The Community Health Plan of Washington (CHPW) had an enviable problem: its growth rate topped 300 percent a year. When it started its new supplier search in 1996, CHPW had 40,000 members and one product line. Today it serves 210,000 members and offers five products and is looking to add more in the short term, according to Darnell Dent, Chief Executive Officer.
Its secret to maintaining this growth is smart outsourcing.
CHPW, a not-for-profit health plan that offers public-sponsored health products like Medicaid, began outsourcing in 1992 when it first opened its doors. Its founding executives decided to outsource its back office “because we were brand new and didn’t have the scale or the awareness of how much it would take to manage our business but were keenly aware that our focus had to be on growth and service, not the back office,” says Dent.
With a focus on growth, the payor needed a supplier “who could scale up its operations quickly” and make outsourcing easier through customization and flexibility. Equally important, CHPW needed a supplier who better understood the public healthcare market; its original supplier specialized in commercial products.
CHPW began a partnership with Adaptis, who focused on providing flexible, scalable services so that CHPW could use their internal resources to drive business and increase operational efficiencies. This type of outsourcing relationship enabled CHPW to rein in operational costs which helped fuel expansion while enhancing its service to members, providers, and regulators.
Dent says competitive pressures are forcing providers with less than 500,000 members to operate more economically. Rising costs and falling revenues of state governments are causing premium compression. “Cutting the cost of each transaction is at the top of our list,” he says.
IT Challenges in Healthcare
The payor also had a technology challenge. “Today technology is changing so quickly, we couldn’t keep current,” says Chris Stewart, Director of Operations for CHPW. Its new supplier had to be able to scale as its transaction volumes increased, and have the expertise to handle exceptions. “We have to be HIPAA compliant,” she says. (The Health Insurance Portability and Accountability Act has stringent requirements and stiff fines.)
“Healthcare’s greatest challenge is its IT spend,” explains Michael Fahey, Director of Operations for Adaptis, the health plan’s nine-year supplier. Healthcare’s IT spending as a proportion of total revenue is historically only two-three percent compared to at least five percent in other industries, according to a recent Capgemini report entitled “Healthcare’s Top Business Issues and Responses for 2005: A Capgemini Forecast.”
“Healthcare companies traditionally don’t have a deep investment in IT, so outsourcing is a good strategic move for the future,” he adds. Health plans typically invest their IT dollars in claims processing systems, member service portals with online access, and medical management systems.
Then there’s the pressure of government regulations. And because healthcare is such a regulated industry, the payor didn’t want the responsibility of keeping up with all the government regulations. “That requires a high level of expertise,” says Pam Fowler, Adaptis’ Vice President of Marketing.
“Healthcare is a regional industry,” says Chris Pouliot, an Account Executive for Adaptis. “That’s why we decided a cookie cutter approach is not the way to go.” For that reason, Adaptis sent a dedicated team to CHPW “so we can react to legislative changes and the payor’s needs as they change.”
CHPW decided to have its supplier focus on technology and services so it could focus on risk management, member satisfaction, and compliance. An Adaptis study found 85 percent of the cost of healthcare goes to the healthcare provider. “Someone else can handle the claims,” says Stewart.
Working with Its Supplier to Improve Processes
Adaptis, headquartered in Washington state, has a regional operations center in Yakima, Washington and an international facility in Pune, India. The supplier handles all claims and capitation bills. In addition, it maintains the payor’s network and database, gathering the needed information on its membership, and provides online services to all its physicians, including online appointment booking.
Adaptis works with small-to-medium healthcare insurance companies, which outnumber large insurers by a two-to-one margin. “We wanted to have a deep specialization in one industry,” says Fahey. He says BPO in general and claims processing in particular are so process intensive “you have to know where to cut costs.”
To ensure client control over outsourced operations, Adaptis and the payor manage projects according to defined service level agreements that assure performance standards are met and routinely measured.
Dent says CHPW typically brings a component of a specific business process to the Adaptis team and “they work with us to blend in the technology” to improve the process. “It’s been a good fit,” he says.
The supplier worked with CHPW to put together monthly service level agreements (SLAs) which Fahey says are “aggressive.” To ensure quality, the supplier monitors those service levels daily. “We don’t want any surprises at the end,” Dent says. Today CHPW receives ten times the management reports it received in 1996.
CHPW is now in another growth spurt, according to Dent. But this time it has Adaptis ready to grow with it.