Top Issues Facing Health Payers in 2007 and 2008

The most significant pressures facing payers evolve constantly, though they rarely change radically from year to year. While payers strive to lower administrative costs and improve efficiencies, manage health care costs and grow the business, recent years have seen substantial change in how they address these issues.

Identifying the top issues facing the industry, Accenture shows how leading payers on the path to high performance are not only meeting the challenge but actually turning it to their advantage. No issue exists in isolation: They form a network of interrelated challenges, and leading payers address them all.

To receive more Research & Insights, sign up for My Outlook, your single e-mail source for all of Accenture's latest ideas and innovation, personalized specifically to your business interests and the industry issues you face.

The importance of a new issue is not always immediately clear. Eight or 10 years ago, the emergence of large, integrated-provider networks assuming global risk for medical expenses and including Medicare-specific provider-sponsored organizations, was viewed as a leading issue. But although a few of these networks still exist, most have disappeared.

Deciding whether a new issue really is substantial and important is fraught with risk, but that does not mean we cannot identify them. Witness the resurgence of a consumer focus and a retail orientation as new issues that have assumed growing importance in recent years. Moreover, governments create the one type of new issue that can appear rapidly, with swift and significant impact. The new Medicare Modernization Act (MMA) is a good case in point.

No health care issue exists in isolation: they form a network of inter-related challenges. Following are key issues facing health payers in 2007-08, and ways that leading payers are leveraging new strategies and innovative technology to address them:

Health care costs and care management
Cost inflation owes its continued existence to the cost and use of pharmaceuticals, increasing numbers of medical interventions for all types of care, regulations and benefits mandates and widespread variations in medical practice, among other issues. To manage these growing costs, leading payers are instituting: evidence-based medicine, tiered networks, continued focus on disease management, managing the cost of claims and the return of wellness.

Continual administrative cost reductions and operational efficiencies
Managing administrative costs and improving operational efficiencies is a constant issue for all health plans. Leading payers on the path to high performance approach the issue in multiple ways, including: eliminating paper, integrating disparate functions and labor cost management.

Growth challenges
Revenue growth will be increasingly difficult, as the commercial insurable market shrinks and costs shift away from premiums. But leading payers are focusing aggressively on:

• Organic growth of core business—Introducing new products, automating the sales force and applying greater pricing rigor with new analytic capabilities.
• Organic growth of non-core business—Bundling core products with ancillary products and partnering with other payers to provide pharmacy benefits management services or consumer-directed health plan capabilities to payers lacking them.
• Inorganic growth—Market consolidation aimed at improving efficiencies and sharing best practices, acquiring entry to new markets or acquiring new capabilities.

The changing consumer and retail model
As premiums rise and employees pay more for health care, payers must provide them with technology support tools to help them make informed decisions and take a more active role in their own health care. Leaders are doing this by using the Web to provide: provider cost and quality information, Web-based tools for budgeting medical expenses, customized benefit statements and cost reports.

The Medicare Modernization Act
To successfully navigate the new Medicare Act and freestanding prescription drug programs, leading payers are using their data analytic capabilities and adjusting their offerings to improve their marketplace appeal. These companies will be able to rapidly measure, analyze and respond to market forces that are sure to come in the next several years.

Health information networks
Some state governments, as well as US government demonstration projects, are advancing the creation of health information networks (HINs). These public-private organizations provide the electronic backbone for both the business and clinical exchange of information using standardized transactions and data sets.

Digital health records
At the heart of HINs and many other efforts in health care lies the digital health record, three variants of which are currently recognized: electronic medical record (EMR), electronic health record (EHR) and personal health record (PHR). Such records promise to ensure better adherence to evidence-based clinical guidelines, to reduce cost increases through the elimination of duplicate testing and diagnostic procedures, improve the effectiveness of care management and to influence consumer behavior by providing a portable, consumer-specific record.

The uninsured
With up to 46 million uninsured, the health care industry faces a growing issue for both payers and for American society overall. While no individual payer can address this problem, many leaders are creating products that lower the affordability barrier for specific segments of this group. Ultimately, the issue will most likely require a public-private effort.

To address these issues, leading payers are focusing their efforts where they can realize the greatest improvements in quality, outcomes and cost management for the investment required. To this end, technology provides critical support. This technology falls into three interconnected areas:

• Core technologies—Run leading payers' businesses so their processes are as smooth and uniform as possible. They capture information, process transactions and answer inquiries. Additionally, as high performers have grown through acquisitions, they have been consolidating and modernizing their core systems as much as practical.
  
  
• Information and analytics—Help leaders uncover what they need to know to improve effectiveness. But the technology is rapidly evolving and can also provide information from providers about the external environment; help leaders understand customers better; produce reports; and offer predictive modeling that forecasts costs for groups, as well as its use in medical management.
  
  
• Decision support software—Used by leaders to help them operate better. This falls into two categories: clinical and customer decision support software. Clinical software helps managers handle cases by providing expert systems, data, tracking, alerts for when something needs to be addressed, etc. Customer decision support software helps customer service representatives address members' needs, by getting information quickly and dealing with their issues. It can also allow the plan to interact directly with providers and other users on common transactions.

The path forward
Clearly, the issues facing health payers are enormous. Cost issues, which underlie all these concerns, will continually increase for a myriad of reasons. While there are no overnight solutions, leading companies are working to understand and meet the challenges of 2007-08. These leaders are finding creative ways to address industry's interconnected issues, and they are supporting those approaches with innovative technology. With this approach, those on the path to high-performance should survive and thrive in the future.

To receive more Research & Insights, sign up for My Outlook, your single e-mail source for all of Accenture's latest ideas and innovation, personalized specifically to your business interests and the industry issues you face.

Peter R. Kongstvedt, M.D., F.A.C.P, is a senior executive in Accenture's Health & Life Sciences group.