A Case for Thorough Testing and Management Oversight

Today I was reading a synopsis of a fiasco that happened in the 1990s with Oxford Health Plans – a successful HMO at the time. If ever there was a case for thorough project management to be wrapped around a major system overhaul and detailed and planned testing to be utilized on a project…this one is surely it.

Here’s the story….

Oxford Health Plans is a successful health maintenance organization (HMO) in the New York area. The firm went public in 1991, and its stock price enjoyed steady growth. In 1997, however, problems with a new computer system. led to significant losses, $120 million in the fourth quarter on top of $78 million in the third quarter. When the company announced its second quarterly loss, its stock price was 75 percent lower than its previous high. It was unable to send out monthly bills for many of its customers, and the company could not track payments to hundreds of doctors and hospitals. During the year, uncollected payments from customers rose to $400 million, while Oxford’s unpaid bills to (caregivers) rose to over $650 million.

The problem began when Oxford started planning a system, based on the Oracle database management system, when it had a little over 200,000 members. By the time the system went live three years later, the HMO had 1.5 million members. The company tried to convert to the new system all at once. While the computer system labored under the load, Oxford management continued its aggressive drive to sign up new members. The new system was intolerant of errors that were accepted in the old one. As a result, an account with thousands of participants might have been rejected for an error in any member’s record.

Some customers refused to pay the HMO after not being billed for months so Oxford had to write off over $100 million in uncollectible bills. The HMO’s failure to pay its bills also angered care providers: At one point it owed Columbia University $16 million and Cornell $17 million for medical services. Oxford lost track of its actual medical costs-information a health care provider needs to set reserves and project liabilities.

While organizations have been implementing IT since the 1950s, we still seem to repeat many of the same problems. Oxford is a clear case of a management failure rather than a technology failure.

Summary

Have you ever heard of one of those projects where you ask yourself – or someone else – what were they thinking? Did they even put a project plan together? Did they even setup any test cases and perform any user acceptance testing at all? Who signed off on all of this? Or worse…have you ever heard this asked about one of your projects?!?

Solid project management practices won’t fix everything and make every project successful, but they often will and certainly will help avoid any frequent occurrence of project nightmares like the one mentioned above.

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2. Dealing with Project Failure
3. One Case for Twitter – Comcast / Salesforce Case Study
4. The Difference Between Project Success and Failure May be in Your Head
5. What if…The Project Budget had No Limits?