOs have been consolidating operations through mergers and acquisitions. Thus, the portfolio of projects encountered by a given HMO might include the following examples:

  • Integration of an acquired HMO, which may include reorganization, staffing changes, information systems data conversions, retraining, facilities changes, etc.
  • Starting a new contract in a new location or for a new population, which may include systems configuration, provider contracting, member communications, regulatory approvals, etc.
  • Converting to a new information system for core business operations such as enrolment, claims, and medical management, which includes systems configuration, data conversion, training, process redesign, etc.
  • Implementing systems enhancements to improve efficiency or automate formerly manual processes
  • Implementing regulatory mandates. The most dramatic recent example of this is the series of projects health companies have launched to reach compliance with the Health Insurance Portability and Accountability Act (also known as HIPAA)

Typical Project Issues

HMOs and other health care administrators have a variety of staff that includes semiskilled, skilled, and executive workers with diverse educational and experiential backgrounds. For example, business school graduates may run enrolment and billing and claims, while those in medical management often are registered nurses, licensed practical nurses, or licensed physicians. The information technology group usually includes people with primarily computer science or information technology backgrounds, but may make up less than 10% of the company's staff. In addition, companies employ a great number of semi-skilled workers to answer phones in call centers, process claims, or process member enrolments.

The result is that most HMOs, unlike technology companies such as Philips, IBM, or HP, simply don't have a widespread systems engineering discipline, and therefore formal project management is natural only in the information technology group. Nevertheless, every project that a company undertakes normally has significant impact on people, processes, and systems throughout the company – and taking a systems view of each project is essential to ensure all impacts are addressed up front.

Case Study

In the remainder of this paper, we focus on the issues surrounding project management in an HMO focused solely on providing services for Medicaid and other public-sector programs in the United States. AMERIGROUP Corporation, with headquarters in Virginia Beach, Virginia, is the country's largest publicly traded company concentrating solely on providing services for members of these health programs. The company was founded in 1994 and began serving members in 1996. It now serves over one million members in six states (New York, New Jersey, Maryland, Illinois, Florida, and Texas) and the District of Columbia.

Rapid growth has meant a constant stream of projects – acquisitions of other HMOs, start-up of new Medicaid contracts in new locations or for new program types, systems enhancements and automation of existing manual processes, and compliance with regulatory mandates. At the start of the period of this case study, it was not unusual for 50 to 60 different projects to compete for funding and resources during project portfolio reviews.

Initial Assessment

In early 2000, changes in the Information Technology Services group within the company led to the contracting of a Chief Information Officer who, with others in the company, recognized the need to create and implement a formal system of project management to address various issues the company faced. These included:

  • Project scope was not well defined and changed frequently during implementation. There was often contention between business owners and project team members about what things were in- and out-of-scope on a particular project.
  • Project results were not predictable, particularly with respect to completion date and cost.
  • The company was not accurately able to predict resource needs, leading to frustration among project team members who were overcommitted, and aggravating the scope and schedule problems.

The company decided to engage Optimetra to perform a full assessment of the project situation and to provide a report and recommendations for next steps.

Evaluation and Recommendations

In September of 2000, Optimetra interviewed 20 AMERIGROUP associates to evaluate the state of project management practices, obtain an understanding of the company's expectations for project performance, and investigate underlying reasons for project difficulties. Interviews varied from ½ to 1 hour long and drew from a core questionnaire covering the gamut of project management practices. Those interviewed included everyone from senior staff members to business analysts and other consultants. The findings included:

  • Positive attitude, high motivation
  • No standard project planning process
  • Wide range of project complexity ($10k - $4M+)
  • Various project management tools in use
  • Conflicting project priorities (cost, scope, schedule)
  • No clear project management organization
  • Lack of clear project roles and responsibilities
  • No formal development of project manager skills and experience

Based on prior experience in running business projects in HMO environments, Optimetra recommended the following initial steps:

  1. Develop a project management process framework
  2. Select and implement project management software tools
  3. Develop project management job descriptions
  4. Design and implement the project management function
  5. Develop and implement plans for general skill-building in project management
  6. Develop and implement plans for coaching and mentoring project managers

Implementation

Optimetra began development of the project management methodology for AMERIGROUP in the fall of 2000, based on the findings from the initial report and on input from AMERIGROUP staff. The methodology, documented in the AMERIGROUP Project Management Manual, covers all aspects of initiating, planning, executing, controlling, and closing projects for the company. We based the process components on Optimetra's own experience in planning and managing projects for other HMOs, industry literature (Kerzner, 1995; Lewis, 1995), and A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (PMI, 2000). Primary topic areas in the manual include:

  • Project definitions and project trade-offs (scope, cost, schedule)
  • Project organization types
  • Project plans
  • Project close
  • Project management tools
  • Portfolio management and workflow
  • Cyclical processes within projects
  • Controlling project performance
  • Earned Value Management (not currently used by the company)
  • Continuous improvement for project processes

Given the need for AMERIGROUP to increase predictability of cost and schedule on projects, the process emphasizes project planning, probably more for its ability to force thinking about the goals of the project and the process of reaching those goals than for the ability to create documents preserving those thoughts. The planning process includes 12 components, not all of which are mandated for every project. These components include:

  • Project charter
  • Work breakdown structure
  • Schedule (WBS and schedule are typically merged in a tool such as Microsoft Project)
  • Deliverables Specification
  • Risk Management Plan
  • Issue Log
  • Communications Management Plan
  • Procurement Management Plan
  • Quality Management Plan
  • Change Management Plan
  • Resource Management Plan
  • Financial Analysis and Budget

We also developed several complementary documents to support the methodology. These included:

  • Job descriptions for project managers and ancillary staff
  • Templates and forms for various project plan components
  • Checklists to allow users of the methodology to verify that the correctly completed all steps
  • Training materials, including Powerpoint presentation, instructor's guide, and exercise workbook
  • Quick reference guide to the planning system

The training materials support a two-day instructor-led classroom experience. The class is designed to work effectively for up to 16 attendees in a single class. Over a two-year period, from spring 2001 through late summer 2003, we trained 229 AMERIGROUP staff members in 23 separate sessions; this represented more than 10% of the employee base at the time. Attendees were from all levels of the company, from executives leading projects to production staff who participated on project teams.

AMERIGROUP Corporation submitted the training materials to Project Management Institute (PMI®) and hence obtained Registered Education Provider status for its class. The primary reason for doing this was to allow attendees to earn PDUs in support of obtaining or preserving Project Management Professional (PMP®) certification.

The second part of the implementation was to secure enterprise-level software tools, with an intensive focus on supporting the company's need for resource capacity planning as well as the WBS/scheduling needs. AMERIGROUP evaluated Microsoft Project, Niku Project Workbench, and Primavera TeamPlay. Microsoft Project was not considered a contender at the time (late 2000) because it did not yet support enterprise resource capacity planning and tracking or portfolio management. The company finally selected and implemented Primavera TeamPlay, using a team from the Information Technology Services department to install and configure the system and train system users.

The third part of the implementation was to create a Project Support Office (PSO) to provide ongoing support for the methodology and tools. The PSO was created as part of the ITS department, but provided services to all business functions within the company. Staffing included a VP, Planning, Analysis and Support, as well as project managers and project coordinators. Responsibilities of this function included:

  • Support and maintenance of methodology, including associated documentation and dissemination of best practices
  • Support and maintenance of enterprise project management software
  • Planning and control of ITS implementation budgets
  • Refinement of portfolio management process
  • Provide project managers for major ITS initiatives

Note that although the PSO included some project managers, these were primarily dedicated to performing project management functions in the ITS organization as well as providing support for the methodology only throughout the rest of the organization. The PSO did not initially furnish project managers to other business units in the enterprise.

There were also some follow-on efforts to the initial implementation. These included the following:

  • Development of a scaling methodology to allow scaling the project management process for very small projects.
  • Development of a project plan review and audit process and accompanying tools.
  • Extension of the methodology for special purposes. These included development of the AMERIGROUP Implementation Guide (Kumpf 2002), which specifically shows how to use the project management methodology to manage integration of acquired businesses or startup of new customer contracts; and the AMERIGROUP Proposal Process Guide, which focuses on proposal development and proposal management while incorporating appropriate elements of the project management methodology.

Successes

Four years after initiating the project, we have learned much about how to effectively implement formal project management into an organization. We count the following among our successes:

  • Formal approach to project management has been generally embraced by the organization.
  • Have developed project executive resources, particularly sponsor/owner and program manager roles.
  • Project planning tools used to stimulate thinking by project managers and team, and several components are internalized.
  • Improved predictability of implementation budgets and schedules.
  • Developed clear understanding of objectives and plans among project team.
  • Company is recognized leader in implementation of acquisitions and new state Medicaid contracts.
  • ITS department has successfully used comprehensive methodology on managing projects on every scale, from systems enhancements to major systems conversions.

Challenges

As with any large-scale process implementation that involves changing company culture, there are ongoing challenges to address. Those we encountered include the following:

  • Implementation of enterprise software too rapid – overwhelmed organization capacity to adapt
    • Most of organization backed off to simpler tool
    • ITS continued with enterprise tool for capacity planning
  • PSO reorganized 2004:
    • Project managers from PSO now represented in dedicated Implementation Department and ITS projects group
    • Need for centralized support of methodology has declined due to internalization of approach
  • Project planning tools application
    • Charter, WBS/schedules/milestone list, Issue Log, decision log, risk management plan, financial analysis and budget communications plans products used consistently
    • Other plan components not used consistently by all projects based on needs of project
  • Still struggle with the tradeoffs of project management investment – occasional tendency to revert to prior behaviors

Recommendations for Other Companies

Given our implementation of formal project management, we have several recommendations for other companies considering the same path. These are as follows:

  • Fully assess current state of PM practices
  • Understand company culture – both opportunities and limitations
  • Adapt project management model accordingly
  • Develop senior staff understanding of and commitment to concepts and ideas
  • Train, train, train
    • Make the investment in the people
    • Choose the right people to train
  • Select right people to use and evangelize tools – find the right team member strengths
  • Evaluate need for more complex tools only after processes and simple tools fully internalized

References

Kaiser Family Foundation (2003 data) Population Distribution by Insurance Status, state data 2002-03, U.S. 2003. Retrieved April 7, 2005 from www.statehealthfacts.org.

Kerzner, H. (1995) Project Management: A Systems Approach to Planning, Scheduling, and Controlling (5th edition). New York, NY: Van Nostrand Reinhold.

Kumpf, D. (2000) AMERIGROUP Corporation Project Management Initiative Initial Report. Virginia Beach, VA: AMERIGROUP Corporation proprietary document.

Kumpf, D. (2002) AMERIGROUP Corporation Project Management Manual (20th edition). Virginia Beach, VA: AMERIGROUP Corporation proprietary document.

Kumpf, D. & Stanley, L. (2003) AMERIGROUP Corporation Implementation Guide (8th edition). Virginia Beach, VA: AMERIGROUP Corporation proprietary document.

Kumpf, D. (2003) AMERIGROUP Corporation Proposal Process Guide. Virginia Beach, VA: AMERIGROUP Corporation proprietary document.

Lewis, J.P. (1995) Project Planning, Scheduling, and Control: A Hands-On Guide to Bringing Projects in on Time and on Budget (revised edition). Chicago, IL: Irwin Professional Publishing.

Project Management Institute. (2000) A guide to the project management body of knowledge (PMBOK® Guide) (2000 ed.). Newtown Square, PA: Project Management Institute.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2005, David Kumpf and Cherry Wittelsberger
Originally published as a part of 2005 PMI Global Congress Proceedings – Edinburgh, Scotland

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