Built to scale: Ed Sellers leads BlueCross BlueShield of SouthCarolina

May 1, 2006

Every time a new stop light goes up in a growing neighborhood,BlueCross BlueShield of South Carolina (BlueCross) wants to have acustomer within a block of it. This health plan, nested withsubsidiary businesses, has prioritized growth through an aggressivebranching out from its core competencies. Half of its totalbusiness comes from selling products to other healthcareorganizations.

Every time a new stop light goes up in a growing neighborhood, BlueCross BlueShield of South Carolina (BlueCross) wants to have a customer within a block of it. This health plan, nested with subsidiary businesses, has prioritized growth through an aggressive branching out from its core competencies. Half of its total business comes from selling products to other healthcare organizations.

Twenty years ago, the plan's CEO realized that serving South Carolina members alone would not position BlueCross to grow indefinitely. In the years since, the health plan has launched 20 health and technology subsidiaries and entered into hundreds of national contracts-in essence, diversifying in an attempt to compete on any block big enough to have its own stop light.

That diversification strategy has bloomed into a $3 billion business with 13,000 employees nationwide. Sellers says BlueCross builds its enterprise with a fluid, scaleable platform so it can react to opportunities and change scope quickly. Increasing in size alone would not allow the dimensional growth or flexible dynamic required to keep up with rapid changes in the healthcare market.

"There are some things we think we do as well as anyone else in the United States," he says. "One of those things is transition. We believe we are the most experienced health insurance company when it comes to handling major transitions. And I'm talking about hundreds of people and entire data centers."

National reach

One of the largest business segments for BlueCross is its soup-to-nuts Medicare portfolio, which includes Medicare Advantage, fee for service, a Medicare Advantage prescription drug plan, national Medicare call center services, national Medicare claims processing and national data center hosting. According to Sellers, the company regularly contracts with the Centers for Medicare & Medicaid Services (CMS) for a variety of pilot programs because it has such a far reach. It currently processes 20% of all Medicare claims for CMS.

In late March, CMS awarded a pivotal contract worth up to $1.9 billion over 10 years to three companies, one of which is Companion Data Services, the data center subsidiary of BlueCross. As a result of the Medicare Modernization Act (MMA), over the next five years, CMS will consolidate its 20 current data center contracts and work with only three companies: Companion Data Services, EDS Corp. and IBM. Sellers says the contract was a coup for the organization.

"We weren't going to roll over and let the national technology companies take the contract, so we made the decision to separate all our Medicare processing into a [dedicated] data center," he says. "It took about 15 minutes for the board to decide. This was half defense and half offense. If we lost the contract, we would lose scale; if we won it, we would gain scale."

Companion Data Services handles more than 200 million Medicare claims per year and anticipates the volume to grow to as much as 500 million per year as a result of this new contract. The opportunity also allows Companion to bid on even more CMS business outside of what it already provides.

Sellers says this isn't the first time "little ol' BlueCross and BlueShield of South Carolina" has won a big CMS contract.