Best Applications Outsourcing: Oklahoma Dept. of Human Services and ACS, a Xerox Company
Awards Criteria: Best use of outsourcing to achieve the buyer’s objectives for ITO while also achieving mutually beneficial outcomes.
The Oklahoma Department of Human Services (OKDHS), which serves over one million families, has won 19 awards (before this one) for being first in the nation, thanks to systems ACS, A Xerox Company, created for it. ACS built electronic payment systems from the ground up to support the OKDHS’s mission.
The situation prior to outsourcing
The OKDHS, like other states, used paper claims to process and audit childcare services. The time it took to process and audit 43,000 kids and 4,300 provider claims manually “just took too long,” recalls Henley. Some providers had to wait six weeks to get paid.
Henley says childcare claims accounted for 20 percent of the workload of the business and claims audit unit but took 80 percent of its time. In addition, the OKDHS estimated overpayments totaled 10 percent. That translated into $10 million a year in fraudulent claims.
The OKDHS wanted to create an electronic benefits transfer (EBT) system to provide authorization for the state’s childcare subsidy. It already had SNAP (Supplemental Nutrition Assistance Program) benefits on EBT cards, which are similar to bank ATM cards that clients use in grocery stores in lieu of food stamps. (The federal government changed the name in 2008.)
The system ACS created manages day-care time and attendance. Parents swipe the card through a point-of-sale (POS) terminal at the day-care center. The state receives an immediate verification of the time children spend at the center.
“Our final objective is to make our systems benefit our users and not make them feel like they’re welfare recipients,” Henley says. Joseph Doherty, Executive Vice President and Group President, ACS Government Solutions, adds, “Lisa always challenges us to think more deeply about her constituents so our systems are more convenient for them.”
Henley says building these complex systems “would have been untenable by the agency alone.”
Improved processes and new technology have saved money over time. Henley reports the original childcare contract was $5.25 per child per month. It’s now $2.97. SNAP costs have fallen from $1.99 to 89 cents.
The state has saved 10 percent of its childcare budget or $10 million a year. Henley says the state used that money to provide grants to day-care centers across the state, “which benefits all kids, not just subsidy kids.” So far the program has funneled $70 million to this program.
Today the childcare system “runs better, easier, and on its own,” according to Henley. From day one, it has paid at 100 percent accuracy on 30 million card swipes a year. The providers are also pleased they don’t have to fill out paperwork. One large center with 300 kids employed three people to do nothing but file claims. “Now they just have to watch the kids,” says Henley.
Provider satisfaction was 20 percent when the program started. Today it is 89.63 percent, she reports.
The OKDHS staged the nation’s first automated childcare conference because it had so many requests to learn about this system.
Henley says this project “has been so successful, outsourcing has become attractive to all our business units.”
When the childcare system didn’t work
The initial roll-out of the childcare system was phased until problems surfaced and the partners stopped the project. ACS was the prime, but had subcontracted the transaction processing to another party. ACS actually purchased another company, Transaction Processing Services, to resolve the issues.
Henley says the partners had “to rewrite every part of the system design after the purchase.” She says “we sat down together and negotiated.”
Henley admits the OKDHS did “very little” to help ACS initially. “It was our mistake,” she admits. In addition, the OKDHS’s technical staff advised not to roll it out because it wasn’t ready. “But we ignored them and rolled it out anyway,” reports Henley.
Another problem was the two embarked on the project without service level agreements (SLAs). “That was a stupid thing to do,” Henley says in retrospect. Version 2 had SLAs.
As a result, the partners introduced “a very bad system” to 17 counties. The result: “We had some very angry providers because the system wasn’t working.” The media covered one angry meeting in Lawton. Henley knew it was going to be a tough meeting; driving to Lawton she saw cars with stickers that said, “DHS sucks.” Attending were 60 child-care providers and 30 DHS staffers. “One provider stood up and said, ‘If I had a gun, I’d shoot y’all right now,'” reports Henley.
She says “ACS took all the heat. They said, ‘We’re going to resolve these issues and provide a better system.”
The problems forced the OKDHS to reevaluate. The Department determined it had to change project directors. Then it formed teams to help ACS, which rebuilt the system after spending hundreds of thousands of dollars on the initial version.
The change was “phenomenal,” reports Henley. “Both the clients and service provider became engaged. We searched for solutions together.” For example, the original system took 23 steps for parents to swipe their card at the childcare provider’s POS terminal to check in a child. Lines formed and parents were late to work. Retooling the system reduced the steps to eight. It now takes 15 seconds to check a child in/out.
Once ACS reworked the system based on the findings from focus groups, it did a big-bang conversion. “If you’ve tested your systems properly, there’s no reason not to go ahead. You have no business rolling them out if you haven’t done the proper testing,” Henley explains.
There were unusual issues. One childcare provider called to say her POS machine was hot. ACS rushed over to discover she had put the machine on a heater and it melted. “So it was hot,” Henley says with a laugh.
The chance at a mulligan had another, unanticipated benefit. It also helped OKDHS “understand our client and provider base better as well,” Henley observes.
The two partners learned from the childcare problem. Subsequent conversions went smoothly. “We have few unanticipated issues because we are now active participants in every step of the process,” Henley reports.
Why this relationship works
Henley says unlike other providers, “ACS actually drills down and learns the program. You don’t see that very often.” ACS engineers actually came to her often to discuss her policies. They told her more than once, “You have a policy that’s causing your staff more work. We can automate and improve your accuracy,” she reports. They also read the agency’s voluminous policy manual so they could ask “thoughtful and provoking questions to understand how our systems work.” This was important because she felt their knowledge “helped us build a better system.”
Whenever Henley has a question, she says ACS has the answer. “They really do their homework,” she notes. But so does she. She participates in production calls and helps write design documents. “I know how many abandoned calls we have,” she says.
ACS also is willing to do the near impossible. On example was the OKDHS wanted its funds expunged back if a debit card was undeliverable or hadn’t been used in 90 days. No state’s system had been able to do that because they felt federal Regulation E prohibited it. Henley read the government’s obfuscating prose, then worked with ACS’s legal department. The result: it allowed the service provider to create a system that returned funds back to the OKDHS. “Bam, we did it,” she boasts.
ACS will take on new tasks that seem to be peripheral to applications outsourcing. For example, the OKDHS asked ACS to take over the banking involved in the debit cards. “Most states keep the direct deposit information and outsource the debit card,” she explains. But Oklahoma felt the social workers had better things to do than worry about bank deposits. They also had an eight percent error rate. “The change makes good business sense because it gives our clients a single point of contact to call for a problem,” says Henley. “ACS never told me, ‘Sorry, we’re really not in that business.”
Henley adds, “We’re not afraid to fight with each other. And we’ve had some big fights.” She says observers have told her “you fight like brother and sister rather than buyer and service provider.” But Henley says the fights are to create “an absolutely incredible system.”
She adds, “They know we won’t take offense if they tell us we are crazy, and we’re free to tell them they are.”
Communication is important. “Things don’t get better with silence,” says Doherty. The two also respect each other. “We can laugh and be friends and still expect each other to perform,” he adds.
Henley says the relationship has to be two-sided. “We know we have to adhere to the same rules they do,” she adds.
ACS’ Government Solutions headquarters is just outside Washington, D.C. Henley appreciates the fact “they make trips here and not just when there are problems.”
ACS also is “happy to tell me” about the latest technology. “This is a big deal for me,” she says.
Doherty adds that the cultures of the two organizations match. ACS’s CEO Lynn Blodgett published a book of his photography about homeless people. “Human services are at the heart of our organization,” he says.
Henley wanted to automate the respite program. Previously the OKDHS gave caretakers six blank checks to pay people to take care of their incapacitated loved ones so they can have a break. She sent an e-mail to ACS telling them how the program currently works, the state’s payment policies, and the number of claims.
ACS engineers sat in her office and “we hashed it out.” The process took weeks. The two then produced a statement of work (SOW). Together they will produce the first system of its kind in the nation, according to Henley.
In January 2009 the OKDHS added distribution of the state’s sales tax refund via an electronic payment card. This enabled 84,000 Oklahomans to receive their funds quicker than traditional checks. Meanwhile, the state saved money associated with postage and printing.
Currently the Department is looking into adding three new programs to the SOW. “We add scope as we find areas that are better suited to their business than ours,” says Henley.
Lessons from the Outsourcing Journal:
- Buyers have to work closely with service providers when designing new systems. If they don’t get involved, the systems may not work.
- A good service provider will go the extra mile to fix a problem, even if it means buying another company!
- Buyers appreciate open, honest communication, especially when a service provider cannot do what the buyer asks.