Though outsourced customer relationship management (CRM) is common in many vertical markets, only in the last few years has it grown significantly in healthcare. From 2002 through 2005, outsourced CRM in this niche has achieved a healthy cumulative average growth rate (CAGR) of 13.4 percent, according to Brian Bingham, Manager, Global CRM and Customer Care Research, IDC. Gartner predicts CRM customer service and support and business process outsourcing (BPO) will grow from $7.6 billion this year to $12.2 billion in 2007 and credits CRM in healthcare with about 7.5 percent of that total value.
In general, the business drivers for outsourced CRM are similar to those for most outsourced IT. Business process costs have increased and fast-evolving technology is too hard for in-house personnel to keep up with. In addition, insurance payers require faster speed to market launching products and need to focus on core competencies to remain competitive.
More specifically, however, certain changes in the healthcare industry are pushing insurance payers in particular to implement CRM.
Market Changes for Healthcare Providers
For example, Bingham says new HMOs and pharmaceutical companies are offering ancillary products and services, which puts increasing competitive pressure on incumbents. For this reason, he explains, "companies need a competitive differentiator to sell, market, grow, and retain customers and, as a result, they are inclined to enhance their CRM capabilities." The difficulties of doing that internally have driven providers to consider outsourcing, he adds.
Alexa Bona, Research Director, CRM, Gartner, notes that healthcare executives are faced with extreme budget pressure to reduce costs while improving customer satisfaction and outsourcing providers can accomplish this with economies of scale, process efficiencies, and labor arbitrage.
CRM also often involves embedding analytics into marketing and sales campaigns and then tying them to customer service. Bingham says this entails use of complex processes and technologies that healthcare companies may be reluctant to implement and manage but which outsourcers have already mastered. The result is the outsourcer can turn what was a cost-based operation into a profit center.
In addition, insurance premium increases of 13-15 percent a year for large groups over the last few years are causing healthcare providers to look at everything they can to keep down costs. Andrew Walsh, Vice President, Health Care Sales at ICT Group, a CRM outsourcing provider suggests there are two types of costs that are relevant here, but only one of which payers have any control over. The first is medical cost and, he says, "there are minimal things you can do with medical cost because people get sick and they're going to incur claims." The second is administrative costs, and "to be more competitive and aggressive on pricing," he says, "firms look to contain their administrative spending any way they can." Outsourcing helps in this regard because generally firms have a lower spend for the same or better results.
Market Changes for the Payers
Walsh observes that "a lot of consolidation" has taken place among healthcare insurers, both among the Blues (Blue Cross and Blue Shield) and the regional players. Because of this consolidation, there's been "a trend away from the not-for-profit corporate structures insurance companies used to have to the structures of for-profit publicly traded companies." That for-profit mentality is driving these companies to outsource CRM to be more cost-effective.
He says consolidation has also left many companies with disparate legacy systems cobbled together in an attempt to centralize activities like Member Services. Outsourcing CRM can help call center agents who had to navigate multiple legacy applications. By overlaying one agent-friendly technology on back-end applications, he says, agents benefit from a streamlined interface and can take advantage of the robust processing capabilities of legacy applications.
Most-Used CRM Technologies
Many healthcare companies have gotten this message. According, most call center technology is horizontal, and in this mix you'll find the following:
- The call center desktop
- CRM software like Siebel that might run on servers in the US but be exercised on terminals overseas
- The telephony infrastructure that allows systems to queue and route calls to the next-best available agent
- IVR (Interactive Voice Response) and speech recognition
- Quality monitoring systems that record calls for quality purposes and score them to track agent performance
- Workforce management systems that determine how many agents are scheduled for the busiest periods
- Technologies for interaction with agents via email to shift higher cost interactions to lower cost self-service channels
Bona is especially seeing focus technologies that allow a single view of the customer. Bingham says analytical tools are also hot. These segment and profile how and when products are being used, how to get better profit from customers, and how to cross-sell and up-sell.
Along these lines, Walsh sees an uptick in speech-enabled technologies, especially IVR applications. These help providers cut costs by handling common transactions like requests for replacement ID cards. The result: Providers don't see a reduction in live agent call volume. Instead, the inquiries are more complex, giving agents the opportunity to invest more in the total customer relationship.
Leading the way in CRM are the traditional call center and telemarketing providers. In the former ranks are Convergys, Sykes, Sitel, Teletech, Client Logic, EDS, West Corporation, and Teleperformance USA, while the latter include ICT and PRC.
Offshore CRM providers are dominated by Indian companies like Wipro Spectramind, Progeon, Intellinet, and Daksh (recently bought by IBM).
Bona also points out that some new providers have entered this space from a consulting and systems integration heritage. Companies like Accenture, IBM, Deloitte Touche, and Capgemini number in this group. She says "they position their offering in a different way -- they talk with board-level people about business transformation rather than just contact center activities."
These players may not even run the contact center themselves. "They'll take the business risk and do the business transformation," she says, "but may sub out the call center to a company like Convergys." Their value proposition is understanding the healthcare industry and knowing how to manage different vendors so the customer doesn't have to.
Along with these factors, there's a general increase in healthcare premiums and a real push by insurance companies to keep down costs they can control so as to maintain competitive pricing. So administrative costs have come under the knife -- particularly through implementation of self-service health insurance. Unfortunately, most patients don't even understand the complexities of an HMO, never mind coping with coverage and rate issues by themselves. CRM is valuable here in that it allows the insurance company to reach out to payers, understand their needs, and inform them of their self-service options. Outsourced CRM is especially compelling in this scenario because insurers can deploy it for a fraction of the cost of a complicated installed system and still provide the kind of customer service that differentiates them from the competition.
Lessons from the Outsourcing Journal:
- New healthcare companies offering ancillary products are increasing competitive pressure on incumbents who need outsourced CRM to differentiate themselves.
- Consolidation has left many healthcare companies with disparate legacy systems. Outsourcers can give agents simpler CRM interfaces without forfeiting robust legacy capabilities.
- To implement self-service insurance, healthcare providers have to redefine member service from a transactional experience to one that develops a holistic relationship with the member using CRM.