The rise of consumer-directed healthcare (CDH) and high-deductible health plans is impacting all healthcare industry stakeholders. One impact is that payors need to adjust their capabilities in service delivery.
In the nascent CDH space, the industry is still experimenting with new account types such as Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), and Flexible Spending Accounts (FSAs); and legislation is still evolving. CDH is becoming widely accepted by consumers and employers, and Madan Moudgal, COO, CareGain, says "it's here to stay."
The market is no longer aimed just at employers to bring in health plan memberships. CDH brings a greater push toward individualization of plans as consumers take more control. The change necessitates payors adjusting their technology to service individual clients, not just groups.
Moudgal says payers have four choices in reacting to the evolving requirements of CDH: rip out and replace legacy systems and customized software, add a point solution and attempt continually to retrofit a solution in order to adjudicate claims, wait and see what happens over time with CDH, or outsource.
Outsourcing to CareGain, a CDH solutions provider, enables payors to leverage their investments in existing systems, integrating them rapidly, flexibly, and cost-effectively with CareGain's Defined-Care Platform. He observes that outsourcing also meets the needs of payors with customers that have some interest in CDH but not yet enough members (employers) nibbling at it.
Changing the Value Proposition
NASCO, a service provider specializing in complex national, regional, and local health benefits programs for BlueCrossÆ and BlueShieldÆ (BCBS) plans, turned to CareGain in 2005. In 2003, the company was ahead of the curve in CDH products, recalls Mike Price, Director, E-Business Solutions. However, as legislative changes occurred and the CDH market became more dynamic, NASCO recognized its current solution was no longer the best way for NASCO's customers to do business.
NASCO's end-to-end membership and claims-processing solution, which is provided in an ASP model, is designed to reduce health-plan customers' administrative costs. That value proposition changed as CDH entered the picture. NASCO's customers (health plans) needed the ability to administer one or more accounts for their members and set up processes for a group. "Our BCBS customers required more flexibility in product offerings than our existing product could support," says Price.
There was another fundamental problem with the existing solution: control. Given the high level of interaction between the CDH servicing entity and the health plan member, highly outsourced administration resulted in disconnects that left NASCO customers dissatisfied. NASCO needed to respond to health plan concerns, but there was limited transparency to determine the cause of some issues; therefore, NASCO could not bring about quick and effective change. To better serve its customers, NASCO wanted to initiate changes in the vendor's product as needs evolved.
"We became interested in exploring a software platform that would integrate with our system and give our customers the ability to administer it or to outsource the administration of it," Price explains. "We also needed to be more fleet of foot regarding regulatory changes in how we are to render the service and the technology that we are to use."
SaaS Model Facilitates Enhancing the CDH Product
NASCO found all that and more in CareGain, a company founded in 2001 by a banker and a physician who at that time recognized an opportunity to develop solutions for the challenges around reimbursing individuals. In 2002, CareGain built an account administration platform--essentially a hub--that integrates with existing health plan systems and manages/supports different account types or multiple accounts and also links to third-party banking platforms.
"We chose CareGain because of its position in the market but especially because of its vision for the platform and its willingness for us to participate in evolving its functionality," states Price. Because of the solution and relationship, NASCO can now react to market demands much faster. NASCO, for example, asked CareGain to add a payment module that would cut checks out of the back end.
"This relationship is a partnering approach, not a vendor-customer relationship," Price continues. "When we identify an enhancement we need, CareGain does it at little or no cost to us because they, too, want the product to be successful and meet our customers' needs. Even though they improve the already-robust platform, Price commends CareGain for staying focused on the niche CDH industry and "not trying to stretch the software to meet the needs of several industries."
CareGain delivers the platform to NASCO in a hosted ASP model or, as it's commonly referred to today, Software-as-a-Service (SaaS). The difference in price from this model and the prior vendor's solution derives funds that NASCO can re-invest in helping develop the product's future functionality.
Asked for advice to others that may consider such a solution, Price observes that the most important things are to "know your goals, know what you're comfortable in giving up in an ASP arrangement, and know which vendor you're more comfortable with because of its vision and future capabilities." NASCO, for instance, wanted to effect change at a fast pace--not once a year.
Price says NASCO did not constrain its provider-selection criteria with factors such as length of time in business, number of large clients, etc. "We selected the provider that would best meet our vision and goals. The vision is providing the most dynamic flexible platform that allows NASCO's customers to meet their current and expanding needs as they evolve. The goal was to gain more product control to ensure the vision. He adds, "We don't want to swap out CDH products every two years; we wanted a platform that will last."
As its banker and physician founders did in 2001, CareGain is still recognizing opportunities to develop solutions for the challenges of the evolving CDH market. Moudgal predicts that payors will start looking closer at how they procure technology and says that off-the-shelf software will be more important than customized applications developed in house. Hence he asserts that there is "an opportunity for fresh thinking, an opportunity for SaaS, and opportunities for capabilities in integrating systems."
Of course, it also creates more opportunities for outsourcing.
Lessons from Outsourcing Journal:
- Because of evolving market needs in consumer-directed healthcare and high-deductible health plans, payors need to adjust their capabilities in service delivery. This requires changes in technology, and outsourcing is the ideal solution for effecting rapid change cost-effectively while the market is still evolving.
- Outsourcing for consumer-directed healthcare platform that integrates with payors' existing systems enables payors to leverage their investments in legacy systems.
- Outsourcing meets the needs of payors with customers that have some interest in consumer-directed healthcare but not yet enough members (employers) nibbling at it to make it cost-effective for a payor's investment in changing technology.
- In selecting a provider with an ASP or Software-as-a-Service (SaaS) model, buyers must understand how their own goals and the pace of their expectations matches the provider's vision and pace of developing future capabilities. The buyer needs to know up front what it is comfortable in giving up if it selects an ASP or SaaS arrangement.