3. eCommerce Overview and Dynamics 11 Proposed Timeline and Team 50 Potential Benefits and Cost 57 Context and Project Objectives 29 Proposed Approach and Deliverables 33 Why Partner with Andersen Consulting? 60 Executive Summary 3
4. Conservatively estimated, CareFirst’s potential annual cost savings and revenue enhancements exceed $100MM. Enhance Revenue Reduce Costs Reduce Non-Care Related Costs Reduce Care Related Costs Potential eCommerce Benefits Attract/Retain More Members Expand Share of Each Customer eCommerce Economic Value Tree (9.1) Value Potential ($MM) (90.0) $ 22.0 $ 16.5 ($ 99.1) $ 38.5
5. CareFirst has significant work to do to move up the curve of eCommerce capabilities. Many health plans are ahead, yet few are personalized. Source: Andersen Consulting research, industry literature Healthcare eCommerce Service Spectrum Information Commerce Personalization Inquiry Transaction Oxford BS CA Aetna Cigna Kaiser Well point UHG Care First High Low High Low Degree of Buyer Focus In Customer Service eCommerce Interactivity Level ILLUSTRATIVE
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11. eCommerce Overview and Dynamics 11 Proposed Timeline and Team 50 Potential Benefits and Cost 57 Context and Project Objectives 29 Proposed Approach and Deliverables 33 Why Partner with Andersen Consulting? 60 Executive Summary 3
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13. As a consequence, new strategic principles are emerging, changing the old economic assumptions that we have relied upon in the past. Old Assumption Strategic Principle 1. Create a business model with several business partners around a single value proposition eEconomy Assumption Fewer economic constraints on size, complexity and scope of enterprises and enterprise networks Consequence High interaction and collaboration costs drove high levels of vertical integration Low interaction and collaboration costs drive “best of breed” specialization and networked-based value delivery 3. Gain first leader advantage Early market share leadership, once achieved, can lead to dominance Fast followers could leverage learnings of leaders, since diminishing returns to scale limited optimal size of enterprise Increasing returns to scale enables unlimited size of enterprises focused on information components of offerings and channels 2. Generate greater returns on intellectual property and relationship assets Competition is heightened for capturing information and owning customer relationships Return and valuation were derived from bundles of physical assets, intellectual property and customer relationships, but primarily driven by physical assets Return and valuation are derived independently from asset components, with returns primarily driven by intellectual-property and customer relationship assets Strategic Principles in the eEconomy
14. As a consequence, new strategic principles are emerging, changing the old economic assumptions that we have relied upon in the past (cont’d). Old Assumption Strategic Principle 4. Don’t rely on returns based on information asymmetry eEconomy Assumption Margins based on imperfect markets will erode Consequence Returns by producers could be protected by high search and comparison costs incurred by customers Fewer opportunities by producers to capture returns based on price differences for similar goods and services 6. Expand rapidly into markets, in particular, through disintermediation New entrants and fast-moving competitors emerge quickly and capture market share without expanding to build distribution channels Cost and time of entry into markets required creation and coordination of physical assets, means of production and distribution points Virtual presentation of goods and virtual points of sale enable inexpensive and rapid entry into new global markets 5. Expand product diversity and broaden value propositions to buyers Companies, products and business models will cater profitably to smaller customer bases Variety was limited by a segment-level understanding of buyer preferences Declining information and communication costs enable more granular understanding of buyer preferences Strategic Principles in the eEconomy (cont’d)
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17. A large number of new internet-focused companies are moving quickly to populate the healthcare eCommerce space. Abaton.com Access Health Avicenna Systems Axolotl Healtheon Daou Systems iTrust Health Desk Corp. Patient Infosystems Shared Medical Systems Status One Health System Web M.D. Manage Internal Operations Process Transactions Deliver Care Manage Care Manage Provider Network Manage Customer Relationships Manage Products & Risk Market and Acquire Customers Develop Products and Services Advanced Health Covation Claimsnet Kinetra Healtheon Melophis Quadra Med Proxymed MEDE America Araxsys Ariba Technology Concur Technologies Envive IndX Software Luminate Software @Outcome Caresoft Enact Health Mgmt. Systems KnowMed Systems See Appendix for detailed description of services and offerings for these companies. Cerner Network Alchemy Neoforma TIBCO Software Pointshare Officemed.com BroadVision Calico Technology ChannelPoint InsWeb Corporation Siebel Systems Xyber Net
18. These internet-based players are exploiting the eEconomy opportunities by providing eCommerce capabilities in many aspects of the healthcare value chain. Sample of Enablers’ Offerings* *A comprehensive list of new entrants can be found in the Appendix InsWeb Now offers extensive advice and comparison capability for life and auto policies and is expected to add healthcare Covation Facilitates exchange of healthcare information over the internet, e.g., patient enrollment, claims, and medical data Caresoft Offers web-based disease management solutions Shared Medical Systems Offers groupware to streamline workflow across health enterprises iTrust Offers web-based physician practice management solutions Abaton.com Employs web-based software to automate transactions across all classes of healthcare participants Manage Internal Operations Process Transactions Deliver Care Manage Care Manage Provider Network Manage Customer Relationships Manage Products & Risk Market and Acquire Customers Develop Products and Services
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27. With few notable exceptions such as United and Aetna, no one has made a major entry into the eCommerce space; however, all are poised to do so. Approximate eCommerce Position of Health Plans* * Top nine by membership Conservative Aggressive
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29. eCommerce Overview and Dynamics 11 Proposed Timeline and Team 50 Potential Benefits and Cost 57 Context and Project Objectives 29 Proposed Approach and Deliverables 33 Why Partner with Andersen Consulting? 60 Executive Summary 3
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32. The eCommerce strategy touches many components of the overall IT blueprint. Overall IT Strategy eCommerce Strategy Business Processes Information Applications IT Infrastructure IT Architecture Business Enables Drives Information Technology IT Alignment with Business IT Management & Delivery Leadership Sourcing Structure & Governance Processes
33. eCommerce Overview and Dynamics 11 Proposed Timeline and Team 50 Potential Benefits and Cost 57 Context and Project Objectives 29 Proposed Approach and Deliverables 33 Why Partner with Andersen Consulting? 60 Executive Summary 3
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43. Our approach will deliver a strategy that is logically integrated with CareFirst’s business strategy which we are jointly developing, not just a set of initiatives. Low Low High High Long-Term Contribution to Strategic Direction Short-Term Business Case . Framework for Prioritizing eCommerce Initiatives . . . . . . . . . . . . . . . . . . More Aggressive Strategy More Conservative Strategy . Initiatives Sample Deliverables
44. A net-centric technical infrastructure is complex and requires significant new technology; this project will deliver the conceptual design for this architecture. Illustrative Net-Centric Architecture Communication Fabric Transport Services Massage Transport Transport Security Packet Forwarding/ Internetworking Circuit Switching Network Address Allocation Quality of Service Network Media Services Media Access Physical Media Communications Security Environment Runtime Services Language Interpreter Virtual Machine System Services System Security Profile Management Environment Verification Task & Memory Management Application Services Application Security Error Handling/ Logging State Management Active Help Other Common Services Component Framework Operating System Codes Table Services File Services App. Integration Interface Base Services Web Server Services Batch Services Workflow Services Push/Pull Services Report Services Presentation Window System Desktop Manager Form User Navigation Web Browser Report & Print Direct Manipulation Input Device Business Logic Interface Application Logic Data Abstraction Information Database Services Document Services Replication/Synchronization Versioning Access Security Indexing Storage Messaging Encryption email Core Specialized Virtual Resources Fax Terminal File Sharing Printing Paging Audio/Video Phone Authorization Authentication ORB CTI EDI Legacy Integration Directory Services Domain Name Communication Transaction Resource Management Transaction Management Transaction Partitioning TP Monitor File Transfer RPC Msg Oriented Streaming email Database Access Sample Deliverables
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46. A conceptual technical architecture design identifies the architecture components and technologies required to support a given solution. Requirements / Assessment Architecture Assessment: Technical Architecture Relevant Systems NT Gateway Server 1. Windows NT 2. Falcon MQ Bridge 3. Falcon MQ Server 4. MSMQ 5. SNA Server Illustrative Technical Architecture Design LAN/ WAN/ Internet LAN/ WAN Unix Server 1. AIX 2. TransAccess 3. U to A 4. Entera 5. MQ Series 6. CORBA 7. Web Server 8. SNA Server 9. RDBMS IBM ES/9000 Mainframe 1. MVS 2. CICS 3. IMS 4. MQ Series 5. TransAccess 6. Database (DB2,VSAM, IMS) NT Server 1. Windows NT 2. TransAccess 3. NT to A 4. MSMQ 5. CORBA 6. Web Server 7. MQ Series 8. RDBMS UNISYS A-Series Mainframe 1. MCP 2. COMS 3. A to U 4. U to A 5. A to A 6. NT to A 7. Falcon MQ Client 8. Database (DMSII) Windows Workstation 1. Windows 95/NT 2. Entera 3. CORBA 4. MSMQ 5. Browser LAN/ WAN LAN/ WAN/ Internet Sample Deliverables
47. An interface and connectivity diagram presents underlying protocols and interface technologies employed. Requirements / Assessment Architecture Assessment: Interfaces & Connectivity NT to A MSMQ NT Server TransAccess CORBA Web Server A to U Falcon MQ Client U to A UNISYS A-Series Mainframe COMS RDBMS Interface Legend Available Under Construction Future MSMQ Windows Workstation Entera CORBA Browser Entera RPC MSMQ DCOM/ ActiveX IIOP HTTPS MSMQ DCOM/ ActiveX IIOP HTTPS BNA Terminal U to A Entera MQ Series Unix Server TransAccess CORBA Web Server RDBMS Entera RPC DCOM/ ActiveX IIOP HTTPS U to A RPC ODBC MQ Series TransAccess RPC A to A NT to A TransAccess MQ Series IBM ES9000 Mainframe CICS IMS DDCS (DB2) Cedar/LU6.2 MQ Series TransAccess RPC 3270/LU2 NT Server Falcon MQ Server SNA Server MSMQ Falcon MQ Bridge MS RPC ODBC MSMQ TransAccess RPC MS RPC ODBC U to A RPC Falcon MQ MQ Series MQ Series Illustrative Interface and Connectivity Diagram DMSII Database Database DB2 VSAM IMS Sample Deliverables
48. A physical environment blueprint communicates the physical topology including computers and network components. Gateway Server IBM ES/9000 Mainframe UNISYS A-Series Mainframe LAN Conceptual Design Infrastructure & Application Blueprints: Physical Environment Blueprint Application Data Center Server Relevant Systems Producers (External) Remote Sites Company A Fax Machine Illustrative Interface and Connectivity Diagram Workstation Scan Station Producer Desktop Unix Server NT Server User Workstation LAN/ WAN/ Intranet Integration Framework Server WAN Application Server (Master) WAN Firewall Internet LAN WAN LAN/ WAN Application Server (Slave) LAN/ WAN Sample Deliverables
49. A process and information flow diagram shows how data and processes supporting business operations flow through the solution architecture. Process & Information Flows: Release 1 Process Flow Requirements / Assessment New Producer Application Update Rate Tables Manual Processing Network Match Engine Scrub Group Structure Manual Group Entry H H H Same Process RFP Fax Enrollment Upload Producer Info Note: All flows from the Integration Framework have a corresponding confirmation feedback loop to Internet Arch. . These feedback loops are not depicted in the diagram. J J Illustrative Process and Information Flow Legacy Systems Broker Scan CP Employer Application & Member Enrollment L2 L1 Case Installation & Member Enrollment Group Installation Sales Reporting Scrub Medical Underwriting Install Case Producer Application Member Enrollment DB2 DMSII File/Report Database Process User Input Memory Cache L3 New Producer Processing Census DB2 Rating Engine L4 Interface Services Interface Engines Rating Engine Faxback Proposal Proposal Generator Process RFP Integration Framework Internet Framework Sample Deliverables
50. eCommerce Overview and Dynamics 11 Proposed Timeline and Team 50 Potential Benefits and Cost 57 Context and Project Objectives 29 Proposed Approach and Deliverables 33 Why Partner with Andersen Consulting? 60 Executive Summary 3
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57. eCommerce Overview and Dynamics 11 Proposed Timeline and Team 50 Potential Benefits and Cost 57 Context and Project Objectives 29 Proposed Approach and Deliverables 33 Why Partner with Andersen Consulting? 60 Executive Summary 3
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59. Conservatively estimated, CareFirst’s potential annual cost savings and revenue enhancements through investments in eCommerce could total over $100MM*. Our price for Phase 1 will be $700,000 plus out-of-pocket expenses. Potential Revenue Enhancement* = $38.5MM Potential Care Related Savings* = $90MM Potential Non-Care Related Savings* = $9.1MM Total Potential Value > $100MM * Detailed estimates and assumptions available upon request.
60. eCommerce Overview and Dynamics 11 Proposed Timeline and Team 50 Potential Benefits and Cost 57 Context and Project Objectives 29 Proposed Approach and Deliverables 33 Why Partner with Andersen Consulting? 60 Executive Summary 3
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62. Andersen Consulting is currently ranked #1 among all world-class internet services firms. Source: International Data Corporation, December, 1998
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66. We have worked with leading healthcare organizations to improve efficiency, service and quality of care using eCommerce. For this regional managed care organization, we created a web-enabled referral process that links the health plan with its network of primary care physicians and specialists. Referral processing time was reduced from days to minutes, with corresponding improvements in efficiency and provider relationships Health Alliance Plan For a national managed care organization, we are implementing a web-based solution to assist marketing to individuals and small groups. The solution assists both brokers, employers and individuals in requesting quotes, delivering proposals and signing business quickly and more efficiently National Managed Care Organization For this provider of eCommerce infrastructure and services, we developed a web-enabled solution to support eligibility, enrollment, referrals, claims and payments. We also worked with Covation to implement technical and physical security and fault tolerance features for all of their IT utility based services Covation (PhyCor, NationsBank and AC Joint Venture) For this electronic insurance market maker, we developed a health insurance entry strategy. We examined and prioritized potential products for individual, small group and senior markets. We identified appropriate carriers to provide products, developed pricing strategies and created implementation plans Internet Marketplace For this state university system, we identified opportunities for the health and academic components to use internet and multi-media technology to support telemedicine, clinical research and health education. We defined new governance structures for the components to cooperatively invest in technology to support the University’s electronic campus initiative. University of Texas
67. We have also worked with leading organizations in other industries to develop eCommerce strategies and implement internet-enabled business capabilities. For Toyota, we developed the vision and internet presence strategy, focusing on sales and customer satisfaction. The site will allow customers to view nationwide inventory, conduct the vehicle purchase (using the dealer as needed), and manage ownership of the vehicle in a customized way. Benefits will be increased sales close rates and more efficient use of dealerships. Toyota This internet software provider chose us as a development partner to build their web-based software sales and distribution retailing storefront. The site allows customers to download and “test drive” software products and make purchases. Leading Internet Software Provider For First Union, we developed an internet solution to provide electronic banking services to customers. The solution provides real time access to legacy system data and supports customer service functions previously provided by telephone. First Union will use these capabilities to differentiate itself as a technology leader and to reduce service costs. First Union National Bank We developed the internet strategy for this pharmaceutical company, focusing on corporate identity, patient education, on-line product information, and corporate intranet applications. The benefits include marketing, training and information delivery costs, and improved communications with stakeholders. Large Pharmaceutical Company For Toshiba, we developed and implemented an internet strategy to reduce costs, increase sales and improve customer service. Benefits include reduced publishing and distribution costs by 70-80%, reduced phone support costs, and increased sales through reduced time to get product information to customers. Toshiba America Electronic Components
68. We have a significant number of eCommerce clients across multiple industries. Wallace Abbott Pepsi
69. We are participating directly in the eEconomy through our investment in, and operation of our own eCommerce businesses. Covation is a joint venture with Bank of America (formerly NationsBank) to provide an eCommerce infrastructure to support healthcare administrative transaction processing. Covation Qpass is an internet service enabler that provides a payment solution for web-based retailing, specifically to facilitate small ticket sales of digital content. We developed the business model and products and are a part owner of this venture Qpass ViaWorld is an internal service organization that provides internet access to Andersen Consulting travelers to book and modify airline reservations. ViaWorld includes direct web and voice access and has reduced our cost for agency commissions and computer reservation system usage. ViaWorld Services We are an investor and business partner for this provider of internet-based distribution solutions for healthcare insurance. As part of our partnership, we assist ChannelPoint clients with business process design, systems integration and implementation. ChannelPoint iFlourish.com is a pure play internet portal we are in the process of launching. This company will offer an intentions-based package of goods and services targeted at active consumers aged 45 and over. iFlourish.com
70. To ensure that we bring best practices and thought leadership, we invest in high-impact R&D. Selected eCommerce R&D Areas Facility where visitors can see and experience the most exciting new ideas in the financial services industry “ Think tank” and client working center focused on specific and contemporary business change issues Center that focuses on delivering Internet solutions including strategy, prototyping and development capabilities Center focused on identifying, evaluating, and integrating technologies to drive business opportunities Workshops to educate industry executives on the strategic applications of advanced technology State-of-the-art digital media production facility dedicated to rapid application prototyping and proof of implementation Development centre focused on creating Internet, multimedia, and component-based solutions Joint venture with BBN to provide Internet-related infrastructure services Financial Ideas Exchange… Institute for Strategic Change... Internet Centers of Excellence (ICE)… Center for Strategic Technology Research (CSTaR ® ) … DAVINCI Virtual Corporation… Emerging Technologies Lab… FinancialWorks… ServiceNet… (The following pages provide an overview of some of these areas)