How Maximus doubled federal revenues
I had lunch recently with an executive I know and I told him I had just talked to Thomas Romeo, the president of Maximus Federal Services.
My friend frowned. “Aren’t they primarily a state and local play?” he said.
And there lies one of Romeo’s biggest challenges: the perception that Maximus is just a provider of business process management solutions in the state and local market.
Granted, the state and local market is their biggest business segment, accounting for 55 percent of the company’s $1.7 billion in 2014 revenue.
But Maximus’ federal business has nearly doubled as a percentage of total revenue since Romeo came on board in 2011.
In 2010, Maximus pegged 9 percent of its revenue to federal customers. In 2014, the figure was 17 percent. At the same time, the base had doubled from $831.7 million in total revenue to $1.7 billion.
The company’s growth has been greatly aided by the Affordable Care Act. The company operates customer contact centers for the District of Columbia and five state-based health insurance exchanges. In the federal market, it operates two customer contact centers as subcontractor to General Dynamics IT.
The company’s success in the federal market also is attributable to bringing its strengths from the state and local market into the federal space, primarily around contact centers and eligibility appeals for Medicaid and Medicare.
But it is also branching out from the health services market, Romeo said, and he points to one of his group’s biggest wins, the $848.4 million contract to provide operation and maintenance support for the Education Department’s Debt Management and Collections System. The system is part of the Office of Federal Student Aid and manages outstanding student loans.
Maximus will provide a contact center, case management, mail fulfillment and other services. A major goal is to reduce the number of students who default on their loans, Romeo said.
That goal, in a nutshell, is Maximus’ strategy in the government market – finding customers and projects that are focused on the end result.
If an agency is putting out a solicitation for a call center where the requirements focus on how long it takes to answer a call or turn around an email correspondence, Maximus likely won’t be interested, Romeo said.
Maximus is a best fit when an agency gives up its focus on the process and turns its attention to the results, Romeo said. And that can be a challenge for many agencies who don't like to give up that level of control.
“If you want to manage to the outcome, you have to write the contract to the outcome,” he said.
For example, Maximus has a welfare to work contract in the United Kingdom, where the company doesn’t get paid until a person gets the job. The company is paid again if the person still has a job at six months and then again at 18 months if the person is still employed.
“The goal is sustainable employment,” he said. “You have to align the payment to the result.”
There is a risk for the company, and that’s why Maximus has shunned projects where the outcomes can’t be clearly articulated and reliably measured, or when agency expectations are unrealistic.
“Usually the service level agreements are why we walk away,” he said.
For new programs that have no baseline, Maximus tries to convince the customer to start with a cost-plus type contract but reserve the right to change to an outcome-based contract.
“We’ll spend the first year getting the baseline and then we’ll flip it,” he said. Our competency is that we understand the process very well.”
With a focus on outcomes, Maximus constantly works on being more efficient and effective. Its profits rely on that.
Often, that means introducing new technologies, but it also has to do with the people the company hires such as doctors and nurses who review Medicaid and Medicare eligibility applications. It also has lawyers on staff.
Technology always plays a critical role in Maximus’ approach to business process management, but it isn’t the driver.
“You have to start with the outcome and then look to see if the contract meets those outcomes and then you look at the tools,” Romeo said.
Another challenge in the federal space is that often agencies don’t like to see contractors making what the customer sees as too much profit, even when the agency is paying less than under a cost-plus structure. They are still bothered when they see a contractor’s profits rise.
“But it’s a self-correcting system,” Romeo said. “Even if I make a higher profit for a period of time, the contract will be recompeted and prices will go lower.”
Part of Romeo’s job is convincing agencies that cost-plus is not a better deal. He tries to learn what value means to that particular agency.
He’s always on the lookout for agencies that are buying business process management, and then positioning Maximus with those agencies. He wants the company to be seen as a thought leader for BPM.
Some of his targets include the Census Bureau as it gears up for the 2020 Census and expanding work the company does at the Veterans Affairs.
He also sees immigration reform as a possible opportunity. If reform takes hold, there will be a need to find illegal immigrants, qualify them and get them on a path to citizenship.
One approach could be for the government to hire a company to provide a call center, another to process applications and another to provide outreach into the affected communities.
“But who do you hold accountable?” he said.
Maximus Federal will focus on agencies looking at citizen engagement solutions such as the General Services Administration and the Social Security Administration.
“This is a very exciting time for us,” he said.
Posted by Nick Wakeman on Jan 26, 2015 at 9:34 AM