Optimal Outsourcing – When Both Parties Are Reading from the Same Play Book | Article

footballLike a football team’s playbook, with plans for punt, pass, kick and misdirection plays, winning outcomes from outsourcing initiatives depend on both players operating from aligned interests. They must be flexible and operate as a team to run plays from any formation and to take advantage of any defensive (market) plays that rise before them.

Although this pattern is now the operating mode of all highly successful outsourcing arrangements in the commercial arena, many governments have been slow to adopt this principle and still take a “contracting out” (adversarial) approach. The Commonwealth of Pennsylvania, however, has initiated a number of very effective, innovative outsourcing agreements now accruing notable results.

One of those is the relationship between Pennsylvania’s Bureau of Managed Care Operations, Department of Public Welfare, with Dallas, Texas-based outsourcing service provider, ACS, to perform services for the enrollment process in the Commonwealth’s Medicaid program. The Commonwealth had no ability to hire staff in mass during the peak times of enrollment activities, but an assessment in the early 1990’s pointed to outsourcing as an effective strategy to meet this need.

The Ball Carrier Adds a Counter-step

The success of Health Choices (Pennsylvania’s Medicaid program now serving more than one million people) is dependent on the percentage of consumers who make selections as they enter the program, rather than being auto-assigned to various options. They also look at the success of the enrollment implementation process.

The relationship with ACS for the outsourced enrollment services is so successful that the Commonwealth has renewed the contract twice. According to Rich Wallace, director, Enrollment Assistance Programs, 80 percent of consumers now make choices rather than being auto-assigned, and enrollment implementations are efficient and involve innovative improvements.

But he recalls their first implementation was slightly rough, as are many game-starting kick-offs. The Department’s expectations were unclear and unrealistic, he admits; and ACS was not good at reading their minds. “We retooled,” Wallace says, “and we’ve done two enrollment implementations since then that have been wildly successful.”

He continues, “In those early days, we looked on the relationship as a contract where the provider had to do what the contract says, and we would monitor to make sure they did it. Now that we realize this is really a partnership, we look at it more as though we are building a house together. It belongs to the Department, but we’ve hired ACS to build it, using all their expertise and giving us ideas about what they can do for us. We participate in the building process by saying, “This is what we’re looking for.’ Success develops when you no longer have an adversarial role and everybody understands what you’re expecting to accomplish.”

The Ultimate Power Sweep Play

ACS was flexible in meeting the Department’s needs from the outset, Wallace reports. The provider even moved its call center and operations facilities from Philadelphia (where the program began) to Harrisburg, where the main hub of operations centralized after the program began to expand statewide.

Both organizations are now focused on making sure the process doesn’t overcome the outcome, being flexible to change the process where it doesn’t help the enrollment goals of consumers making informed, objective choices.

To ensure this approach, they changed to a performance-based pricing structure at the time of their first contract renewal. ACS is now compensated on the number of enrollments it achieves, receiving full payment if a consumer selects a health plan and a PCP (primary care provider); half payment if the consumer chooses a plan without choosing a PCP. In children’s substitute care, where the Department is most vulnerable, ACS receives a double payment.

Wallace says the incentive pricing change did more than anything else to focus everyone on the same goals. It was the Department’s idea, but the plan has been refined over time with ACS. Wallace credits the provider with “always having been willing to meet us halfway in working out the way this plan works and to reach compromises so that the Department is not getting gouged and ACS is getting reimbursed in a fair way.”

Moving forward, they made another significant change in the way they worked together. Realizing the field staff was underutilized and busy only when consumers came in to enroll, they decided the field staff should utilize spare time to make outbound phone calls to consumers. The original plan to use the field staff only during implementation periods has now evolved to keeping them in place, and it took a joint commitment to ensure the staff would have enough activities to keep busy. It’s a hallmark of the Pennsylvania program, Wallace states, and very unique, compared to what other states are doing. It has paid off in a program seeing continual growth.

Inside Power Running Plays

Pennsylvania’s Medicaid program now has one of the best-developed provider directories of any state, thanks to their joint efforts to find out from the enrollment specialists what’s working and what’s not. They have managed to reduce 99 specialty codes down to the 30 codes people usually ask for when seeking healthcare providers. They changed the zone-centric provider directories to a state-wide directory that makes more sense.

Working together, they also realized zone enrollment advisory committee meetings were becoming ineffectual because there were fewer enrollment issues. Jointly, they changed the meetings to present hot topics of interest to the committee members. The meetings are no longer just going through a process, and Wallace reports people feel they’ve learned or gained something for the time they invested in attending.

ACS is always willing to go beyond what’s required, according to Wallace. He cites an example: “When we couldn’t pay them for finding PCPs because they weren’t in the directory, they found a way to get them in the text so that at least the information was getting over to the plan. We then came up with a way to pay for going the extra mile. We really have become a blended program.”

That attitude is reflected both internally and publicly. If either party anticipates that a request or response to each other might be controversial, they call first, to advise what’s coming and explain the issue driving it. Publicly, during the past year, they began introducing themselves to consumers as “the Health Choices enrollment program,” rather than two different staffs.

Wallace sums up the partnership aspect of their outsourcing relationship thus: “ACS does things that are good for our Health Choices program in general (which may not always be directly related to enrollment functions they are responsible for) because they have bought very heavily into the philosophy that if the program looks good, the Department looks good, and then ACS in Pennsylvania looks good. We both realize we live and die together.”

Lessons from the Outsourcing Journal:

  • Where outsourcing parties focus on the contractual provisions as the sole approach to managing their agreement, rather than taking a teamwork or partnership approach, the relationship usually becomes adversarial and limiting in its potential for success.
  • A performance-based pricing structure is a highly-effective means of ensuring continued aligned interests between the parties and flexibility in working together to achieve their mutual goals.
  • Outsourcing is an effective strategy to meet required staffing levels during peak periods.


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