
Two years after moving into a glittering glass office in downtown Providence, health insurer Blue Cross & Blue Shield of Rhode Island says the 13-story tower is paying dividends.
Criticized at the time for spending $125 million to construct and outfit the tower, Blue Cross responded by saying a study showed it could reap $25 million in savings over the next 23 years by consolidating its six buildings into one. Last month, Vice President for Corporate Real Estate and Administrative Services Tom Bovis said Blue Cross was on track with its savings.
By the end of 2011, the insurer expects to pay $700,000 less for building costs than had it remained in its previous offices scattered throughout Providence. Savings come from more efficient energy and water systems, consolidated printing equipment and savings on property taxes thanks to an existing tax-stabilization agreement.
Specifically, Bovis said electricity use has declined 10 percent since the October 2009 move, yielding a $70,000 to $80,000 savings. The insurer has replaced more than 600 individual printers, fax machines and scanners with about 100 multifunction devices in common printing areas. Set to print two-sided automatically, the insurer estimates it reduced printing costs by $50,000 a year and significantly lowered maintenance efforts.
Blue Cross is also generating revenue from leasing half of its top floor to Providence Investment Management LLC with the lease payments flowing to a fund for building upkeep.
Bovis said the insurer has also realized efficiencies that are difficult to measure. Employees who once worked in separate buildings and never saw each other now bump into each other in the hallway or on the elevator. Related departments were placed next to each other, for example the finance department is no longer in one building and the actuarial department in another.
R.I. Health Insurance Commissioner Christopher F. Koller said administrative costs comprise 15 percent of Blue Cross health premiums, and building costs are a sliver of that amount.
Koller’s office has not undertaken an analysis of whether Blue Cross’ move affected rates one way or another. Nor could Koller say if the insurer’s operations have improved by consolidating its operations.
Bovis, though, says it has.
“Just talking to people, just walking around the building itself, people just feel more productive being in one building,” Bovis said.
Besides passing each other in the hallway, the building also contains training rooms and conference areas designed for Blue Cross’ specific needs. Technicians also installed wireless Internet throughout the building to provide employees with secure, on-the-go access to the company’s electronic databases whether they’re in a meeting or the cafeteria.
Before Blue Cross constructed the building, Koller sent then-Blue Cross CEO James E. Purcell a letter warning him that the tower may generate public criticism. More than three years after penning the letter, Koller said his predictions have come true.
“There’s certain symbolism to how you choose to have your administrative building,” he said.
Some perceive the sleek, modern building as excess for a nonprofit organization. Some candidates for state office threw volleys at the insurer during the 2010 campaign and the building’s cost sometimes comes up publicly when the insurer proposes rate increases.
And the company says that by staying in Providence it helped the local economy by keeping 1,000 employees in the downtown area. Architects also designed the ground-floor cafeteria too small to accommodate all the employees, in an effort to steer workers to local eateries.
Those employees came from six buildings spread throughout downtown. When the insurer moved out, some real estate agents expressed worry that the buildings would become hulking ghosts in a city struggling in a tough economy.
Since the move, Providence has leased the 71,519-square-foot office building at 444 Westminster St. Curt Schilling’s video game company 38 Studios moved into the 104,000-square-foot One Empire Plaza and toy company Hasbro plans to move into the 138,128 square feet at 15 LaSalle Square.
“It’s worked out very well for the city because all three of the main buildings we vacated are 100 percent fully occupied,” Bovis said.
That was far from a sure thing. CB Richard Ellis-New England Senior Vice President Alden Anderson recruited both 38 Studios and Hasbro and called trying to fill such space a “daunting task.” Ultimately, it worked out.
“It’s not like you moved the chess pieces around the chessboard, you actually brought two big companies here,” he said.
Hasbro is opening its office after running out of room at its Pawtucket headquarters. And 38 Studios moved to the capital city from Massachusetts. Anderson and city officials have hailed the moves as crucial to building an envisioned knowledge-based economy. •