Reference no: EM132183286

Health Care Partners (HCP) was a 40-year-old company providing health care benefits for large corporations. In order to keep health care costs down for its clients, HCP needed to get a large group of physicians and health care providers in the group who were willing to accept the cost reimbursement rates established by HCP. HCP provided reimbursement rates that were in line with its competitors. Although HCP had some success in getting service providers into its network, several hospitals and physicians resisted joining the network because HCP had a reputation for reimbursing service providers slowly.

In order to pay service providers more quickly, HCP had to modernize its operations and eliminate a lot of the paperwork that generated delays in payments. HCP upgraded its computers quickly. But the real problem was software. No software was readily available in the marketplace to satisfy the needs of HCP. HCP hired a software development company, SoftSmart, to assist its information technology (IT) personnel in the development of the package.

SoftSmart was provided with offices for on-site personnel on the same floor as HCP’s IT personnel. HCP had budgeted $15 million for the entire project, entitled QuickPay, and had promised all physicians and hospitals in its network that the system would be up and running in a year or less.

FIRST QUARTERLY REVIEW MEETING

In the first quarterly review meeting, which was attended only by HCP personnel, Paul Harris, the chief information officer, stated how furious he was:

Why can’t I get a straight answer from anyone on the status of the QuickPay Project? We’re spending $15 million and nobody seems to know what’s happening. Whenever I ask a question, it appears that all I get in response is bad news. Why aren’t there any metrics for me to look at each week or each month?

Since the project began about three months ago, I have seen requests for more than 200 scope changes. Now I’m told that we will probably be missing deadlines and the schedule slippages cannot be corrected. We have escalating costs because of the scope creep and it looks like we’ll have some deterioration in value expected for our clients. Evelyn Williams, the project manager for HCP, spoke up. When we hired SoftSmart, we gave them a fixed price contract. We had no idea how many scope changes they wanted, but we assumed that there would be a small number. We were a little naïve. Last week, when we asked them for their position on the status of their work, they said that they cannot provide us with detailed status information because they say that it depends on the number of scope changes that we approve. Their schedules keep changing.

Paul Harris was furious. It appeared that the company would be spending significantly more than $15 million, and he could not get metrics, schedules, or effective status reporting. This project had the potential to be a colossal disaster.

Paul demanded that the company now have monthly rather than quarterly review meetings with him and possibly other senior management personnel. He was convinced that everyone understood what had to be done, but he was equally unsure as to whether they would do it.

REVIEW MEETING AT END OF MONTH 4

Paul Harris was still quite unhappy after seeing the data in the review meeting. There were schedules and metrics. During the briefing, Paul was told that work was progressing but not as fast as originally hoped for. However, the metrics provided no useful information and the schedules had a series of footnotes at various locations stating dependencies on the approval of various scope changes. Once again, Harris found it difficult to determine the true status of the project.

Evelyn Williams, the HCP project manager, spoke up again. We’re making progress in status reporting but not as fast as I would have liked. Some of the team members from SoftSmart are reluctant to provide us with good metrics. They tell us that they simply do not believe in the use of metrics, probably because they are afraid of what the metrics might reveal.

That’s why they often select the easiest metrics to report or those that provide the least amount of information. Some of our own personnel are infatuated with metrics, and we simply cannot afford to create all of the metrics that these people desire. I’m not sure right now which way we should go or what would be a reasonable compromise. To make matters worse, we have lost some of our key personnel to other projects.

CRITICAL DECISIONS

There was now no question in Paul Harris’s mind that things were not going as planned. The morale of the team was poor; key personnel had left the project, probably by choice; and status reporting was unacceptable. SoftSmart was probably taking advantage of HCP by pushing through questionable but profitable scope changes, and the end date would most likely slip. The decision was clear; there was a definite need for a health check on the project.

Several questions had to be answered before officially conducting the health check. First, should the health check be performed using internal personnel such as representatives from the project management office? The project manager would most certainly not be the person allowed to perform the health check.

Using project management office personnel is an option, but they may have friendships and loyalties to some people on the project team and may not be honest in their conclusions as to the real status and health of the project. External facilitators may be the best choice, provided they can operate free of politics and create an environment such that people will feel free to vent their personal feelings. They also bring to the table experience in conducting health checks in other companies.

The second question is whether the interviewees will be honest in their responses to the health check facilitators. Paul believed that the personnel at HCP would be honest. However, the real issue may be with SoftSmart. HCP may not be able to get SoftSmart to agree to the interviews, and, even if the interviews were conducted, SoftSmart personnel would most likely not provide honest responses. Therefore, it would have to be a health check at HCP only.

Third, Paul was unsure as to how other executives at HCP would respond when hearing the truth about the QuickPay Project. The results of the health check could cause other issues previously hidden to surface. This could make the situation worse than it is already. People could lose their jobs or be demoted.

However, there could also be good news and the early detection of problems that could have led to disasters later on.

Paul concluded that there was really no choice: A health check must be conducted. HCP must know the true status. HCP must identify issues early such that sufficient time exists for corrective action.

Paul called an emergency meeting of the QuickPay Project team and asked SoftSmart representatives to be present as well. When informed that he was authorizing an outside company to come in and conduct a health check, several team members expressed their dissatisfaction. One team member argued that outside resources do not understand the HCP culture or the project and that this would be a waste of time. Another argued that the project was already in financial distress and the cost of the health check would make matters worse. A third team member asserted that critical resources would be tied up in interviews. SoftSmart argued that, by the time the results of the health check are known, it may be too late to make changes because of the ongoing scope changes occurring on the project. Harris held his ground and stated emphatically that the health check would be performed and that everyone would be expected to support the company conducting the health check.

THE HEALTH CHECK

HCP hired Pegasus Consulting, which had experience in health checks on IT projects and also some experience with hospitals and the health care profession. An agreement was reached that the health check would be completed within three weeks, just prior to the project review meeting scheduled for the end of the fifth month of the QuickPay Project.

Pegasus spent part of the first week reviewing the business case for the project and the project’s history over the past four months. During the remainder of the first week and all of the second week, Pegasus interviewed project personnel from HCP to discover the facts. The interview sessions went well, and the interviewees were quite honest in their opinion on the status of the project and what needed to be done to correct the deteriorating situation. A few of the on-site representatives from SoftSmart were also interviewed, but Pegasus believed that their contributions to the health check were meaningless.

By the end of the third week, Pegasus had prepared its report and was ready to brief Harris on the findings. At the briefing meeting, a spokesperson for Pegasus made the following statements:

There are several issues, but the most critical one is the schedule. It is our opinion that the project will be at least three months late. We did a root cause analysis and discovered the following:

Performance is not following the baseline because the baseline is continuously changing due to the number of scope changes. While we believe . . . some of the scope changes are necessary, many could have been delayed and performed later as an enhancement project.

HCP will not be able to meet its forecasts. The culprit appears to be the requirements package which was ill-defined. Had the requirements package been properly prepared, the original forecast may have been achievable.

The benefits and value expected, as identified in the business case, seem realistic and it is our opinion that both HCP and its clientele will receive these benefits.

The governance for the project is poorly structured. For a project of this magnitude and with the associated risks, a governance committee should have been established. The chief information officer should not be the only person responsible for governance on this project.

Risk mitigation has not been performed by the project team. We cannot find any plan on risk management and this is unheard of in a project of this magnitude. This reflects poorly upon the project manager and the assigned team.

It is our opinion that HCP may have assigned the wrong project manager.

Several of the interviewees commented that they had little faith in the ability of Evelyn Williams to manage this project. Several of the interviewees had worked for her on previous projects. We recommend that she be replaced.

We were not able to find any contingency plans. Everyone told us that they wanted to develop contingency plans but the number and frequency of the scope changes made this impossible.

There are opportunities for some corrective action. Included in our report is a fix-it plan that we believe will work. However, even with the implementation of the fix-it plan, the project will still be about three months late.

Paul Harris did not seem surprised with the findings of the health check. He read the final report and believed that the recommended fix-it plan could work. But now Paul had to prepare for two more meetings in which he was expected to report on the findings of the health check: an executive staff meeting and the five-month QuickPay Project review meeting.

QUESTIONS

1. Is the turnover of key personnel in the first three months of the project an indication of looming disaster?

2. Is it advisable to perform a health check after just the first three months of the project?

3. What were the three life-cycle phases that Pegasus used in performing the health check?

4. Did Pegasus do its job correctly?

5. Was three weeks sufficient time for Pegasus to do its job?Health Care Partners (HCP) was a 40-year-old company providing health care