Question

In April 1999, one of Capital Blue Cross’s health-care insurance plans had been in the field for three years but hadn’t performed as well as expected. The ratio of premiums to claims payments wasn’t meeting historic norms. In order to revamp the product features or pricing to boost performance, the company needed to understand why it was underperforming. The stakeholders came to the discussion already knowing they needed better extraction and analysis of usage data in order to understand product shortcomings and recommend improvements. After listening to input from the user teams, the stakeholders proposed three options. One was to persevere with the current manual method of pulling data from flat files via ad hoc reports and retyping it into spreadsheets. The second option was to write a program to dynamically mine the needed data from Capital’s customer information control system (CICS). While the system was processing claims, for instance, the program would pull out up-to-the-minute data at a given point in time for users to analyze. The third alternative was to develop a decision support system to allow users to make relational queries from a data mart containing a replication of the relevant claims and customer data. Each of these alternatives was evaluated on cost, benefits, risks and intangibles. Questions 1. What are three costs, benefits, risks, and intangibles associated with each project? 2. Based on your answer to question 1, which project would you choose?

Answer 1

1.

Option 1:

Costs: expenses for writing ad hoc reporting programs, expenses for maintaining ad hoc reporting programs, expenses associated with maintaining staff with CICS expertise

Benefits: employees already understand the new system,  shorter short-term costs, no employees would be replaced by automated system

Risks: Continued low performance of premiums to claim payment ratios, possible loss of data integrity, no processes available for auditing performance, possible law suits associated with low premium to claim payment ratio

Intangibles: employee perception of current system, employee perception of proposed system, industry perception of the performance of Capital Blue Cross

Option 2:

Costs: expenses for writing a dynamic retrieval  program, expenses for maintaining a dynamic retrieval  program, expenses associated with training staff with new functionality

Benefits: data would be more accurate, users would be able to view required data, less costly than developing a new system

Risks: difficult to develop processes for auditing performance, difficult for the program to provide a relationship among the data, more costly than Option 1

Intangibles: employee perception of current system, employee perception of proposed system, industry perception of the performance of Capital Blue Cross

Option 3:

Costs: expenses for software, expenses for outside consultants, expenses associated with employees taking time away from work to learn new program

Benefits: auditable processes, reliability of data, relational capability among data stores

Risks: Possible compromise of proprietary information through consultants, costlier than other two options, time taken for development and implementation

Intangibles: employee perception of current system, employee perception of proposed system, industry perception of the performance of Capital Blue Cross.

2.

I would choose option 3 , since auditable processes, reliability of data etc.