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Pan American Life Automates Claims Processing with Kofax Intelligent Capture and Exchange

Published 14 January 2010 | By Kofax

Kofax Solution enables leading insurance to process 7,000 insurance claims a week.

The situation

Be careful what you wish for. In 2002, when Pan-American Life Insurance Company introduced Worksite, a line of supplementary health, life and disability insurance for workers, the New Orleans-based mutual company expected they had a few years to keep records on paper and process claims by hand. In a pleasant surprise with a few less-than-pleasant implications, Worksite's sales far exceeded projections.

The challenge

As a result, in only two years, the volume of claims grew to 7,000 per week, and claims processors struggled to keep up. You never want to complain about success, said Deborah Tatro, vice president for the Worksite and Special Risk lines, but such rapid growth does present some unique obstacles to overcome.

With such a large volume of claims coming in, Pan-American brought in temporary workers, which brought its claims-processing staff to 50, and the company also contracted with an outside vendor to scan and verify data a costly stop-gap measure. We knew we needed to bring that technology in-house, but we were hoping it would be later rather than sooner, Tatro said.

The increase in claims also put a strain on the company's Customer Relationship Management Center, which began fielding more calls checking on claims status, with each request requiring an information search and return call. The situation eventually began to affect sales as well.There was no choice but rapid action.

Pan-American administrators huddled with Chief Technology Officer Karen Chauvin, authorizing electronic automation of the paper-based processes. Intense pressure prompted Chauvin and her staff to quickly find an economical, permanent solution to the paper glut.

The solution

In 2002, Pan-American's life insurance line had converted from microfiche storage to digital images. The input system was Kofax Capture, and the software licensing (images per month) had adequate capacity to add the Worksite documents. Ms Chauvin remembered reading about Kofax Intelligent Capture and Exchange, the foundation for Kofax's strategy to help organizations streamline business processes,  and she contacted Pan-American's local Kofax reseller, Advanced Imaging Solutions.

AIS President Lynne Smith clearly understood the insurer's need and urgency. He quickly recruited two consultants from the Kofax Professional Services Group. On 4 and 5 May 2004 they analysed the needs and developed a strategy. On May 10, Kofax consultant Ed Figueroa used Pan-American's own documents to demonstrate Kofax Intelligent Capture and Exchange. With Smith, the Kofax consultants wrote a proposal for enough document throughput to erase the backlog and improve customer service dramatically. AIS submitted the proposal 20 May. The projected cost was notably below that of the service bureau.

Pan-American management approved the proposal's concept and specifics, but they made one stipulation: delivery in one month. The Kofax team agreed, and shifted into overdrive. The Kofax solution included:

Kofax Capture, the world's leading automated information capture platform, Kofax VirtualReScan (VRS), the de facto standard for capture productivity and quality throughout a document's lifecycle, and Kofax Transformation Modules (KTM), which streamline the transformation of business docuements into structured electronic information by automating the processes of document classification and data extraction.

A glimmer of hope

AIS upgraded the system with Kofax Capture, Kofax Adrenaline scanner controller cards and Kofax VirtualReScan (VRS) automated image enhancement. Simultaneously, the consultants drawing on Pan-American's existing business process reengineering began the health insurance configuration. A key component was the Kofax Transformation Modules (KTM) forms processing module.

Worksite processes two kinds of federal government medical claim forms: the well-known HCFA 1500 and UB-92. These crowded, data-heavy forms generally arrive with black characters in red-printed boxes. Kofax Capture deletes the red lines to facilitate character recognition.

Kofax spent a week installing the HCFA process, 7-11 June, and the UB-92 solution went in the next week, recalled Mike Rowberry, senior project implementation manager. By the time they left [18 June], it was operational, right on schedule. Pan-American ran their due diligence testing over the next two weeks, and then began their production claims scanning using Kofax beginning 1 July.

Now Kofax KTM reads the forms, extracting information and populating Pan-American's backend database. If a form is unreadable by the machine, it goes to a human quality controller for manual entry. Once the data enters the line-of-business computer, an IBM midrange, the system approves routine claims automatically before cutting and mailing checks without human intervention. Questionable claims go to a human evaluator who looks at the data form and/or the related scanned image.

Occasionally forms arrive in monochrome. Then Kofax captures the images and sends them to scan operators for data entry processing. The software sequentially highlights the fields required by the database for heads-up entry.

After the installation, Chauvin's staff continued to tweak the solution. For example, they realised they were capturing more data than was needed. We did some additional refining of the modules, including our mapping, Rowberry stated, And we got more selective in the data we pulled. Capturing only necessary information sped the entire process.

Rowberry noted that we found a few, minor errors the first week, such as fields slightly out of alignment. Kofax support straightened out everything. Even when support is remote, it works very well, Rowberry attested.

Further, he reports complete compatibility between the new capture system, the line-of-business database, and the back-end document imaging system.

It was a complicated project, no doubt about it, relates AIS' Smith, but there were no surprises or unanticipated issues. Meeting the compressed schedule proves that. The key was superb preparation by both Pan-American and Kofax.

The results

Worksite's crew of 50 claims readers shrunk to 20, freeing valuable office space. Service bureau use dwindled to zero, a significant savings since the internal processing costs Pan-American at least 25 percent less than outsourcing. The capture and document imaging systems have plenty of capacity for future growth.

Now claim payments go out on schedule. Even when a flood of claims arrives on Monday, we are caught up by the end of Tuesday, observed Rowberry. And even when Hurricane Ivan forced us to evacuate for three days in October, we were caught up by the end of the next week.

Kofax Intelligent Capture and Exchange performed exactly as advertised. And we made all of our deadlines, he added.

Chauvin reports that staff scanning productivity has more than doubled since the initial implementation. For scan/data validation processing of the UB-92 and HCFA-1500 claims, average output per person grew from nine to 21 per hour.

Now, a newly confident sales staff sells Worksite aggressively, and business continues to grow.

Ann McGraw, manager of the Corporate Customer Relationship Management Center reports a greatly raised effectiveness of her staff. They resolve most customers' issues on the first call. When customers need additional documentation for claims, the customer service representative instantly gives the caller the requested information.

The fact that we no longer hear complaints from the CRMC is key, remarked Chauvin. The calls changed. The CSR can now discuss issues instead of dealing with customers' problems.

An expanding future

With the emergency in the past, Chauvin and her staff see other areas where capture automation offers major gains. We want to grow our imaging, she noted, using Kofax in administration, such as billing.

Mauricio Le Sage, IT director for group systems, revealed, The next step is to use Kofax Intelligent Capture and Exchange for our Group Health line in Puerto Rico. Then we want to branch into other forms, like dental claims. That will take a lot of customisation, but we have the right horse to ride.

Chauvin agrees with that evaluation. This was one of the most successful projects we have ever done here, and I hold it up as an example whenever I can. It was a very aggressive time frame with very successful results! Kofax and AIS bent over backwards to meet our deadlines. It was a true partnership, she concluded.