Outsourcing by health plans surges in popularity

Low cost, high profitability, innovation, and individualized care for a member-which of these things does not belong?

Actually, the current healthcare market demands all of these things at once, but meeting that demand is a challenge under traditional health plan models. Across the board, health systems and health plans are tightening their belts, working to find ways to do more with less.

The Affordable Care Act (ACA) has resulted in millions more health plan members. At the same time, it is pushing plans and providers to focus on individualized care.

READ: How to decide which services to outsource

Shashi Yadiki, executive director and global business head at Dell Services Health Plan Sector, says this shift toward individualized care is the biggest factor in the increasing outsourcing market.

“Both health plans and providers are focusing their attention on consumers, and outsourcing is a way to reduce complexity in their organizations and focus on key initiatives," he says. “For health plans, [the key initiatives are] sales and marketing, and the member experience. For providers, the key initiatives are improving health outcomes through personalized, precision medicine. Other back office and administrative functions, which are largely generic and which benefit from standardization and economies of scale, are being outsourced to allow the organizations more time and bandwidth for innovation and development in their key focus areas.”

Next: Upward momentum

Doug Brown, managing partner of Florida-based research firm Black Book Market Research LLC, says health plan business process outsourcing (BPO) services have grown by 22% year-over-year since 2002. In 2014, Black Book surveyed more than 5,000 health plans that use business process outsourcing and found that 75% say they will likely outsource the development and management of new value-based payment models due to inadequate technology or staffing, 60% say they are considering outsourcing of utilization management, and about 30% say they plan to outsource care coordination and case management.

The health plans looking to increase or move to outsourcing join an already large number of plans doing so. According to Brown’s data, about 40% of small- to medium-sized plans outsourced some of their operations last year compared to 20% in 2012. Eighty percent of the largest health plans outsource significant portions of their operations, Brown adds.

Health plans are looking for administrative cost optimization above all other benefits when it comes to outsourcing, Brown says, noting that 56% of the health plans polled by Black Book cited this as their top need. The other top needs health plans cited as reasons to explore outsourcing include:

• Regulatory compliance (40%);

• Core administration (46%);

• Payment integrity (63%); and

• Health payment solutions (72%).

Other outsourcing goals include improving client and member relationships, improving profitability while reducing administrative costs, and increased regulatory compliance. The health plans surveyed cited improved claims productivity, improved benefit coding quality, and improved complex claims processing accuracy.

“Back room” services have been outsourced for years-more than half of mailroom and data entry activities are outsourced, and about 90% of those activities have headed overseas, according to industry reports. But new trends are developing to send more clinical and support services, such as radiology services, to contractors outside the health plan. And it makes sense-the cost to read an X-ray in the U.S. can be more than double the cost it would be for an off-shore consultant.

Next: Growing acceptance

Outsourcing has been a taboo topic in politics over the years, and many companies have tried to avoid the practice to head off angering their clients. In a 2004 survey, only 5% of health plans reported that they were planning to outsource services, citing fears over employee unrest and political backlash. But it’s a different story today. Over the last decade or so, American workers were very concerned about losing their jobs to overseas contractors. But in the most recent Gallup poll, only 8% of American polled feared they would lose a job to outsourcing, compared to 11% or more in previous polls.

This shift means health plans are looking to outsource new kinds of services, such as disease management and wellness services. Contractors, for example, might be used to identify and target the costliest members and offer them education or service reminders. Rather than worrying about politics or employee backlash, however, privacy is a new concern, especially if nurses or representatives employed by contracted agencies are calling health plan members to discuss their protected health information.

Health plans leading the way in this arena include Blue Cross and Blue Shield of Minnesota, which has implemented a disease management program with American Healthways that uses contracted nurses to help physicians improve compliance among patients with chronic health conditions. The program allows the physicians to have more up-to-date information about their patients and increase employee engagement.

Next: Changing needs

Future infrastructure needs for increased analytics, consumer engagement, telehealth, and other innovative tools spurred by healthcare reforms will also increase the need for outsourcing, says Yadiki. Outsourcing allows organizations to upgrade their IT platforms using operating budgets, not capital budgets, he says. And applications can easily be delivered via the cloud, which relieves the organization of all the maintenance, updates and security issues.

Brown says he believes technology needs will continue to dominate the growth in outsourcing.

Yadiki says providers are also going through tremendous merger and acquisition activity, which might require changes to electronic health records (EHRs) and other clinical and business applications, or integration of data from various sources. So providers are looking for cloud-based integration help and focused, time-limited assistance with EHR implementations that BPO contractors can offer, Yadiki says. Health plans also use outsourcing to manage temporary administrative needs, such as surges in workload from August to January during annual open-enrollment periods.

In addition to the sheer increase in the number of new enrollees, a more complicated process has also increased the need for outsourcing, Yadiki says. “The application process is bewildering for many consumers, and they can’t just go to the websites and sign up,” he says. “They need help from humans, and health plan call centers ramp up during open enrollment to help explain the complexities for the choices and how to complete the application process. The ACA has also meant tremendous growth for some health plans, and they have used outsourcing to quickly expand their operational capacity.”

Rachael Zimlich is a writer in Columbia Station, Ohio