A Look into the Crystal Ball: Three Predictions for Healthcare Payors in 2012

If we had a crystal ball, we could look ahead to the end of 2012 and see the many changes that affected healthcare payors throughout the year. Based on what we know now, it's pretty safe to assume that the industry will face changing government regulations, new relationships with providers and members, and increased challenges related to the demands of the new healthcare economy. While I don't possess that magical crystal ball, I can predict three critical changes that I believe will begin to transform our industry in 2012.Based on many conversations with executives at leading payor organizations, and HealthEdge's recent Payor Market Survey (more on that in a moment), one thing seems certain - payors will need to leverage new technology to compete in the rapidly evolving healthcare marketplace. Full disclosure - I'm a technology guy - I live it and breathe it every day. I also have a good understanding of the business issues facing the industry, and I know that payors need to put systems in place that will enable them to quickly react to market and customer needs, adopt new standards, deliver better customer and provider service and connect everyone involved in the evolving healthcare delivery cycle. The software and platforms built years ago, and even the newer systems that are based upon old business models, are going to impede payors' ability to support the dramatic shifts coming our way. Below are my top three predictions for the coming year.

Prediction 1 - The Emergence of New Healthcare Business Models

In 2012, many payors will seek to differentiate themselves from their competitors and increase their market positions by participating in one or more of the emerging healthcare business models. These new market initiatives include value-based benefits, next-generation consumer-based benefits, other healthcare reform programs and various payment reform models including ACOs.In many of the ACO proposals currently being discussed, for example, a network that includes payors, doctors and hospitals will share responsibility for providing high-quality, lost-cost care to patients. Providers that meet the objectives of the new programs will receive financial rewards for their work. The goal of the model is to incent everyone involved in the healthcare delivery cycle to help achieve better overall results, while keeping expenditures in check. The government will begin receiving the initial round of applications for its ACO Shared Savings Program in January 2012, and the first ACOs based upon this new program are expected to launch in the spring. The current ACO proposals circulating in the industry extend well beyond Medicare beneficiaries, and many payors and providers across the country have already announced their plans to support one or more of these initiatives.Earlier in this article, I hinted at a survey that HealthEdge commissioned in order to better understand the business imperatives currently facing the payor community. We were curious to find out how executives at leading payor organizations felt about their readiness to address new healthcare delivery models and to support new standards including ICD-10. The full results of the survey, which will be released shortly, were nothing short of staggering.We asked payor executives, for example, which healthcare delivery models their organizations were planning to participate in and support over the next three years. Over 55 percent responded that they were planning to support ACOs. Unfortunately, more than 63 percent of the executives surveyed also admitted that they don't currently have the technology that will be required to turn this goal into a reality. In order to successfully implement ACOs, payors will need to deploy solutions that will enable them to support a variety of new payment and incentive models. They also need to have platforms in place that provide real-time visibility to members and providers that will allow them to continuously make good decisions based upon the latest information and recommendations.In addition to widespread adoption of ACOs, I predict that value-based healthcare approaches, which focus on incenting at-risk members to better manage their care, will also surge in 2012. The value-based model incentivizes specific healthy behaviors for individuals who have or are likely to develop chronic diseases. For example, people at high risk for diabetes may receive reduced or eliminated co-pays for certain prescribed medications and physician visits, or other incentives if certain health goals are reached. This is a dramatic shift away from traditional approaches, as it focuses on proactively managing the people that are most at risk as a way to create and maintain a happier and healthier patient population, while keeping the overall cost of care in check. Similar to the ACO model, the successful implementation of value-based healthcare will require new systems that enable payors to achieve dramatically increased levels of agility, flexibility and transparency.

Prediction 2 - The Rise of Business Process Outsourcing (BPO)

What will happen to payors that don't have the ability or desire to deploy these new technology solutions within their organizations? How are they going to remain competitive in the healthcare marketplace?The solution to this problem, I believe, will come from organizations that are partnered with best-in-class healthcare technology companies to provide next-generation BPO services that address the new healthcare business initiatives. In 2012, BPO providers will emerge as a viable option for many payors seeking to level the playing field. It will enable these organizations to quickly expand their market offerings and meet their front- and back-office goals, without having to invest in an entirely new IT infrastructure or re-train their staff.BPOs will also provide a path to compliance as ICD-10 deadlines approach. The same survey that addressed new plan models also asked about ICD-10 readiness. Again, the results were less than promising, as only 22 percent of survey respondents stated that they were ready to adopt this important new standard. Based upon the survey results, it is clear that a significant number of payors still have not completed their ICD-10 remediation plans. At this point, many of them are still evaluating their existing systems. A number of these organizations would certainly benefit from a solid BPO option.Recent research from industry analysts found that as payors strategically align their IT investments over the next year, BPO will be one solution they use to address new business models and meet compliance deadlines. Many payors, the analysts tell us, will elect to outsource functions including enrollment and claim processing, customer service and network management. The analysts believe that a new generation of BPO providers will leverage cutting-edge technology to deliver new options that address many of the evolving needs of the healthcare payor community.

Prediction 3 - The Elimination of Manual Processes and Hard-to-Maintain Satellite Systems

Despite the fact that we live in a technology-driven society, the healthcare industry is still far behind other markets when it comes to embracing new technologies. Many payors still rely on outdated, and even unsupported, systems to run their organizations. Unfortunately, these solutions were built to operate based upon old healthcare models, and they were not designed to support the capabilities that are now required in the 21st century healthcare marketplace. As a result, many payors are forced to tolerate massive levels of manual processing and human error, and large numbers of "satellite" systems that have been deployed to plug the holes that can't be filled by their legacy platforms.More than half (53 percent ) of the Payor Market Survey respondents identified high rates of manual processing and the need to reduce administrative costs as some of the most significant obstacles currently facing their organizations. In 2012, I predict that payors will seek out technology solutions that will enable them to quickly offer the innovative products the market demands while simultaneously increasing operational efficiencies and reducing unnecessary administrative costs. They will also work to reduce their dependence on their expensive, hard-to-maintain satellite systems, replacing them with new solutions that will meet all of their current and future business needs. By leveraging next-generation technology, payors will be able to dramatically decrease the need for manual processing and virtually eliminate human error, allowing them to redeploy their valuable resources to activities that will have a greater overall impact on the organization.2012 will undoubtedly bring significant changes, and a number of new opportunities, to healthcare payors across the country. While it's impossible for those of us without a crystal ball to predict exactly how the future will unfold, one thing seems certain: payors that have the technology in place that will allow them to quickly address market changes and new business models will be well positioned to compete in the new healthcare economy.

About The author

Ray Desrochers is executive vice president of sales and marketing for HealthEdge (www.healthedge.com), provider of the award-winning HealthRules product suite, a next generation, enterprise-class software platform for healthcare payors. He can be reached at rdesrochers@healthedge.com or 781.285.1316.