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Digital Transformation in Healthcare Payers Means Unifying "Proactive Member Engagement" and "Modular Core Processing" January 2020

Written by: Jeff Rivkin, Research Director, Payer IT Strategies

Introduction Digital transformation at scale is a challenge for healthcare payers. Attempting to address increased expectations around member engagement and product flexibility, infusing social determinant data, collaborating with providers, and containing costs in a squeezed premium and regulatory environment combine to tempt payers to attack digital transformation with point solutions.

Digital transformation for payers is usually discussed in terms of "core processing" and "member engagement" (both administratively and clinically). Again, the allure is to address these macrofunctions in a siloed way.

A better answer than this "local solutions" approach is to invest architecturally. Organizations should invest in open infrastructure, plug-and-play modular component functionality, rules-based flexibility, system-of-record mentality, extensible canonical data model architecture, and cloud flexibility. They can achieve these goals using a combination of scalable hardware and multidevice accessibility for members, which allows scale and elasticity for changing requirements.

This paper shows how core processing and member engagement have evolved and how IDC has predicted where these technologies are headed to provide context around solutions that meld core processing and member engagement as two sides of the same coin within an architecture with a 360-degree view of members (aka "member 360").

Oracle is marrying comprehensive core administrative processing and personalized proactive member health engagement in an ecosystem with partners such as dacadoo. The Oracle solution uses a core administration engine and a mobile health platform in a cloud-based closed-loop architecture to modernize operations, enabling better member understanding, predictable risk, preventive health, and increased member engagement.

WHAT'S IMPORTANT An architectural approach that unifies the themes of "modular core processing" and "proactive member engagement" will benefit payers as they struggle to modernize.

KEY TAKEAWAYS Organizations should invest in open infrastructure, plug-and-play modular component functionality, rules-based flexibility, system-of-record mentality, extensible canonical data model architecture, and cloud flexibility. They can achieve these goals using a combination of scalable hardware and multidevice accessibility for members, which allows for scale and elasticity of changing requirements.

AT A GLANCE

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IDC VENDOR SPOTLIGHT Digital Transformation in Payers Means Unifying "Proactive Member Engagement" and "Modular Core Processing"

Core Processing Background Effective payment of claims is increasingly difficult. Health savings accounts (HSAs) and shared medical and dental accumulators were the simple beginning of what is now a complex bag of variables for claims reimbursement.

Historically, the claims and billing engine was the heart of the healthcare payers' technical infrastructure, along with enrollment and back-office functions, which was payer IT. Far-reaching extensions of claims adjudication, including being the core of member, product, and provider data, were found in the bowels of the claims and billing engine. It was the system of record and largest application for payers, around which all other functions orbited, but no more.

The complications of the Affordable Care Act (ACA) and the specialized functionality required to operate as payers evolved from "claims payers" to "partners in care" and have broken the legacy claims and billing engine. That engine has morphed into an almost unrecognizable beast as it has been surrounded with supplements, patched, appended, and refactored to attempt the multiple functions required. Now, differentiating capabilities include autonomous product/plan configuration, rule bases, enterprise workflows, self-service interfaces, integrated customer relationship management (CRM), pricing transparency, and automated business intelligence (BI)/analytics/reporting via dashboards for informed decision making.

Claims and billing variables now include understanding not just member medical encounters but also a variety of contexts. These contexts include episode determination, member illness burden and behavior (obesity, wellness participation, diabetes, etc.), provider contracts, provider incentives, and evolving benefit plan designs, which include cost sharing. All of this complexity is stressing reimbursement engines to the breaking point, ushering in the next generation of these systems.

In response, vendors are designing their systems in a more modularized approach, enabling individual modules to be sold and implemented as standalone products with application programming interfaces (APIs) and service-oriented architectures (SOAs) and/or cloud architectures. The healthcare payer industry does not favor a "rip and replace" approach to core payer system installation because such an endeavor is risky, very expensive, and resource consuming. It is more feasible for payers, as well as provider organizations now offering health insurance products, to assemble core payer functionality as needed and with multiple products from perhaps different sources.

Large health IT vendors, including services companies, are evaluating their options for developing and delivering core payer administrative systems, including the options to build, use, or engage business process outsourcing (BPO) or business process as a service (BPaaS) using a new generation of solutions that are cloud based.

Despite vendor evolution, the speed of healthcare payer adoption to make this change is slow because redeploying this foundation system is daunting and expensive in these days of cost reductions and limited premium increases. However, the environmental reasons discussed in the trends that follow point to the drivers for replacing these systems.

Trend 1: Member Benefits Record => Unique Person

In the legacy core architecture, the claims and billing engine served as the master benefits record showing what product/plan the member owned and to what benefits he or she was entitled. The chief reason was to adjudicate claims. Now, the benefits a member owns are of great concern in the context of the "whole person" both administratively and clinically, the unique person as proven by identity management software, and the marketing, sales, and customer service potential in terms of CRM software.

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Trend 2: Member Services => Customer Relationship Management

The legacy claims and billing engines served with their own customer service module. Customer service is now part of CRM to enable dovetailing with sales, enrollment, and marketing in the context of the whole person.

Trend 3: FFS Contract Terms => Multiple Reimbursement Methodologies

In the fee-for-service (FFS) claims adjudication methodology, contracts were simpler and rate schedules could be tabular and directly applied. Now, shared savings, retrospective bundling, and prospective bundling join the FFS reimbursement methodology. By losing the one-to-one claim-to-payment relationship, the entire claims engine loses its integrity. Bundles and multiple encounters or billing events factored into a reimbursement cause the contract-to-price of claims pricing logic to disintegrate.

Trend 4: Adjudication-Based Provider Data => Provider System of Record

Gone are the days when limited provider information could be maintained inside core administration or claims adjudication engines and extracted and passed around the healthcare payer enterprise for various operations. In the legacy claims architecture, the information about providers was held in the claims engine.

The evolution of networks to be narrow or tiered, to contain care coordination affiliations, and to be adequate and transparent has spawned software niches to enable provider network management. This recruiting, credentialing, contracting, and validating software unifies the network management departments with the claims and billing departments.

The complicated nature of provider data and the increased scrutiny on directories to be accurate and the networks to be adequate spurred the use of identity-matching fuzzy logic software in the provider space. Having a unique, comprehensive provider system of record inverts the previous relationship and now feeds the claims engine downstream with the necessary adjudication fields.

Trend 5: Claims-Based Product => Fast Product Speed to Market

In the legacy core architecture, the product offering (what is available to be sold) was intermingled with the customer product instance (what was bought) in the legacy billing and claims engine. There really was no "product catalog" as plans were mostly customized, especially in the group market, so the claims-centric approach sufficed.

ACA minimum essential benefits mandates, price competition, velocity of mergers and acquisitions, and emerging distribution channels (exchanges) forced examination of the product creation life cycle. Speed through the product development and deployment cycle is now critical to effectively compete as payers are transitioning from the traditional B2B distribution model to a B2C distribution model.

The traditional B2B health insurance market is also experiencing change driven by employers offering consumer-driven health plans (CDHPs), which prompt a significant volume of new and revised plan designs. Therefore, product strategy teams need the flexibility to rapidly configure and roll out innovative product offerings to gain market share.

At this point, payers would be happy with just an isolated, reliable, and flexible system of record of their product offerings. Standard components for this system include a workflow for flexible product design and development, an autonomous central repository for product/plan offerings, a workflow for plan filings, document generation (including the Qualified Health Plan [QHP] template and Summary of Benefits and Coverage document) production, internal and external document access, transparency and compliance reporting, and generation of marketing materials.

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Member Engagement Background Historically, health insurers have held a safe place in the customer's mind. Members were a bit fearful, and a bit confused, but masked by the employer group relationship to the payer, customers usually remained loyal to their payer, if only because of inertia.

No more.

Engaging the health insurance customer has moved toward the "retail model" over the past five years as healthcare payers convert from:

» Loyal employer group members with subsidized pricing

» A base of annual loyal "renewal" members

» A claims paying and utilization review culture driving consumer fear of claim denial

» Once-a-year, "open enrollment" mass marketing blitzes

to:

» Individual customer choice and frequent switching

» Semi-commoditized product offerings and pricing

» Marketing messages that healthcare payers are providers' "partners for patient care"

» Highly segmented and individualized marketing

The customer has become more educated, engaged, and picky and less loyal — as in the retail market.

As health insurance benefits and pricing have become commoditized through the ACA, the customer relationship becomes paramount for payers. Annual marketing campaigns are being replaced with continuous presence techniques combined with segmentation approaches historically found only in retail and financial services. This personalization must be tempered with a healthy respect for privacy and security, or the customer experience (CX) could go from a payer/patient health partnership back to the adversarial claims-based days of the past.

Customers now have choices and will switch healthcare payers if their experience deteriorates; they expect more, comparable to other retail or financial experiences they have that are easier. Customers' fear of health insurance companies has slowed adoption by those companies of a semi-retail approach to interacting with the member/patient in a way that is now possible technically but culturally difficult. Engaging customers to develop a trust with their payer that is equivalent to the trust they have with their medical providers is a lofty goal, but this is the "partner in care" customer experience desired by payers. Characteristics of this desired "partner in care" mindset include:

Be Technically Equivalent to Other Industries in the Mind of the Customer

For both providers and healthcare payers, there is emerging customer demand for services consistent with standards set by the retail and financial markets for accessibility, responsiveness, and omni-channel delivery (web, mobile, and interactive presence). An integrated customer engagement strategy that enables automated interactions, shared communications, and appropriate transaction and information transparency to three parties — the health plan, the provider, and the consumer — is now expected by the consuming public.

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Connect Physical Life and Digital Experience

All industries have customers; we may call them patients, citizens, or clients. In all facets of society, we are headed down a path where engagement with a customer will need to be a seamless blend between the digital world and the physical world. The line between formal medical record keeping and life-event capture has blurred, as exemplified by the explosive growth of wearable technology that helps consumers track their progress and spur their physical activity.

Enable Transaction Ease by Providing Customer-Facing Software That Is Easy to Use

To achieve this new "partner in care" loyalty play, payers are working hard to improve the marketing, sales, enrollment, billing and payment, and claims administrative processes for the customer. New or modified software is required to capture, transact, manage, and report the data necessary or generated by these functions. These software tools include:

» Enrollment and exchange interaction software

» Premium payment software

» Provider billing and payment software

» Claims adjudication software, with flexibility to handle the variety of claim types

» Electronic health record software

Enable Patient Care Ease

Concurrently, healthcare payers are adopting innovative wellness, care coordination, and care management strategies. As an example, they are broadening their networks to be perceived to be flexible to different lifestyle choices; thus, they sponsor gym memberships, nutrition assistance, weight management, wellness checks, and alternative medicine coverage. New or modified software is required to capture, manage, and report the data generated by these care functions. These software tools include:

» Care management software

» Care coordination software

» Wellness survey/assessment software

» Individualized health tracking software including "health scoring"

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IDC Prediction Background In October 2019, IDC made the following prediction:

Responding to Increased Healthcare Costs and Consumer Pressures, "Benefit Plans of One" Will Be Offered in 30% of Health Plans for Engaged Consumers by 2022

Custom benefit plans are coming. Building on historical wellness themes and a scaled capability for insurance companies to derive advanced analytical insight out of an infusion of a tsunami of demographic, consumer, and social determinant data will enable health insurers to offer benefit plans that differentiate through personalized products and flexible premiums and deductibles at an individualized level.

Insurance companies that are using basic claims data, high premiums, fixed deductibles, and rudimentary screenings such as body mass index (BMI) and smoking propensity will be revolutionized in developed regions of the world. Health insurance companies will use real-time care data from providers to segment their populations, and a new level of "wellness" accountability from members will be encouraged. This level of "Wellness 3.0" will include encouraging personal responsibility around getting readings on bone density, colorectal screening, retinal eye exams, mammography, flu shots, and fall risk prevention strategies.

In exchange for this member behavior that exhibits consumers engaging in their own healthcare, companies will provide newly authorized benefits like home care meals, over-the-counter (OTC) drug credits, and transportation to the doctor's office, as well as decreasing deductibles and premiums based on individualized metrics. At the same time, plans will continue their slow and steady embrace of narrower provider networks to rein in costs and support accountable care initiatives that do not work with broader networks. In fact, a "network of one" will eventually parallel the "benefit plan of one" to maximize consumer satisfaction.

The context provided by this prediction shows that member engagement and core administration payer systems will need to evolve to technically enable personalized health benefits for members. Concurrently, member engagement and wellness systems will need to evolve to capture more data with decreased latency and integrate directly with core systems to allow interactive "member 360" with actionable advice at the point of care or certain physical activity.

Key Benefits An architectural approach that unifies the themes of "modular core processing" and "proactive member engagement" will benefit payers as they struggle to modernize to stay current on features, updates, and capabilities.

In modular core processing, all the enrollment, pricing, billing, authorization, pricing, and wellness paradigms are changing for healthcare payers. Payers must develop a comprehensive open architecture that:

» Enables flexibility to improve operational efficiency (with or without cloud implementation)

» Is more adaptable for new capabilities, along with innovation and consolidation

» Is more transparent for members and providers

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» Is more scalable to grow market share, to accommodate mergers/acquisitions, spin-offs, joint ventures, disintermediation

These attributes are now fundamental for healthcare payers that wish to survive.

In proactive member engagement, consumers expect their relationship with payers to follow the semi-retail, seamless partnership model. They expect easy, intuitive, engaged participation from their insurer as they navigate the health ecosystem. Engaged members are loyal members, willing to shop not only for price as their differentiator when selecting an insurer during open enrollment. Payers must develop a comprehensive open architecture that helps members:

» Enable administrative transaction (enrollment, authorization, claims) ease

» Engagingly assist patients with their health management, both chronic and episodic

» Connect the physical and digital aspects of members' lives to help members manage their lifestyles

» Move the care paradigm from reactive (sick/disease management) to proactive (passive data capture, preemptive direct provider communication) yet still manage chronic diseases through effective care pathways to reduce overall cost burden

These capabilities are competitive differentiators for members when evaluating payers.

Solutions that can combine these goals under one architectural approach are, of course, more efficient with IT resources and more easily interchangeable with on-premises or hybrid cloud options and should be considered when replacing portions of the core administration and/or member engagement software portfolio.

Considering Oracle Oracle has a health insurance ecosystem including customer experience, financials, and document generation functionality surrounding its flagship Oracle Health Insurance (OHI) offering. OHI is a set of software solutions that supports the core business processes of healthcare payers/insurers for the following areas:

» Product design/benefit plan configuration

» Claims processing — adjudication, accumulation, and financial pre-processing

» Fees and provider contracting

» Enrollment

» Policy administration

» Premium/contribution calculation and renewal

» Alternative reimbursements/value-based payments

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Oracle has entered a partnership with Swiss-based dacadoo, an AI-driven health and wellness cloud vendor that operates technology solutions for digital health engagement and health risk quantification. dacadoo develops and operates a comprehensive Health Engagement Platform to motivate users to achieve and maintain healthy lifestyle habits. The platform combines motivational techniques from behavioral science with functions from online gaming and social networking as well as automated, AI-based coaching to activate and engage users. It works as a personal health coach in users' pockets, rewarding users for personal achievements and helping them attain their goals.

This service helps insurance companies provide their members with an opt-in mobile device tool, which uses data to encourage members to enroll in a preventive health program. To that end, dacadoo uses 300 million person-years of clinical data to calculate a person's "Health Score." To help users remain active and engaged, dacadoo applies the Self Determination Theory (SDT) as underlying behavioral science and makes use of various engagement techniques.

Oracle's OHI is integrated with the dacadoo platform for enrollment, premium calculation, and repricing data, which is then correlated against the dacadoo Health Score.

For both disease management and lifestyle management, the platform uses current OHI (enrollment, claims, wellness) data to optimize and engage the member. For disease management, the dacadoo platform launches and runs preventive programs, coaching, and care pathway management. For lifestyle management, the dacadoo platform launches and runs improvement and other coaching programs.

This platform also quantifies the dacadoo "wellness" data correlated against OHI claims and enrollment data, which enables the model of enrollment triage to identify high risk members for care pathways based off past claims and allows forecasting of future claims, assisting population health management and laser-focused personalized health management.

This comprehensive "360-degree" view, which is active and ongoing and is fed from activity on the dacadoo platform concurrently with OHI claims and enrollment activity, provides active management of health.

Challenges

Oracle and dacadoo each have open SOAs and RESTful API architectures. Evolving interoperability standards for FHIR, microservices, X12, and HL7 are homogenizing data, enabling multicloud or hybrid cloud solutions to further open the data of the enterprise whose walls are increasingly opaque. The line between healthcare payers and providers is blurring, and the IT infrastructure of most payers is increasingly multivendor, multipartner, and multibusiness. Both vendors will need to continuously reengineer their "plumbing" to ensure optimal interoperability.

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Conclusion Healthcare payers now have a significant desire to develop, maintain, and work off a common "member 360" data repository for both clinical and administrative needs, operationally and analytically, for member engagement and modular core processing.

The combination of the available technology and emerging consensus in favor of a data-centric approach to application and analytic portfolios has inspired the introduction of a comprehensive strategy to meet most of the needs for member support inside, outside, and across the payer enterprise.

This comprehensive architectural approach, if maximized and optimized, can evolve to be a real-time, cloud-based health management orchestration engine for members — and a crucial competitive advantage for healthcare payers. Oracle is uniquely positioned as one of the world's most ubiquitous cloud infrastructure and application implementers to ensure that progression.

IDC believes this core administration market will continue to grow and evolve and become inclusive of member engagement. To the extent that Oracle can address the challenges described in this paper, the company has a significant opportunity for success.

About the Analyst

Jeff Rivkin, Research Director, Payer IT Strategies

Jeff Rivkin is Research Director of Payer IT Strategies for IDC Health Insights. In that role, he is responsible for research coverage on payer business and technology priorities; constituent and consumer engagement strategies; technology and business implications for consumer engagement; front-, middle-, and back-office functions; value-based reimbursement; risk; and quality-based payment and incentive programs, among other trends and technologies important to the payer community.

This comprehensive architectural approach, if maximized and optimized, can evolve to be a real-time, cloud-based health management orchestration engine for members — and a crucial competitive advantage for healthcare payers.

https://www.idc.com/getdoc.jsp?containerId=PRF004851

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MESSAGE FROM THE SPONSOR

Flexibility is poised to emerge as the new gold standard in health IT systems, yet many healthcare payers are ill-equipped as they remain saddled with rigid legacy systems and lack a partner-in-care approach. Explore how the Oracle Health Insurance offering enables payers to simplify their healthcare IT and improve their organization's digital transformation with better operational efficiency, member engagement, and adaptability to ongoing market and regulatory demands.

https://www.oracle.com/industries/financial-services/insurance/solutions/healthcare-payers.html

The content in this paper was adapted from existing IDC research published on www.idc.com.

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