A Healthy Prognosis for Medical ASPs | Article

Medical MicroscopeAfter looking at the vital signs, the health care ASP market is healthy. Russell Sherlock, president and chief executive officer of Outsourced Administrative Systems, Inc. (OASYS), a health care ASP, says a variety of trends have coalesced to create a surge of interest in ASPs dedicated to health care.

Technology is one wave. The Internet has created a new world based on Web interaction. Change is happening at light speed. Sherlock says commercial insurers have had a difficult time keeping up with technology and committing the capital investment that that requires.

ASPs are an elegant solution to doing business in this new economy. “The Web makes traditional software solutions seem passe when you can use a standard browser to gain access to the software on a remotely hosted basis,” says Sherlock.

Gone are the days when a company, seeking to implement a new software program, had to purchase new software and hardware and then install it. Today, utilizing thin client architecture, workers don’t need processors with huge memories and massive megahertz speeds because all they need to access the ASP’s software is a PC and a Web browser.

Computing tasks which were traditionally done on the desktop (client) are now being transferred to the server which is hosted by the ASP. “Companies can realize significant gains by eliminating capital investments because the power of the computer has been distributed via the Internet. This allows them to accelerate their business plans,” says Sherlock. “That’s why ASPs have become so popular today.”

Congress Creates A Need

Congress created the second wave. It’s a tsunami called the Health Insurance Portability and Accountability Act of 1996, also known as HIPAA. One clause in this law mandates administrative simplification. Federal law will soon require a fundamental change in the way medical insurers and providers conduct business. The government plans to implement rules that establish mandated formats and data content standards for electronic claims. Also, they are charged with creating policies and procedures to ensure security and confidentiality of medical data. The time frame is within the next two years. Electronic transactions must become the norm.

ASPs have programs and experience. They can get companies up and running faster than they can do it themselves. With the 24 month clock ticking, many health care companies may have no choice but to use an ASP to comply with HIPAA mandates.

The third wave is the high demand for technical employees. The workplace just doesn’t have enough people skilled or seasoned in these new technologies, creating an employment dearth. Often the only way to hire an expert is to sign an outsourcing contract with an ASP, according to Sherlock.

ASPs Can Cut Costs

The fourth wave is cost. Health care companies are under pressure to contain their rising costs. Sherlock reports insurance companies spend 85 percent of their revenues on the cost of care and just 15 percent on administration. Yet they are forced to spend up to 70 percent of their personnel costs on administration functions.

Insurers are trying to focus their internal energies on health care management and outsourcing the commodity-like processes that bring only 10 percent of their dollars. These processes include claims processing, billing, enrollment, and customer service.

OASYS’ Automated Transaction Processing (ATP) provides electronic claims processing that can save the insurer up to 65 percent per claim transaction. This patented process allows the ASP to dial into the insurer’s system and act as a virtual electronic processor. The system completes all the claims in its queue, and then logs out, leaving a 100 percent audit trail. The ASP’s program completes all the keystrokes a human would make.

Sherlock points out the ATP program does not replace all human intervention; it simply changes work force utilization. ATP can handle all claim error corrections where the data used in this analysis is in electronic format on a computer somewhere. Insurers then employ their claim processing staff to perform more meaningful tasks where human analysis and intelligence are required.

ASPs Becoming The ATM Of Health Care Providers

OASYS also enables members, providers and employer groups access to their health care information 24/7 via the Internet using its Web site, online-Healthplan.com. The insureds can look at their claim status on line. If they have a question about their claim, they can send an email which OASYS answers within 24 hours. This eliminates the frustration of being put on hold forever, a very popular option.

Members can also perform routine administrative tasks like change their address or request ID cards. The Web site also explains each person’s benefits.

In April OASYS created a strategic alliance with HealthMagic. That company created HealthCompass, an Internet personal health management tool that allows consumers to create a lifelong health record for themselves and their family members. Any online-Healthplan.com member can integrate his or her health information from the Web site into HealthCompass without having to type in all the information.

Nurturing Member Satisfaction

After two years of operation, OASYS began crunching numbers to decipher any usage trends. It discovered more than 50 percent of its customers access the Web site within the first 60 days it’s available to them. And the number of hits after hours continues to grow. “Our Web site handles insurance transactions like ATMs handle banking,” says Sherlock.

OASYS, which is based in Indianapolis, Indiana, processed over 16 million ATP transactions in 1999, a 130 percent increase in volume since the ATP service was introduced in 1996. Daily volume in 1999 averaged 63,500.

The company, which has been outsourcing for 10 years, became an ASP in 1994. Its programmers originally designed the ATP process to handle Medicare claims.

ASPs like OASYS who focus on outsourcing the health care industry have found a prescription for success.

Lessons from the Outsourcing Primer:

  • Congress passed a new law (HIPAA) that requires health care insurers to process claims and related transactions electronically within two years. Outsourcing to an ASP is the fastest and easiest way to comply with federal law.
  • Technological change is forcing health care insurers to use ASPs to keep up with the shift to Web-based service.
  • Outsourcing to an ASP means a company can save capital expenditures, accelerate its business plans and gain access to experienced personnel and new technology.
  • Health care ASPs can cut the cost of processing routine claims by 65 percent.
  • Customers (the insureds) like the service because they can access their information on the Web 24/7 and don’t waste time being put on hold.


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