Absence Management Outsourcing Case Study

The Situation: An energy and utilities company, with over $7 billion in sales and more than 11,000 employees, was spending exorbitant amounts running its disabilities management group and employee complaints about the group’s service were on the rise. Due to process inefficiencies, employees took longer to get back to work, which was a huge financial burden. They had a fragmented solution utilizing multiple vendors and internal staff with unclear accountabilities.  The associated vendors provided inattentive service at high costs. In addition, the company wanted a more pro-active service capable of not only tracking but reducing overall absence rates.  They engaged us to assess the situation, recommend the best course of action and work with them to get the disabilities management group and function back on track.

Our Approach: We first performed an initial assessment to determine priority issues and worked closely with the client to establish a work plan.  Next we redesigned the client’s absence management processes in a way that worked well for them using best practices and lean process design wherever possible.  We also helped the client to restructure some of their vendor relationships resulting in immediate cost savings and to select a new vendor where a current vendor relationship had become unworkable.  We selected and implemented an absence management system that not only supported the new processes and efficiencies, but allowed the client to see previously unavailable absence data that we helped them use to begin to target program and policy changes to reduce absenteeism overall.  Finally, after our other enhancements were implemented, at the client’s request, a majority of the function was outsourced to us on-site and we assumed ownership for STD, FML, TRTW, and ADA claims, as well as restrictions, all nurse case management and Worker’s Compensation and LTD claims initiation.  We were able to use the new system to much more assertively and effectively manage claims resulting in significant absence reductions.

Primary Solution Components: The initial goals were to reduce both costs and absenteeism through model restructuring, process redesign and tool selection and implementation.

We compared the group’s process to best practices and performed empirical work measurement.  This allowed us to restructure the process for moving cases through the system to ensure a time efficient workflow and eliminate non-value added tasks. We improved their use of third party administrators by consolidating relationships and more exactly defining roles and service levels.   Job descriptions were updated to reflect process changes. Responsibilities were clarified and procedural documentation was created.

We next evaluated, selected and implemented a new disabilities management tool compatible with their current technology.  Among other advantages, the tool allowed us to implement a task driven workflow and measure cases against industry guidelines. We also gained significant operational and managerial reporting capabilities.

Finally, at the client’s request, we assumed ownership for much of the function.  The disabilities group staff was offered positions with us to preserve continuity and we implemented a new, seasoned management staff and augmented other staff as needed.  We established relationships with synergistic internal teams, began detailed analytical reporting and started our field outreach programs designed to ensure that the business unit leaders understood the absence management programs and process.  We strategized with the client’s management team on a regular basis to design process enhancements and program changes to allow us to continue improving overall absenteeism.

The Results: Our work improved service and saved the company $5.7 million over the initial three years and in excess of a million each subsequent year.  Specifically we:

  • Increased the group’s workload capability by 35 – 40%.
  • Saved an average of 400 – 800 days of absence against industry guidelines per month.
  • Saved $3.6 million in administration costs in the first three years with savings continuing at a comparable rate thereafter.
  • Saved $150K in the first month due to revamping of vendor relationships.
  • Gained advanced reporting capabilities allowing management to look at data in various ways to find trends and better manage absenteeism.
  • Raised percentage of claims closed within MDA guidelines from 60% to over 90%.
  • Raised percentage of claim calls answered from 50% to 80% and percentage of issues resolved within 1 business days from 35% to 99%.
  • Significantly reduced litigation risks by ensuring consistency in case handling.