Quality Measures in the Health Insurance Industry: A False Sense of Security

Why quality measures may not be telling the whole story in the health insurance industry

Quality improvement programs have become widespread in the health insurance industry. Models like Six Sigma or total quality management (TQM) are used to help health plans boost efficiency, address shortcomings and exceed customer expectations. However, these programs could be providing executives with a false sense of security.

Part of the problem may be that the current measures tend to reflect a one-dimensional snapshot of performance. So when problems arise in a specific vertical, there is often little effort made to co-ordinate with upstream or downstream parts of the process. The result is that as errors flow through the system, the cost of poor quality increases, as greater resources and multiple touch-points are required to fix the issue.

Even if a specific problem does get fixed, the true root cause is rarely addressed. This makes it almost impossible to learn from the mistake and prevent it from recurring. This article looks at what can health insurers can do to improve this.

Health insurance is now a reform-driven industry where emphasis on quality is taking on a new urgency. As consumers enjoy greater choice and flexibility to switch programs and choose health insurance providers that better meet their needs, quality becomes a key part of the value proposition that differentiates one provider from another. Accenture research shows that more than one-quarter of consumers say that they do not feel loyalty to their health plans, and 40 percent are influenced in their selection by word of mouth recommendations.

This research demonstrates that health insurance consumers are driven more by value, than by price alone, and are not willing to trade quality for a lower price. By sharpening their focus on service quality as a differentiator, health plans can create a compelling offering that helps to recruit and retain this increasingly discerning consumer base. More than anything, it is customer service that separates those insurers that will attract and retain customers from those that will lose them.

On average, health plans report audit results indicating that more than 99 percent of the value of claims processed and 98 percent of claim payment volumes are paid correctly. And yet at least 2 percent of total paid dollars are overpaid and recovered, and an average of 5 percent of processed claims are later adjusted. This suggests that these quality measures are wide of the mark and that there is work to be done on the quality of administration.

This work is important because the cost of administrative defects is considerable. Taking into account the end-to-end impact of additional phone calls, grievances and appeals, and unrecovered or overpaid claims, Accenture estimates the total cost of poor quality to be between 5 percent and 8 percent of operating costs and between an estimated 2 percent and 3 percent of medical costs.

In combination, these represent between an estimated 2 percent and 4 percent in waste due to poor quality that health plans will likely never recover. Over time, this poor performance leads to lower operating margins and a likely decline in market share as dissatisfied members and groups look elsewhere for a more efficient service.

A comprehensive end-to-end focus on quality requires health plans focus on three capabilities:

• First, plans should create a culture that is accountable for quality and constantly reinforces it. Many health plans are organized in silos, which makes a holistic view of quality difficult to achieve. Breaking down these silos is vital to better ensure an end-to-end perspective, shared goals and collaboration across organizational boundaries.
  
  
• Second, analytics should be used to set priorities and improve performance. Health plans have limited resources, which means that they must prioritize the issues that make the biggest impact on quality improvement. With the right data and analytics tools, they can quickly get more insight into the trends and anomalies affecting their business. This better enables health plans to direct their focus towards the areas holding the greatest potential return.
  
  
• Finally, plans should simplify processes and apply consistent approaches to achieve better outcomes. Healthcare administration is complicated. By maintaining a focus on reducing variation and simplifying the administration process, health plans can reduce the number of manual workarounds that contribute to greater variation in outcomes and higher operating costs.