Integration Management - Cigna's Self-Inflicted Wounds

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Anania acknowledges that the Cigna team "didn’t have time to do a very thorough volume testing or end-to-end testing" in the rush to go live. But she blames that on the IT staff working for Cigna HealthCare’s business unit and on the CGEY consultants brought in to do the implementation. Asked if she herself bears any responsibility for ensuring that comprehensive testing was done, she says, "The business divisions had autonomy, and you can’t second-guess the people on the ground every day. The business was working with a name-brand systems integrator, and they were not knocking on the door saying, Don’t go live, don’t go live. Can you truly expect one individual to have more visibility into the day-to-day workings of what’s going on in that project than the people in charge of it?" (Brian Baum, chief marketing officer of CGEY’s health business unit, declined to comment, citing "contractual arrangements" that prohibit the consultancy from discussing the project publicly.)

Anania says the back-end data problems have since been fixed. "We slowed down the pace of migration and shored up those processes around the conversion of customer data," she says. Her IT team also instituted more thorough testing practices and brought in more experienced managers to monitor the project. The CIO of Cigna HealthCare, Meg McCarthy, who was hired by Anania, has been let go, as has the IT manager directly in charge of transformation, Hayward Donagan. Both women declined to comment for this article, saying they had signed nondisclosure agreements upon leaving Cigna.

Post-Mortem: A Hard Lesson Learned

In July 2002, Cigna was able to move additional members to the new platforms without major incident, and in January 2003 it successfully migrated another 700,000 members. The company also launched MyCigna.com, an online portal where Cigna members can look up their benefits, choose from an array of health plans, check on the status of their claims, retrieve health information and talk to nurses online. While some members have complained of difficulty in getting onto the personalized portal, Anania and others point to MyCigna as an example of a successfully implemented technology-based project.

Cigna officials now say that despite the initial problems, the transformation project is allowing the company to process medical claims more efficiently and better manage customers’ needs. In January, the insurer announced it was cutting another 3,900 positions as part of a "streamlining" of Cigna’s sales force and medical management team. A spokeswoman said the new IT systems have enabled that downsizing by eliminating duplication in claims processing and billing.

Recent customer satisfaction surveys conducted by Cigna show that 83 percent of existing members are satisfied with the service they get, compared with 58 percent earlier in the year. The project, however, will well exceed its original $1 billion price tag, according to Anania. Cigna officials decline to put a number on the extra cost.

Anania says there have been a number of lessons from the missteps of the past year (see "Lessons Learned," opposite page), among them the need for strong IT governance.

"We moved 20 experienced application developers into the project," she says. Translation: Cigna is relying less on its name-brand systems integrator?CGEY?and more on its own IT systems staff to manage the project. (For more on bringing project management in-house, see "It’s Time to Take Control," at www.cio.com/printlinks.)

Anania, however, seems reluctant to centralize the governance of IT to too great an extent. "At the end of the day, you have to strike the right balance between central IT authority and strong functional guidance that’s aligned with the business," she says.

Wall Street analysts who cover Cigna are troubled by its missteps, but most remain bullish on its prospects for recovery. "This kind of thing is cyclical," says Todd Richter, managing director with Banc of America Securities in New York City. "Over the past five or six years, Cigna stock has outperformed Aetna’s. Aetna is now on a comeback, and they are forecasting huge earnings growth, and Cigna is forecasting down earnings for next year."

Standard & Poor’s Stoddard agrees: "Cigna mismanaged their pricing, mismanaged the risks they were holding in their reinsurance operation, and mismanaged their IT transformation. But these problems can be fixed. Aetna lost millions of members with bad pricing, and they turned it around."

Cigna is working hard to do the same, and Anania remains part of that turnaround team. But even now, the CIO seems reluctant to claim ownership of Cigna’s IT future. When asked if the buck stops here for IT’s performance, she sits back in silence and looks vaguely troubled. It’s left to her PR handler to jump in and say, "Yes, the buck will stop here going forward."

Copyright © 2003 IDG Communications, Inc.

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