IT deal with Dell to affect third of Blue Cross workers

PROVIDENCE, R.I. — Close to one-third of the work force at Blue Cross & Blue Shield of Rhode Island will be directly affected by a decision to outsource essential information technology systems to Dell Inc., the company informed employees at meetings Wednesday.

Dell, which has provided IT support to Blue Cross for nearly a decade, will assume a much large role beginning in January, leading to the layoff of about 80 employees, Michael Hudson, executive vice president and chief financial officer, said in an interview.

Another 130 will cease working for Blue Cross but will be offered positions with Dell. About 50 will learn that their jobs are being eliminated, but they’ll be able to switch into other positions “likely without an interruption,” Hudson said.

Overall, the staffing reduction will affect 260 of the 980 people Blue Cross employs, Hudson said.

Expanding Dell’s role at Blue Cross is projected to save the independent, nonprofit organization $100 million over the life of a new seven-year contract, said Hudson.

“We’re not an IT company. We’re a health insurance company,” said Hudson, in explaining why Blue Cross determined that it should rely more heavily on Dell.

The challenge for Blue Cross is to stay “affordable” while developing information systems that are “simple” for policyholders and providers to use.

“The expectations our customers have in terms of technology goes up, it’s not just comparing us to the health care industry, it’s comparing us to any other industry like the banking industry. So those are big complex IT projects ...

“We have to be able to provide those types of services, and we have to compete against the large national companies that have a lot more money and the ability, since they have such a broad membership base, to spread those investments over tens of millions of members versus the 430,000 we have. There’s no way we can beat them at that game. So we said, ‘What are some other ways we can use the expertise and skills of another company to bring scale and IT expertise to us in an affordable manner?’”

Despite the outsourcing, the move in the long run “preserves the most jobs” by keeping Blue Cross “local and independent,” Hudson said. “It’s good for our associates and the local economy.”

By improving data and analytics, Dell can also help Blue Cross transition to focusing on managing the health of populations and reimbursing providers for the quality, not the quantity of medical services rendered to patients.

State Health Insurance Commissioner Kathleen Hittner, when reached for her reaction to the news, said she couldn’t speak with any authority on Blue Cross’ decision. But she acknowledged that the health care industry, partly through the Affordable Care Act, is under tremendous pressure to keep consumer costs down.

The commissioner’s office regulates how much insurers may hike premium rates, mandates how much they must spend on primary care, and requires them to meet targets for transforming from volume-based fee-for-service systems to ones based on value and quality of care.

“What’s challenging for them is to figure out how to do that,” she said, all while confronting the “anxiety” of competitors vying to expand market share and employers opting to self insure.

The agreement soon to be consummated with Dell is the result of a process that began in April when Blue Cross solicited information technology firms to submit proposals to serve as a long-term strategic partner for the insurer. Dell was selected, Hudson said, partly because it is familiar with Blue Cross operations and “they understand some of the inefficiencies we have.”

Blue Cross is one of the state’s top employers and a dominant player in health insurance, particularly coverage offered through employers. In late October, its president and CEO for the past five years, Peter Andruszkiewicz, announced that he will retire in May.

The last time Blue Cross substantially reduced its work force was in 2012 when 39 people lost jobs and four additional vacant positions were eliminated.

Amid some controversy, Blue Cross relocated in 2009 to a $90 million, 13-story building it built next to the Amtrak train station. It has never been fully occupied, said spokeswoman Stacy Paterno.

Blue Cross already has other tenants, including Nortek and USB, and is currently marketing additional unfinished space. But since so many of the new Dell employees will continue to work out of Blue Cross quarters, the work-force reduction will have little impact on the real estate.

“We know we have the ability to consolidate even more,” she said, but the loss of about 80 employees “is not going to make that big of an impact.”

Dell, when reached for comment, issued the following statement: “Through this new strategic relationship, we will focus on helping BCBSRI improve operations and implement new technologies that will lead to better scale and efficiencies to meet the challenges of today’s healthcare industry ... We are eager to hire as many of the BCBSRI employees as the contract allows in order to maintain continuity.”

rsalit@providencejournal.com

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