“Digital” as a Strategic Priority for Healthcare Payers

We at CSC have been spending a good chunk of time formulating our healthcare payer strategy in recent months – and for a good reason. Developing the healthcare payer market has become a strategic priority. These conversations kept me asking myself the same question over and over again: How do you pitch “Digital” to payer leaders who are tempted to relegate digital initiatives to their IT departments, or to small teams that have historically dealt with topics like digital marketing? What is the “Digital” pitch with regard to deriving maximum benefit and return on investment (ROI) from “Digital”?

By Boris Rachev, Global Health Economist, CSC

So here are my thoughts on the subject spread across a series of blogs focusing on payers, healthcare systems and the role of digital innovation. By “digital,” I mean the broad range of technologies and applications our company created as part of our “Journey to the Digital Enterprise 2.0” that enable more efficient automation, better decision making, stronger connectivity with customers, and more advanced data-driven innovations. These technologies, together with business process redesign, make possible a new way of working that can fundamentally transform payer organizations. My focus is the economic, financial and business rationale behind making “digital” a strategic priority.

I don’t think I’m exaggerating if I say that, given current margin pressures and ongoing industry changes, payers face a strategic imperative to consider fundamental changes to their operating model. Digital initiatives can help payers re-imagine their business processes and customer engagement techniques, and enable them to make the needed changes. When executed well, these initiatives can achieve substantial, near-term selling, general and administrative expense (SG&A) cost savings and give payers a much more solid footing from which to face the future.

Payers are being affected by digital disruption. New insurance startups like Oscar Health, Stride Health and Clover Health have demonstrated how “digital” can be used to develop a new business model which capitalizes on digitalization and consumerization in the healthcare space. Such startups are currently struggling to stabilize their operations and increase their members, while adapting to local and federal legislation and ever-changing regulations, but make no mistake, they are poised to change consumer buying behaviors and relentlessly disrupt the health insurance industry. Their current woes are only creating a false sense of security for established organizations – it took Napster 5 years from the time it was launched until music industry revenues were cut in half. The delay is due to two factors: the speed at which consumer behavior changes and the time until economies of scale and the impact of having a large participant network take hold. Both factors will eventually reach a tipping point, and the subsequent changes can be dramatic. Think of Uber in the taxi industry, Airbnb in the hotel industry, and Netflix and Hulu in the TV industry.

Based on such trends, we at CSC believe that payer executives need to think bigger, move faster and champion digital transformation. “Digital” should be at the top of their strategic priorities and the time is now to take significant action and adapt to the changing landscape in health insurance. If they wait until the disruptive effects of digital transformation are more noticeable, it may be too late to change course.

How “digital” helps payers

Digital transformation can have a significant positive impact on a payer’s economic performance, primarily through four levers:

Consumer and provider engagement. “Digital” gives payers new ways to engage with all stakeholders. For example, it can be used to improve the consumer experience by simplifying the buying process and making it easier for consumers to select the right product. “Digital” also enables payers to engage more effectively with providers. For example, sharing more sophisticated, digitally enabled tools to manage the population health of patient panels, savvier electronic tools for gauging the quality of care delivery, better collaboration and data sharing.

Efficiency and effectiveness. “Digital” means eHealth optimization solutions with automations that allow payers to radically reimagine workflows. Many of the processes payers currently use have resulted from a series of small steps made over many years. There is no reason most of those processes should be that complicated. “Digital” makes it feasible to design minimally viable processes based on the end-to-end journeys taken by external stakeholders.

Data operationalization. Without “digital,” it becomes far more difficult – if not impossible – to implement value-based reimbursements (think MACRA) and other payment innovations. Population health management also depends on advanced analytics. “Digital” enables payers to optimize their networks at a granular level and to design more attractive (and profitable) products that cater to the needs of a given demographic, area or segment.

Innovation, innovation, and innovation. Finally, “Digital” enables payers to think more broadly about innovating their business models and care delivery. It can help payers envision new approaches to care delivery that have the potential to hold down costs like wearables and telemedicine. It also makes healthcare more accessible by giving patients easy access to their medical history and helps them locate nearby clinicians, specialists and facilities.

In my next blog, I will address the financial impact of digital transformation – using “Digital” for organizational transformation – and how “Digital” maximizes the value of two-speed IT.

Comments

  1. Where do you think Telehealth comes into play with bundled payments and alternate payment models and chronic disease management? And most importantly, who should foot the bill for the infrastructure? The payer are the providers are some creative collaborative between the two?

    Like

  2. Boris Rachev says:

    Dear Sue, because of the topic’s importance, I have answered your questions in a new blog, which you can find here https://blogs.csc.com/2016/09/22/the-role-of-telemedicine-in-digital-transformation/

    Thanks!

    Like

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