High Performance: A Road Map to Payer Success in U.S. Healthcare
Forces at Work
The highly complex market characterized by powerful and constantly changing market forces requires agility, foresight and relentless execution from payers that hope to survive and prosper. Examples of some of the challenges affecting these organizations include:
- Changing demographics;
- Increasing costs due to a growing shortage of hospital beds, a lack of personnel and the high cost of new hospitalbased technology;
- New treatment technologies, including miniaturization and specialized pharmaceutical treatments;
- Continued costs associated with government-mandated benefits and increasing regulations;
- Industry consolidation;
- A decrease in the number of people covered by commercial health insurance, which has fueled competition for diminishing markets;
- The continual quest for productivity and superior cost structures; and
- New competition from financial services firms.
All these factors create greater pressures for payers to achieve growth and increased profitability at a time when costs continue to rise. In addition to cost challenges, the growing rise of consumer-driven healthcare is prompting the payer community to find new ways to compete. For example, cost shifting that demands consumers to bear more of the financial burden of their healthcare has driven consumers to be more involved than ever in their own care. In turn, health plans are offered the opportunity to engage and enable consumers in healthcare decision making through the use of Web-based portals and telephonic-based health coaching.
The aging of America and the growing number of uninsured has also had a dramatic impact by contributing to cost shifting to public payers, such as Medicare and Medicaid. At the same time, the insurance marketplace is consolidating, leaving fewer existing companies but making those that remain tougher competition.
As market forces continue to evolve, payers are finding long-term, consistent high performance to be elusive. Through extensive research by Accenture, a picture of payer high performance is beginning to emerge. By studying some of the nation’s largest commercial insurers from 1995 through 2006, Accenture has created a framework to give payers insight into what it takes to be a high performer in today’s evolving healthcare marketplace.
Core Components of High-Performance Payers
Based on marketplace trends and past attributes of successful health plans studied by Accenture over the last decade, payers must simultaneously address six identifiable issues to help establish leadership for their organizations.
Intelligent Growth
The obvious way for health plans to grow is by taking business away from the competition. But high-performance payers are even more creative in driving revenue growth than their competitors. High performers also maximize revenue from existing clients and markets through more sophisticated marketing including effective buyer segmentation and cross-selling. For example, health plans bundle their core health product with dental, vision, behavioral health, etc., to increase the overall value derived from each customer.
High-performance payers also can grow by pushing into nontraditional markets, such as government programs like Medicare or Medicaid, or by targeting new groups, such as early retirees or the “young immortals” (uninsured young people who choose to live without insurance). New markets might also equate to new geographies, such as international opportunities that fit the current U.S. healthcare model.
After maximizing revenue from their existing market footprints, high-performance payers next look to adjacent business lines to create opportunity and fuel growth. For a health insurer, this might mean exploring the sale of products and services outside their core business on a stand-alone basis, such as standalone claims processing, data analytics services, medical care management or employee wellness programs.
Inorganic growth, merger and acquisition activity remain relevant for the payer industry. As such, high performers will maintain the ability to identify targets that will add value to their business and understand how to integrate those companies to realize that value.
Differentiated Medical Cost Management
In the healthcare industry, the 80/20 rule applies – 20 percent of enrolled members incur 80 percent of healthcare costs. To stay competitive, high-performance payers apply new care management programs that proactively identify “at risk” members through predictive modeling, before they seek care. Payers can then engage these members through outreach or financial incentives, which typically include highly focused disease management and case management to control costs and achieve desired health outcomes. Self-management programs aimed at wellness and prevention also can encourage all consumers to keep themselves healthy in the hopes of reducing their use of services.
High-performance payers also are experimenting with shifting some degree of financial risk and responsibility to consumers through creative benefit design to involve consumers in making better, more effective health-related decisions. One example of this is the use of “tiered networks.” In a tiered network, health plans select the highest-tier network physicians based on cost-effectiveness and clinical quality. Consumers receive financial incentives to choose these highest-tier providers. A consumer could choose, for example, to see a network specialist for a lower co-payment or pay more to see a doctor who is still in the network but in a “lower” tier. The idea behind this approach is that consumers will have a specific incentive to use those providers that have a proven track record of delivering high-quality, cost-effective outcomes.
Emerging pay-for-performance programs aimed at providers (both physicians and hospitals) also are being implemented to encourage adherence to evidence-based clinical guidelines that correlate to better clinical outcomes.
Exceptional Service at Superior Cost Structures
How do high-performance payers improve delivered services while still managing to control costs? They begin with data analytics to monitor the administrative performance of the plan itself, helping them understand where efficiencies can be achieved. This helps payer organizations to better target their efforts and explore cost-effective ways to improve customer service.
Delivering exceptional service affordably requires a relentless focus on the basic drivers of quality and cost. High-performance businesses are continuously pursuing productivity and quality improvements by streamlining operations, reducing or eliminating errors, reducing the cost of each transaction and optimizing scale. They do this largely by increasing administrative efficiencies through the use of technology. Healthcare and health plan information technology is in a constant state of improvement; solutions that were state of the art as recently as five years ago may be outmoded today. High-performance requires automating high-volume transactions to eliminate paper, reduce labor costs and improve the timeliness of services delivered.
Many solutions automate the most common customer contact processes, including account maintenance and history, eligibility and benefits, referrals and claims. High-performance payers use technology to minimize manual work and noncustomer-facing activities, increasing service center productivity and efficiency. Payers then can afford to spend more time and energy on activities that require interaction, which also leads to increased customer satisfaction.
In addition to investing in technology to deliver better service, high-performance payers are exploring the economies of outsourcing to reduce labor costs. By strategically using claims processing or call centers, for example, payers can deliver superior service at lower cost both to members and providers.
Optimizing Pricing Yield
Today’s high-performance payers have become far more sophisticated about how they develop pricing. Twenty years ago, payers set pricing using a simple spreadsheet. Now pricing is accomplished using much more powerful data-mining tools to create better algorithms and produce pricing that is acceptable to the marketplace.
Payers use portfolio analytics to align pricing with value delivered and to fully explore opportunities created by market inconsistencies. These analytic tools require managing products and customer segments as portfolios to increase profitability and reduce overall risk.
Retail Transformation
Adopting a retail orientation to health insurance is a major shift for insurers in the way they think about and engage customers, yet this trend is common among high performers. As consumerism grows and members become more involved in healthcare decision making, they increasingly expect their experiences to parallel the way they receive products and services in other industries. Even the delivery of healthcare services is adopting a new model as evidenced by a new breed of retail-based clinics popping up in pharmacies and other high-traffic retail locations. Staffed by nurse clinicians or other nonphysician healthcare providers, these clinics treat patients with minor medical problems and refer to physicians when problems are more complex or require additional treatment. Many top-performing health plans are contracting with such clinics to provide easier access (and at lower cost) to members for routine medical needs.
Adopting a retail model implies that payers must play a role in telling consumers the price of the services provided, helping consumers gauge quality, and letting them pay for services when and where those services are delivered. High-performing payers are disclosing pricing and quality metrics as well as pursuing realtime claim adjudication to enable payment calculation and settlement at the point of service. This is also prompting a new level of collaboration with providers.
Similarly, the healthcare consumer expects health insurance to be “packaged” and sold in a way that is consistent with other retail products and services, including easy-to-understand insurance products tailored to the needs of individuals with appropriate price and benefit trade-offs. High-performance payers understand the retail mentality and align their marketing accordingly.
The Role of Technology
The components of high performance can be fully attained only through the use of information technology.Measuring, monitoring and reporting on performance through the use of real-time data analytics enables payer management to take timely, appropriate action to help increase service levels, manage medical costs, understand customers, improve pricing, reduce administrative costs, report on operational progress and more. Decisions that once took days or weeks can be made immediately by leveraging technology.
For example, by integrating company business rules with industry best practices, high-performance payers can perform claims adjudication automatically, consistently, cost-effectively and in real time. In a continually changing healthcare environment, high-performance payers leverage the latest technology tools and business strategies to harness change and use it to their advantage.
High-Performance Culture
Achieving consistent high performance is virtually impossible without the appropriate supporting culture. Establishing high performance within an organization requires implementing clear, objective metrics and management processes aligned with desired outcomes. Payer management must provide well-defined incentives for reaching objectives and consequences for not achieving objectives.
High performers across the health insurance industry have created an internal corporate culture that rewards innovation, and they spend the necessary time and resources to attract and retain innovative employees. People are hired according to a set of desired skills, and individual performance is rewarded to encourage excellence.
High-performance payers are easy to spot. They measure performance and thus evaluate and understand the impact of culture on their companies and on business results. They also possess an organizational structure that supports objectives for achieving high performance and executives who lead by example. They communicate their objectives to employees through formal statements of philosophy, principles and values, and by regularly celebrating companywide successes. They also leverage best practices across business units by passing on stories and “legends” of success.
Harnessing Change
By continually paying attention to the changing healthcare environment and by leveraging market dynamics, high-performance payers differentiate their product offerings to gain market share. Meeting the enormous challenge posed by a whirlpool of complicated healthcare market forces demands that high-performance payers practice all six high-performance characteristics simultaneously, inventing new products and services; exploring new, adjacent businesses; and building new capabilities that will propel them into a successful future.
