Why Outsourcing Makes Sense

If your health care organization hasn’t considered outsourcing, there’s never been a better time than now to do so

In the 1990s, health care organizations were successful in holding down medical costs through management of care and the elimination of unnecessary services. But now, according to an article in American Medical News, these cost cutting approaches can no longer handle the inflationary pressures of today’s health care marketplace.

With an aging population and pharmaceutical cost increases, many health plans are experiencing thin profit margins, if they are at all profitable. For example, according to Business Week’s “25 Ideas for a Changing World” issue, the United States spends $1.4 trillion, or 14 percent of its gross domestic product, on medical care. Within a decade, it could be spending close to $3 trillion and by mid-century, those costs could increase to nearly one third of the economy.

To stem the bleeding, health plans are faced with the prospect of raising premiums, which is meeting with great resistance from employers. Even with increased revenue, there is sometimes still a gap between premium income and expenditures. This is a challenge in an environment of fast-changing and expensive technology, regulations and consumer and provider movements. But not investing in and keeping pace with state-of-the-art technology can affect the market share and hinder financial stability. Finding and retaining expert systems and operational staff can be a drain on an already stressed budget.

In the face of such strong financial forces, health plans are looking for ways to further streamline expenses and improve performance to stay competitive.

Outsourcing administrative functions can be a solution to this problem. According to a recent study by PricewaterhouseCoopers that reported information obtained from top executives at more than 100 United States companies, outsourcing allows companies to focus on core competencies and increase efficiency without having to invest in people and technology. The report also states that outsourcing helps companies become more profitable and maintain a competitive edge. By partnering with an outsourcing vendor, such as DST Health Solutions, Inc., health plans save money by capitalizing on economies of scale and more efficient systems and processes. Outsourcing vendors also have access to in-depth technical knowledge. DST Health Solutions’ customers find they can concentrate on their core competencies and strategically position themselves in the volatile health care marketplace with leading-edge technology and fully integrated administrative services. They gain the economical advantage of minimizing capital costs, along with low overhead and technology costs and exacting service standards.

Technology is important …
As business progresses in this century, technology often is the foundation on which it builds. But just having technology is no longer good enough. In a field where today’s advances are out of date tomorrow, a health plan with ‘80s and ‘90s technology is already far behind.

Health care administrators need technology that allows and helps them to remain competitive. That requires a flexible and scalable system with an open architecture that is easy to integrate and upgrade. It also must be able to take full advantage of the technology, but technology isn’t cheap. The cost to install a system can range from as much as $1.5 million or more – it can go as high as $1.5 billion. Outsourcing gives health plans the benefits of cutting-edge technology without all the costs associated with it.

Many experts recommend application hosting of client/server products as a flexible and relatively inexpensive strategy to accommodate a rapidly changing computer environment. The DST Health Solutions System Suite provides outsourcing services to many of its clients. The product is cost-effective multi-tiered, client/server, products that run on Microsoft® WINDOWS 2000 and Microsoft® SQL server™. Their open architecture helps outsourcers and customers manage the escalating rate of technological advances (Microsoft® 2000) and grows to accommodate large volumes of business. The key is the multiple-tiered configuration that allows easy integration of software components.

The company also offers the highly functional and scalable AMISYS Advance, the evolutionary replacement for the AMISYS 3000 system. AMISYS Advance runs on the Unix operating platform with an Oracle database and offers the same industry-leading functionality and high auto-adjudication rates as AMISYS 3000. Existing customers will continue to realize the benefits, value and HIPAA enablement capabilities from their AMISYS investment. In addition to functionality enhancements, Release 2 of AMISYS Advance will include a Web-native GUI front end written in Java. By transitioning to the HP-UX platform, the product has a solid operating base for new development.

In addition to the standard equipment and systems necessary to provide outsourcing services, many health care organizations are considering new approaches to deal with plans for recovery from a disaster’s impact on their information system. DST Health Solutions’ customers have access to a plan that includes a data center and a remote “hot”-site recovery system and services. The data center has a back-up generator; uninterruptable power systems support; HVAC 28-ton air-conditioning system; and on-site protection against fire, water and moisture damage.

…But health plans need more
A superior system is meaningless if you don’t have experts to run it. And experts are increasingly hard to find. Some analysts think the shortage of IT workers is reaching critical levels. Through the year 2010, the number of IT jobs will increase by 36 percent. Qualified people demand high salaries, and companies court them with signing bonuses and other perks. Turnover is high as they are constantly being recruited away from their jobs.

In the 13th Annual Healthcare Information and Management Systems Society (HIMSS) Leadership Study, respondents (senior operations, financial and IT managers) said  hiring and retraining IT staff is a priority. But finding, training and keeping talented people is an expensive challenge. By outsourcing IT services, the outsourcer meets those challenges for the health plan. Outsourcers provide a diverse environment that presents IT specialists with interesting challenges and upward mobility.

In addition to staffing challenges, there are the hidden costs of lost time and business due to system implementation. This is especially true for a start-up health plan or newer consumer-directed health plans. When faced with the need to get a computer system quickly in place, Health Plan of Texas in Tyler, Texas, turned to DST Health Solutions for its outsourcing needs. “We made the decision to outsource because it gave us immediate access to a superior computer system,” said Tony Orsino, director of operations for HOT. “It was faster to go with a vendor that had the technology and staff in place. We were operational in a short period of time. Without a doubt, we saved capital and got quick access to new technologies, in addition to excellent customer service and personal attention.”

Efficient administrative outsourcing = solid return on investment
Time is money. The more efficiently, quickly and accurately administrative functions are performed, the more money is saved. For this reason, health plans find it cost-effective to outsource many tasks, such as enrollment and claims processing and payment management, to companies that focus exclusively on superior administrative services. DST Health Solutions offers a full array of outsourcing services to its customers: mailroom, scanning and imaging, member enrollment and provider file maintenance, claims processing and adjudication, premium billing, capitation, check printing, ID card generation, fulfillment services and reporting. Customers may choose any or all of these services.

Customers save through DST Health Solutions’ commitment to provide the best technological solutions and superior quality. A good example of a technologically advanced solution is imaging. DST Health Solutions scans paper claims into a computer at the rate of 30,000 plus per day and those claims are immediately ready for processing. Because it reduces manual input, processing time and errors, eliminates lost claims, increases auto adjudication rates and provides immediate access to claims data for customer service reps to respond to inquiries, imaging saves money through maximum efficiency and improved accuracy.

DST Health Solutions sets stringent quality controls. Its processors must achieve an accuracy rating in the range of 97 to 99 percent before they leave training. To assure that they maintain this level, all work performed by a new analyst is checked. Once that analyst has achieved that level, the amount of work checked decreases, but a minimum of 3 percent is still checked randomly for accuracy. After claims are paid, statistically valid samples are gathered and reviewed for payment by DST Health Solutions’ quality control division. The company also sets aggressive standards that are specific to customers’ needs and consistently meets or exceeds those standards. “We set high expectations in both service and technology,” said Judy Vandercoy, vice president of Customer Support Services, DST Health Solutions Operations. “Our niche is outsourcing systems operations and administrative services. We excel at this and take pride in our performance.”

Administrative outsourcers can help health plans meet government and provider demands, decreasing the risk of fines for not meeting those requirements. For example, the 1996 HIPAA mandate requires standardized coding on electronically submitted claims. In addition, the government demands claims security to protect patient confidentiality. Health plans also need to consider state regulations mandating the amount of time it may take to process a claim. Even though DST Health Solutions customers are ultimately responsible for compliance, the services and products it offers assist health care payers in meeting strict regulations. Because DST Health Solutions has a nation-wide customer base, the company is experienced in working with many different state regulations.

The reporting requirements of both government and providers can also pose administrative challenges for health plans. By outsourcing with DST Health Solutions, health plans have reports at their fingertips. The system tailors reports to match customers’ needs. Imaging electronically sends correct data through the system for information collection. That data can then be sorted and grouped to accommodate government and private requirements, such as the Health Plans Employer Data Information Set (HEDIS®). The DST Health Solutions System Suite utilizes a separate report server and common reporting tools such as, Seagate Crystal Reports, which can perform on-the-fly analysis. Data collected during imaging is stored into perpetuity on CD-ROMs and DVDs. If it becomes necessary, customers can quickly retrieve historical information for reports.

The bottom line: health plans save money, stay competitive
Savings are translated to health plans in a variety of ways. As an outsourcer, DST Health Solutions makes the capital and technology investment to provide state-of-the-art services to customers. It takes on the responsibility of recruiting and maintaining experienced staff and has the economies of scale to provide efficient services. All of those items help health plans focus on their core services, like medical management and provider relations, save money and stay competitive.

Orsino says that outsourcing “saved us hundreds of thousands of dollars. We have certainly realized our objective of saved capital. In addition we are able to effectively compete with the competition.” Health Plan of Texas received high rankings in an annual report recently issued by the Texas Health Care Information Council.

In the report – Guide to Texas HMO Quality: 2002 – the Health Plan of Texas ranked in the top 10 out of 43 health plans, all of the categories rating member satisfaction. Processing health care claims accurately and timely is included among those categories. In addition, Health Plan of Texas ranked above the state average in 17 categories related to care.

Across the board, in every industry, outsourcing is helping companies save money and better allocate resources. In a recent outsourcing.com article, Timothy Smith, vice president of outsourcing solutions for the Amega Group, said, “Typically, organizations can reduce the costs of performing a process by as much as 20–30 percent and realize improved process efficiency and effectiveness within three months of implementation. In most instances, however, the biggest value an organization receives from outsourcing is an improved process. The focus should not always be on ROI, but what are we giving up by not outsourcing?”

Benefits go beyond the financial. With the ability to concentrate on their core business, health plans succeed in their area of expertise and lead in the marketplace. This ultimately means plans can compete in a volatile environment. “At DST Health Solutions, we support the growth of our customers,” said Brenda Smoker, COO, DST Health Solutions Operations. “By combining our claims outsourcing service with a superior system, we help them save money and concentrate on their core competencies. This ultimately helps them compete and succeed.”

For more about DST Health Solutions, contact us at inforequests@dsthealthsolutions.com.