How VSP Powered Up -- And How Finance Helped

In her 30 years with VSP, CFO Patricia Cochran has seen the vision benefits provider zoom from a local to an international player. In a recent interview with blogger Steve Player, she described the company's unconventional approach to M&A and finance's crucial role.

Steve Player: How has your career grown since [you joined VSP]?
Patricia Cochran: My career has grown as the business has grown. When I first joined VSP we were a single-state company (operating only in California). In the 1980s we decided we should become a national company in order to have total control over the quality of the product delivery. We were associating with other, similar organizations in the business around the country, but in order to provide consistent service to a company like IBM, which is our customer, we really thought we needed to control all aspects of the business.

And so we started adding new vision plans in other states and acquiring existing companies. We went through a whole series of mergers and acquisitions that took about 16 years. When we started, we were naïve, in a way; given the complexity of state insurance regulations. We really underestimated the complexity we faced. I think we were probably the first national company to have underwriting authority in all 50 states.

SP: What role does finance play in your merger and acquisition efforts?
Cochran: There are a couple ways that finance contributes. One is in the development process. In all of our acquisitions, our finance team has been very involved in looking at the other organization's records, sorting the data, digging in, and finding out what's really going on. I see finance and accounting as the language of business. We speak that language pretty fluently, so we can tell the rest of the management team what we see, what the concerns are, what the opportunities are.

The other thing we've done in finance, and probably one of our best results, is to get the companies that we've acquired onto our financial system. When I look back at some of the things that my colleagues in other businesses have done -- leaving the systems the way they were and trying to cobble things together over many years -- I'm glad we avoided that. Early on, we said, "We're going to get these organizations onto our company system. We're going to bite the bullet before it's too late, because the longer you wait the worse it gets."

SP: It seems you're moving throughout the value chain, from the independent optometrists all the way through to production. How are you pulling that together, and what role does finance play?
Cochran: One thing we did was to experiment on a pilot basis by developing our own companies from the ground up. We created an optical lab to start with, and once we understood the business, we acquired other labs. We did the same thing with the eyewear frames business and with the practice solutions. We've sort of been in the kitchen mixing up our own little businesses, trying to see what works and what doesn't. Once we felt we had some expertise, we were more confident about acquiring other companies.

Another thing we've done is to create an electronic platform that we use to communicate and collect data via the Internet. We have an electronic claims processing system that pulls the data in through the Internet into a communication system that edits the claims. So we get clean claims; in fact, 95 percent of our claims come to us without us having to do anything to them. The finance team has been a big part of the testing and making sure the controls are adequate. Certainly it's an area where we've had a lot of expertise and assistance on internal controls, because that's our bread and butter; all four business lines rely on the data from that system.

Read more of the Finance Transformation interview here.