Payment reform, new healthcare business models, reduced administrative costs and better engagement with members are all top priorities for payors. Pick up any publication – local, national or trade – and the headlines on healthcare reform scream at you in black and white (or in the soft glow of your electronic device). Most talk about the necessity of change, the need to bring the healthcare industry to a point that is on par with other markets (banking, travel, manufacturing) that have gone through as dramatic a transformation, one that is at least 10 years behind and counting. Thankfully, change has begun.
Thanks to industry regulation like ICD-10, and new insurance delivery vehicles created by the Affordable Care Act (ACA) like health insurance exchanges (HIX) and Accountable Care Organizations (ACOs), the payor industry has finally taken notice. In fact, based upon our most recent “State of the Payor” industry survey, it seems clear that health plans are now paying attention, with 78 percent of payors seeking to expand participation in Medicare and Medicaid; 71 percent exploring pay-for-performance (P4P) initiatives; and 61 percent desiring to participate in ACOs.
While these changes have the potential to impact the cost and quality of healthcare in a way that will dramatically change the market landscape in the future, many are still in development. The benefits will not be realized for years to come. However, what continues to be overlooked is the impact that can be made today: reducing the administrative burden on payors. $375 billion annually of United States healthcare costs are devoted to the administrative aspects of the payment system, a significant portion of which is the manual processing of healthcare claims*. With billions of claims processed each year and a large portion of those claims processed manually, it’s easy to see the multi-billion dollar impact that a reduction in manually processing claims can have.
The combination of payment reform and reduced administrative costs combined will have a significant impact on the cost of care. So what are we waiting for? In order to put these powerful forces into action, a fundamental change is necessary – a change from the more than 20-year-old legacy systems that still power most of today’s payors to modern, 21st century technology platforms that were built to service the new healthcare marketplace.
How significant is the need for new technology? According to our survey, while payors overwhelmingly plan to participate in new business models, the majority of them are simply not prepared to address the technological requirements of the emerging healthcare economy. While payor interest in ACOs is high, 47.3 percent of respondents indicated that they do not have the technology that is required to support them. Similarly, 60.5 percent of respondents admitted that they do not have the technology that will be required to support next-generation consumer-directed healthcare plans (CDHPs), and another 52.4 percent face the same challenge when trying to support value-based benefit designs (VBBDs).
Many payors continue to be limited by antiquated core platforms, significant manual processing and large numbers of satellite systems that are hard to use and costly to maintain. As a number of industry experts have predicted, continued reliance on these systems will prevent a large number of payor organizations from taking advantage of new business models, including ACOs and VBBs. It will also prevent them from meeting new challenges including interoperability, transparency and enhanced customer service, and it will hinder their ability to meet new regulatory challenges like ICD-10 compliance.
The good news is that leading payors are taking advantage of the changing healthcare economy. While others are sitting back and waiting for change to affect their business, they are moving forward, embracing change and making it a part of their competitive advantage. Payor organizations can benefit from next-generation technology to achieve what’s possible in healthcare: dramatically increasing auto-adjudication rates, expanding Medicare programs, significantly increasing transparency and customer service, and reducing their portion of the $375 billion in administrative costs.
About the author
Ray Desrochers is executive vice president at HealthEdge, provider of the only integrated financial, administrative and clinical platform for healthcare payors. He is a frequent speaker at industry events and conferences around the world. Learn more at www.healthedge.com.
* John Grubmuller, vice president, Government Health and Human Services at First Data, “Health Care Payment Reform: A Proven Model for Addressing Escalating Health Care Costs.”
