NASCO’s magazine dedicated to ... bridging, filling and closing the payer gap

INSIDE:Take a look into NASCO’s IT strategy, and learn how the company is raising the bar when it comes to security.

VOLUME 6 ISSUE 1 2015

table of contents

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a note from our ceo

q&awith dan galdenzi

it's all about strategy

are you ready?

raising the bar on securing and protecting our customers' data

contributorsCheryl Dillenback, NASCO

Carmi Edwards, BCBSMCarson Hornsby, NASCOLauret Howard, NASCODan Galdenzi, BCBSVTJohn Ladaga, NASCO

Bob Meier, NASCOMichaela Nardella, Horizon

Doug Osborn, NASCO Rebecca Roberts, NASCO

David Weeks, NASCODave Weinstein, BCBSMA Andrea Whitlow, NASCO

©COPYRIGHT 2015 NASCO

During the evening of April 1, I received a call from Dan Galdenzi, Vice President of Business Technology and Chief Information Officer for Blue Cross and Blue Shield of Vermont (BCBSVT). He called me with great news — the BCBSVT Board had approved its ownership in NASCO. I had been anxiously awaiting Dan’s call; I knew this was no April Fools’ Day prank.

One of the unique characteristics of NASCO is its governance and ownership structure. And although NASCO is delighted to support any Blue Cross and Blue Shield (BCBS) Plan, whether an Owner Plan or not, becoming an Owner Plan has tremendous benefits.

I had the pleasure of discussing the key ownership benefits with Dan, Don George, CEO of BCBSVT, and Ruth Greene, CFO of BCBSVT, as they were making their decision to take the purchase proposal to their Board. I shared with them what I believe is the biggest benefit: having a voice on the NASCO Board — helping provide guidance to management and helping develop overall strategic direction.

Some of the biggest decisions Plans make revolve around entrusting IT and business partners with their data and services. And what a great strategic advantage and risk mitigation strategy it is to have an opportunity to own and influence your partner directly. Couple that direct influence over the partner’s strategic direction with the ability to work closely with other Board members representing sister BCBS Plans that have common interests, challenges and opportunities, and you have yourself a tremendous value proposition. On average, NASCO reinvests approximately $50 million back into our products and services at the direction of our Board.

On behalf of all NASCO associates, I welcome BCBSVT as a new owner of NASCO! BCBSVT joins five other NASCO Owner Plans: Anthem, Inc., CareFirst BlueCross BlueShield, Blue Cross and Blue Shield of Massachusetts, Blue Cross Blue Shield of Michigan and Horizon Healthcare Services, Inc., as well as the Blue Cross and Blue Shield Association.

In this issue of The Bridge, you will hear from Dan himself as he’s asked about BCBSVT’s decision to partner with NASCO. You will gain insight into NASCO’s IT strategy and how it will help us to manage change in our technology portfolio, to better secure and protect our data, and to align with the IT strategies of our Plan customers. And you will also learn more about NASCO’s security standards and the steps we are taking to become SOC 2 compliant. In addition, you will see how NASCO’s successful Business Readiness program is being adopted by the Plans. Enjoy!

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VICE PRESIDENT OF BUSINESS TECHNOLOGY AND CHIEF INFORMATION OFFICER FOR BLUE CROSS AND BLUE SHIELD OF VERMONT

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DAN GALDENZI

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NASCO is both proud and excited to be at the heart of the core operating platform for Blue Cross and Blue Shield of Vermont (BCBSVT), and we are committed to providing the leadership, products and solutions that BCBSVT needs to achieve their vision of becoming a transformed healthcare system in which every Vermonter has healthcare coverage and receives timely, effective, affordable care.

The Bridge recently had an opportunity to sit down with Dan Galdenzi, Vice President of Business Technology and Chief Information Officer for BCBSVT, to discuss the Plan's new partnership with NASCO and the multi-year migration effort that began earlier this year.

The Bridge: I know that you had a number of options in choosing an IT solutions provider. How did you and BCBSVT become aware of NASCO?

Dan: Once we really got down to a formal search and we knew that we wanted it focused on partners with Blues experience, NASCO was immediately on our short list. I found out about NASCO through my conversations with other Blues CIOs while networking at one of the Blues IT roundtable meetings in the spring of 2014. We had also had NASCO on a list of possible vendors from a previous high-level evaluation we did four years ago. The Bridge: What were some of your first impressions of NASCO? How would you characterize the NASCO difference?

Dan: My initial impression of NASCO was simply that it was just another for-profit vendor. What I learned about NASCO over the period of time we engaged with you is how different you are. Working with John Ladaga, NASCO’s CEO, I found that he immediately displayed strong ethics, a sense of community, a work/life balance, empathy, fairness and the promotion of an overall culture that is very similar to ours here in Vermont and one that is very hard to find at most companies. The absence of the “profit motive” and the strong focus on customer satisfaction is both evident and extends to all aspects of your organization from the top down. It was a good fit right from the start and that helped us quickly get comfortable with a long-term relationship.

The Bridge: Here you are a solid four months into the migration effort and ideation phase. What are your general thoughts on the effort and level of collaboration between BCBSVT and NASCO thus far?

Dan: This is the beginning of a very long-term relationship and while I wouldn’t exactly call this a honeymoon phase, I would say that we are still figuring out each other’s styles and approaches to managing something this large. We’re looking at NASCO to take the lead early on as the experts in the transition of our systems, since NASCO has done this several times before. But being a much smaller Plan than NASCO is used to, we have thought carefully about and will continue to calibrate the scope and expectations of what we set out to do together. We’re a small single-state company, and we have high retention and very knowledgeable subject matter experts. Those characteristics may help us accelerate some steps along the way that larger companies couldn’t do. But all in all, so far so good, and we’ll continue to foster a strong partnership through frequent communications and a transparent culture. The Bridge: I know that BCBSVT prides itself on being #1 in customer service, and I’m sure that migrating to a new system and the use of new products and services is no small undertaking. What steps are you taking to ensure the same level of quality customer service during and after the migration to the NASCO solution?

Dan: We have created an entire culture of customer service here at BCBSVT. So it’s not simply about maintaining quality; reducing our focus on service would be like tearing down our culture and values — and that’s just not going to happen. That said, there is risk to overworking and over-allocating key resources that are customer-facing, and we will work diligently to ensure we maintain that high level of service and will rely on our governance structure, satisfaction surveys and management feedback to address any signs of our customer culture being threatened.

The Bridge: How do you see the transition to NASCO bringing greater value to your members, employers and providers?

Dan: I think it brings value in a lot of ways. Most importantly, we achieve quicker speed to market for new initiatives and don’t have to create and maintain custom code while doing it. That will help all of our constituents. That’s a big issue for us today with our PowerMHS solution.

NASCO’s ability to easily and quickly comply with Blue Cross and Blue Shield Association releases and government mandates will also be of great help to BCBSVT and our constituents, especially with the focus on consumerism, national accounts and value-based care initiatives. NASCO’s new CRM, NCompass, will be fully integrated with our core claims system and will help improve the member experience even more. Having a more flexible and configurable provider interface with NASCO’s Provider Management and Reimbursement solution (PMR) will allow us to partner more closely with and act more nimbly with our provider community. The Bridge: At NASCO we continually look for opportunities to bring greater value to our Plan customers by leveraging the intellectual capital of both NASCO and our BCBS Plan customers. How does it feel to be part of this larger collective? I know that you recently attended our Executive Committee meeting with other NASCO Owner Plans, any general thoughts on that experience?

Dan: This aspect of the relationship is probably the biggest selling point as well as being a change for us coming from our current vendor. Having Blues experience was essential to even being considered in our RFI process. But NASCO’s approach of leveraging the Blues' intellectual capital is key to the model working. We at BCBSVT are really looking forward to sitting at the table with five other Plans to collectively determine the product roadmap and priorities for NASCO. NASCO still has some steps to take to get their organization aligned more as a product company and thinking progressively and ahead of our needs. But that said, there is a roadmap and strategy to get there, and I’m confident in the management team to achieve that vision. Our participation in that strategy is part of the equation, and we’re ready and willing to support it.

The Bridge: How do you believe NASCO’s business strategy and mission to become the best product and shared services company for BCBS aligns to BCBSVT’s goals and objectives?

Dan: It aligns perfectly. We see claims processing as a commodity business. During our evaluation of NASCO in the RFI process, we identified some key areas that needed to be brought into the 21st century, but once those gaps are closed and addressed, all of our attention will be on the future. Healthcare is changing, now more than ever, with consumerism and pay-for-performance being at the helm of that transition. We plan to partner with NASCO and the NASCO family of Blues on being the best in our industry at addressing these changes and future trends thoughtfully, pragmatically and quickly to help our customers become healthier and save money. The Bridge: I know that BCBSVT, like NASCO, attributes much of its success to the dedicated people who work at the Plan and their tireless dedication to touching the lives of the people they serve. Can you tell me how BCBSVT came to build such a strong culture and develop such a dedicated and engaged workforce?

Dan: Transparency, accountability, empathy, equality, and empowerment. From management on down, we do our best to constantly walk the walk. Our CEO, Don George, is wholly committed to creating a culture that is focused on members’ health, customer service and doing everything we can, partnering with the state of Vermont, in pursuing the goal of providing the best and most affordable healthcare possible to all Vermonters.

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IT’s All About Strategy

The healthcare payer market is undergoing transformational change due to new business models, different payment contracts and the significant impact of consumerism. In addition, this complex and diverse technology landscape is, now more than ever, providing greater challenges in keeping information secure.

To ensure that our Plan customers remain competitive in this ever-changing market and that their information is secure and protected, NASCO is investing time, dollars and resources to make certain that our technologies are adaptable to our market, so when the rules change, we are able to handle those changes quickly and efficiently. To that end, NASCO has developed an IT strategy that provides the

guidelines and mechanisms to manage change in our technology portfolio, to better secure and protect our data and to align with the IT strategies of our Plan customers.

“Consumerism is penetrating healthcare in a big way and is changing the payer landscape at an unprecedented rate,” said John Ladaga, President and CEO for NASCO. “From healthcare exchanges to the proliferation of mobile devices and the emergence of wearable wellness gadgets, we are embarking on a new era in healthcare — quickly — and it is now increasingly important for us to operate with our eyes wide open. Formulating dynamic strategic plans, investing in core systems and embracing emerging technologies and consumer-centric business models will be vital to remaining competitive in this age of the empowered consumer.”

NASCO’s IT strategy draws from external influences, including our Plan customers’ needs, IT industry trends and healthcare industry trends, and it aligns with our corporate strategy as well as our product strategy and roadmaps. Maintaining our commitment to keeping up with the pace of change by continually collaborating with our customers and reinvesting in our system for the shared benefit of all our Plans, we made certain that our IT strategy was developed with the needs of our Plan customers as a significant contributing factor. In addition, we know that staying current with IT and healthcare industry trends is a critical component to helping us achieve our vision.

Our IT vision is to be acknowledged as the Blue-market leader in health information technology delivery and

management; providing simple, agile and secure products and services. It is our goal to offer Plans the most effective, efficient and secure products to meet their administrative services needs. So how will we achieve that lofty vision? By accomplishing our mission: to enable NASCO's product portfolio to advance the goals of our Plan customers through innovative, standards-based technology.

“In a dynamic environment, we must be able to adapt quickly to change and in order for IT to change quickly, we must have at our core a comprehensive IT strategy and the fortitude to adhere to standards,” continued Ladaga.

NASCO's IT Strategy

Plan Customer Needs

Corporate & Product

Strategies

Healthcare Industry Trends

IT Industry Trends

IT Guiding Principles

IT Capabilities

Corporate Support Systems

Product Technology

Architecture

NASCO’s IT strategy was developed with a list of six IT guiding principles that govern action to ensure that all parties are consistently on the same page, regardless of the product or solution being developed:

1. Customer and business driven: Design solutions to maximize ability to configure products and enable customer processes as defined by capabilities and requirements.

2. Limit technology variation: Maximize integration and reuse to reduce complexity and create efficiencies.

3. Trusted and secured data: Secure and manage data to ensure the right information is in the right place to support current business needs and future innovation.

4. Leverage standards: Use and continue to refine architectural and operating standards to support our corporate strategy, build our brand, and achieve our customers’ goals.

5. Performance focus: Deliver highly stable, scalable and multi-tenant solutions that meet functional and non-functional requirements.

6. Teamwork and process: Collaborate within and across organizations using a process-first mindset to drive efficiency, repeatability, quality and speed to market.

Our strategic goals are developed within a comprehensive view of NASCO IT, focusing on IT capabilities, product technology architecture and corporate support systems. Within these three categories are 10 strategic goals (as listed in the following graphic). The first goal, which aligns to all three categories, is to ensure that security is a priority

across all aspects of the IT strategy. Not only is securing and protecting data a key goal within NASCO’s IT strategy, but it is also a cornerstone of NASCO’s corporate strategy. As a trusted partner to our Plan customers, we are committed to providing the highest level of data protection for the personal health information of our customers’ members.

2. Drive change faster, cheaper and better by creating efficiencies across people, process and technology

3. Improve governance and collaboration across functions in support of strategy

4. Enhance technology standards and guidelines to enhance decision-making

5. Application and Integration: Improve ease of access to information and usability

6. Data: Adopt a more information-led and configuration-based architecture

7. Platform: Adapt and mature infrastructure and network to improve performance and cost efficiency (including cloud solutions)

8. Improve integration of corporate systems to improve process

9. Leverage cloud capabilities for efficiency and business continuity

10. Support collaboration and teamwork to drive repeatability, quality and speed to market

IT CAPABILITIES

1. ENSURE SECURITY IS A PRIORITY ACROSS ALL ASPECTS OF IT STRATEGY

PRODUCT TECHNOLOGYARCHITECTURE

CORPORATE SUPPORT SYSTEMS

As we move forward with the execution of our IT strategy, some of the key initiatives and changes you can expect to see in the next 12 months include:

• An enterprise IT architecture practice that will formalize our approach to system design, IT standards and IT governance. This practice is being implemented within the context of our product and systems life cycles.

• Enhanced performance engineering and testing capabilities within our product build processes. In 2015, we will preview a pilot project of the new capabilities to ensure value and alignment with stakeholder expectations.

• The implementation of a standard data integration capability for bulk file movement and the development of more integrated data stores for the growing needs of consumer-centric and integrated health data.

• Continued build out of security tools, processes and teams. Securing our environment and our products remains a primary focus for the organization.

As David Weeks, Chief Technology Officer for NASCO, said, “Simplicity, agility and security are not just a tag line; they are the way we need to think, plan and deliver as a leading technology organization.”

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RAISING THE BAR ON SECURING AND PROTECTING OUR CUSTOMERS' DATA:NASCO PREPARES FOR SOC 2 COMPLIANCE

One of the cornerstones of NASCO’s corporate strategy is to secure and protect our customers' data. We understand our role as custodians of this information, and we take that responsibility very seriously.

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When Plans consider implementing new products and capabilities or migrating new business, generally, the first item addressed is whether the system will be able to handle the change. Much work goes into readying the system for implementation. Plans may spend countless hours putting together plans for system readiness, but shouldn’t they also consider their organizational readiness?

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NASCO has designed our security architecture to ensure we have strong defenses and strict controls in place both for electronic data, such as protected health information, and for physical assets, such as data centers and networks. Additionally, we have appropriate practices in place to ensure that our associates adhere to all applicable HIPAA regulations regarding privacy and security.

To further confirm that we provide a high level of security, we also use external resources to closely examine and evaluate our processes and controls.

The internationally recognized SOC examinations analyze the operating effectiveness, security and availability of service provider controls. For service organizations that operate information systems and provide information system services to other entities, these examinations can help build trust and confidence in their service delivery processes and controls. The examinations are performed by, and the results are reported by, an independent auditor, offering the highest level of compliance assurance for NASCO’s customers.

NASCO initially became SOC 1 compliant in 2010 and continues to receive reports every year substantiating our SOC 1 compliance. The controls that are tested for a SOC 1 audit are based

on the procedures that NASCO has documented and executes. NASCO’s SOC 1 report covers the controls for transaction balancing, change management, logical access and physical access to provide assurance that transactions are received and processed, that only authorized individuals have system access, that changes to the system are reviewed and approved, and that the data center has appropriate physical security controls.

A second set of important standards were created by the American Institute of CPAs (AICPA) Assurance Services Executive Committee (ASEC) and cover a service organization’s internal controls related to security, availability, processing integrity, confidentiality and privacy. These standards are referred to as the Trust Services Principles and Common Criteria or SOC 2 standards. The SOC 2 standards focus on security and other controls that are of interest to auditors and regulators in our industry and that are particularly relevant to the services we provide to our Plan customers.

NASCO is ahead of many healthcare IT organizations as we prepare to have an independent SOC 2 audit conducted for 2015. With a SOC 2 designation, NASCO’s processes and controls will be certified at higher levels of security and reliability. Our goal is to receive an unqualified opinion for the SOC 2 audit, which means that no significant exceptions were found during the rigorous auditing process.

The SOC 2 designation assures our Plan customers, and their members, that the design and execution of NASCO’s controls for security, availability, processing integrity and confidentiality are effective and operational. In addition to the SOC 1 and 2 audits, NASCO engaged Ernst &

Young to complete an assessment of the effectiveness of our controls. Based on the assessment, NASCO identified enhancements we needed to make to our procedures, documentation and monitoring activities. For example, we added multi-factor authentication to validate the devices of authorized parties accessing NASCO systems.

NASCO was also able to identify other key enhancements to security, such as the need to implement an extended data loss prevention (DLP) tool. This capability actively monitors traffic and connections to the Internet and other public and non-public locations and identifies the types of data leaving the NASCO environment. The DLP tool provides NASCO’s Corporate Information Security team the tracking information we need to more effectively monitor data in motion and, if necessary, place restrictions on certain types of data sent outside of NASCO.

As NASCO continues to deliver the solutions that meet the needs of the nation’s largest Blue Cross and Blue Shield Plans, we are committed to investing in maturing our security as well. This commitment includes reducing risks by keeping up with new threats, improving security for both processes and technology, accelerating compliance (especially HITRUST and SOC 2 controls), simplifying adoption of new security efforts through training programs, and integrating more robust security practices throughout our business.

Security threats will continue to grow at a rapid rate, and NASCO must be ever vigilant. To meet and exceed the needs of our customers, we will continue to develop a culture where security is the first, middle and last thought in all the work we do.

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WHAT IS SOC?Service Organization Controls (SOC) are a series of accounting standards that measure the effectiveness of the design and operation of various controls used by a service organization. They are covered under both the SSAE 16 and the ISAE 3402 professional standards.

• SOC 1 is a report on controls relevant to an entity’s internal controls over financial reporting.

• SOC 2 is a report on controls relevant to security, availability, processing integrity, confidentiality and privacy.

hen planning implementations, especially on the larger scale, it is imperative that the organization is as prepared as the

infrastructure. While readiness may have multiple names — organizational readiness, operational readiness, business readiness, etc. — all of the names have the same mission: to ensure that the business operations, the workforce and all of the constituents impacted by the change are as prepared as the technology and systems infrastructure. In 2010, NASCO developed a Framework for Business Readiness (FBR) to support our Plan customers with managing the business operations, workforce readiness and change management components associated with large-scale implementations and migrations. We developed the FBR to mitigate common issues seen in the post-Production period by addressing the root causes of the potential problems earlier in implementation.

As 2014 came to a close, it marked the end of an era at NASCO and for many of our Plan customers. It was the end of NASCO’s multi-year, multi-Plan migration program. However, it was not the end of the FBR. For those Plans completing these projects, the FBR was instrumental in ensuring a successful migration, so much so, that several of our Plan customers are championing this approach and institutionalizing organizational readiness as a permanent part of the way they do business.

“Through our multiyear, multi-wave effort to transition all of our medical claims processing onto the NASCO platform, we established a small but talented team of folks who engaged with front-line associates and their leaders, as well as our partners at NASCO,” said Dave Weinstein, Director of Organizational Readiness for Blue Cross and Blue Shield of Massachusetts (BCBSMA). “We completed our final claims migration at the end of December 2014, and our efforts in planning and preparation through the use of our Organizational Readiness team were one of a number of approaches that helped us deliver a very successful migration effort. Our team worked closely with NASCO’s Human Performance and Business Effectiveness teams to plan the training approach, including an expansive use of the NASCO Learning Center. We also worked in the early stages of our migration planning to examine process gaps, understand how the transition to NPS would impact those gaps, and collaborate with both NASCO and our production teams to manage those questions.

We collaborated on activities, such as our Command Center (post-Production issue management) approach; overall communications planning, both internally and externally; and establishing a reporting methodology for the program.”

“With the sunset of the program upon the completion of our migration activities, we understood that many of those best practices would be valuable both as we continue to evolve in our ongoing collaboration with NASCO and as we undertake other technology and organizational initiatives at BCBSMA,” continued Weinstein. “So the approach lives on in a new form! I expect that our ‘readiness relationship’ with the NASCO Human Performance team and the NASCO Business Effectiveness Unit will continue to complement these efforts in the long term, and I am looking forward to continuing to enhance this part of our partnership further in the months and years to come.”

Michaela Nardella, Director of Service Operations for Horizon Healthcare Services, Inc., believes that everyone plays a role in ensuring operational readiness. She says that at Horizon, “business subject matter experts engage in the development process and provide feedback for the design and roll-out planning, and their participation is fundamental to a project’s success. Prior to implementation, a readiness review is conducted with business sign-off confirming that all factors impacting the business have been taken into consideration.”

Horizon Healthcare Services, Inc., uses a phased approach to ensure operational readiness. “During the preliminary project design review phase, our Operational Readiness team works with business stakeholders to ensure the business goals will be met by the technology choices being made,” continued Nardella. “The team identifies potential gaps during the design phase when changes can be managed more economically. After all potential processes are documented, the team begins phase two and focuses on developing detailed workflows. Using standardized business process modeling, we produce end-to-end business workflow diagrams that prepare employees for running the new systems and using the processes. When they can refer to a visual workflow, employees are able to see where and when they are expected to perform required tasks. This documentation then serves as the basis for the necessary training.”

Horizon’s readiness approach ensures that when a capability is delivered, the technical solution does not increase operational work, users are ready to use the solution, business is ready to manage operational risks, and operational readiness costs are taken into account in building the business case.

“When building the project’s business case, the organization considers any operational readiness costs,” said Nardella. “Too often, an organization leaves these activities out of the project budget even though they can amount to a significant portion of total cost and could influence project selection, prioritization and overall resource allocation at a portfolio management level. These potential costs include contingent staffing to handle initial increases in volume, payments or set-up activities, as well as longer term support costs of the new capability.”

Like Horizon Healthcare Services, Inc., Blue Cross Blue Shield of Michigan (BCBSM) also sees the value of taking organizational readiness considerations into account. The Business Readiness and Optimization team at BCBSM has expanded beyond its traditional role as a dedicated project delivery team. “Our team now supports our business partners by handling complex change, often driven outside of a project structure,” said Carmi Edwards, Director of Business Readiness and Optimization for BCBSM. “Our business readiness methodology and tools are being leveraged to assist in areas that require extensive cross- functional coordination and tracking. Our team is also being leveraged to assist in an ever-increasing complex group renewal sequence, integration of strategic and mandated product changes, and spearheading issue mitigation and resolution of complex business problems. This is a very exciting time where we are on the cutting edge of both project and business-driven solutions as a business readiness team.”

NASCO continues to work closely with our Plan customers to help formulate plans for organizational readiness because at NASCO, our measure of success takes into account more than just whether the technology works — we want to ensure that our Plan customers are always moving toward a more efficient, highly productive work environment. For us, a successful project is more than implementing and walking away — our goal is to ensure continuing success for our Plan customers.

Composed of business operations, workforce readiness and change management activities, NASCO’s Framework for Business Readiness (FBR) consists of six work streams:

The relationships of business functions to each other are defined, stakeholders within each business function are identified, and a description of the composition of the workforce is developed, including associated staffing plans.

The portfolio of metrics that will be used to determine business- and workforce-level successful performance is confirmed, and the tools and methods for data collection and reporting are defined. A schedule for post-Production results monitoring is also executed.

The sequence of work in new or reengineered processes as well as the roles and responsibilities of those engaged in process execution and/or management are clarified.

Awareness for all impacted parties is created in advance of the implementation and expectations are managed.

The performance support content, such as procedures, policies and guidelines used by the workforce, is documented, and the learning solutions to develop workforce capabilities are defined and delivered.

Collaborating with migration leads, the activities required to support effective transition are identified, contingency management preparedness is assured, and interim procedures are identified and communicated.

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