ERM: Improve Quality, Competitiveness, and Costs Through Proactive Management of Risk

Key Highlights:

• Agenda Overview:

  • The presentation covers the managed care industry, an overview of Blue Cross Blue Shield of North Carolina (BCBSNC), the company’s conversion efforts, implementation of the Sarbanes-Oxley Act (SOX), and the execution of Enterprise Risk Management (ERM).

• Managed Care Industry Context:

  • The industry comprises twenty public companies serving 80 million members, with the Blue Cross Blue Shield Association serving 90 million members.

  • There are 43 million uninsured individuals and 40 million Medicare beneficiaries, totaling 253 million people.

• Blue Cross Blue Shield of North Carolina (BCBSNC):

  • Company Goal: To deliver quality, innovative services.

  • Customer Promise: Simplify, Assist, Empower.

  • 2003 Highlights:

    • Members Served: 2.9 million across all 100 North Carolina counties.

    • Claims Processed Per Day: Over 140,000, totaling nearly $6 billion.

    • Customer Calls Per Day: Over 11,000.

    • Providers in Network: Over 36,000.

    • Employees: Over 3,200.

  • Growth Metrics:

    • Significant growth in membership and revenue from 1999 to 2003.

• Conversion Efforts:

  • BCBSNC reviewed best practices of public companies, including compliance with SOX, in anticipation of converting to a for-profit entity.

  • The decision was made not to convert; however, compliance with SOX continued to be pursued.

• Implementation of Sarbanes-Oxley Act (SOX):

  • Internal Control Evaluation Process:

    1. Plan & Scope the Evaluation.

    2. Document Controls.

    3. Identify & Correct Deficiencies.

    4. Assess Controls.

  • Key Deliverables:

    • Documented business processes.

    • Identified risks and controls, including gaps.

    • Risk & Control Matrix detailing risks, controls, control objectives, assessments, owners, financial statement impacts, and gap references.

• Execution of Enterprise Risk Management (ERM):

  • Risk Prioritization:

    • Risks are prioritized by process, considering the likelihood (frequency) and magnitude of impact (approximate cost of event).

  • ERM Objectives:

    • Improve quality, competitiveness, and costs through proactive management of risk.

    • Ensure compliance with regulatory requirements.

    • Enhance decision-making processes.

    • Protect and create value for stakeholders.

This presentation provides an in-depth look at BCBSNC’s approach to implementing SOX and ERM, highlighting the importance of proactive risk management in improving organizational quality, competitiveness, and cost efficiency.

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Citation: “ERM: Improve Quality, Competitiveness, and Costs Through Proactive Management of Risk” ERM Initiative. May 21, 2004.