Gear Up for CAMPing!

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© 2012 Headstrong Corporation. All rights reserved.

2012

Gear Upfor CAMPing!

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IntroduCtIonThe world around us is always changing, sometimes at a pace that makes it challenging to keep up with. The parameters for success in the modern business world are unprecedented. It is no longer as simple as keeping your customers happy, or meeting the expectations of Wall Street. Whether it is profitable or not, business must elevate their standards and approximate those of their competitors. A business that fails to do so risks losing customers, market share, and the ability to maintain a competitive edge.

The Healthcare industry is no exception. As a whole, the industry is rapidly changing and undergoing a massive transformation. The industry has become too complex and costly. In 2009, US Healthcare costs were 17.3% of GDP, or $7,290 per capita. With a predicted average growth rate of 5.8 percent a year, the nation is expected to spend $4.6 trillion on health care in 2020. This is nearly double the $2.6 trillion spent last year. Yet, in spite of such impressive spending levels, the results are disappointing:

U.S. Census data recorded in 2009 indicates that an estimated 50.7 million Americans are without health insurance

The cost of insurance continues to rise, increasing 120% since 1999

2,500 people file for bankruptcy everyday due to healthcare and medical costs

54% of U.S. patients do not seek care, fill prescriptions, or visit a doctor because of healthcare costs

In 2010, 12.6 million non-elderly adults were discriminated against due to pre-existing conditions

98,000 Americans die each year as a result of medical errors

Lack of prescription medication adherence costs between $250 and $300 billion a year

U.S. ranks last among seven countries on Health System

Performance based on measures of quality, efficiency, access, equity, and healthy lives.

There are a multitude of forces that are impacting the

Healthcare industry. New and unprecedented regulations

(e.g., HIPAA, HITECH, PPACA), severe economic pressures,

the mandate to cut costs while improving the quality of

services, and a highly demanding consumer base are

changing how Healthcare companies cope with their

ecosystems. Because they lack the resources and capital

of larger companies, small and medium sized Healthcare

organizations face the increased risk of being swept

away by today’s volatile and always changing business

environment.

There are also segment-specific challenges that have

substantially increased the degree of difficulty in competing

and succeeding in the market. Each segment has its own

unique challenges. For example:

Gear up for CAMPing!

1

By John Reza Headstrong

the Four Essential

Ingredients for

Healthcare Payers,

Providers, and PBMs to

Become a Formidable

Competitor: Cloud,

Analytics, Mobility,

Process

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Hospital revenues are under severe pressure from Medicaid payment cuts. 33 states have proposed cutting Medicaid payments this year. Medicaid is the single largest expenditure representing 22% of all spending at the state level. Recent Healthcare reform legislation is cutting Medicare payments to hospitals by $150B over 10 years. Medicare cuts will total $500B, including cuts to private insurers who run Medicare Advantage plans.

Hospitals are required to take care of any patient who comes through their doors. Due to the increasing number of uninsured Americans, hospitals are receiving decreased compensation for their services. This decline in reimbursements has driven consolidation throughout the hospital segment. The Healthcare M&A reports 704 transactions in the first three quarters of 2011, valued at $185B. For the six-month period ending June 2011, there were 56 hospital M&A transactions.

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Physicians have their own challenges, driving a large number of them to believe that working as employees for hospitals is a better option. In fact, 1\2 of practicing physicians in the US currently work for a hospital system. They receive better hours, a guaranteed salary, and no practice management hassles and expenses.

Health insurance companies are not immune from Medicare cuts, and must now adhere to Minimum Loss Ratio requirements. These new requirements mandate that insurance companies spend a certain percentage of each dollar paid towards a premium on medical care and quality improvement activities. Insurance companies in the individual and small group markets must spend at least 80% towards this end, and those in the large group market must spend at least 85% . This leaves little for administrative expenses, and will require process reengineering to make their internal operations more efficient and cost effective.

Figure 1: Healthcare Industry Ecosystem

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© 2012 Headstrong Corporation. All rights reserved.3

Additionally, by law insurance companies must refund policyholders with any excess revenues. For example, last year Blue Cross and Blue Shield of North Carolina, the state’s largest health insurer, announced refunds of $155.8M to approximately 215,000 individual policyholders.

New “Accountable Care Organizations” have created an identity crisis for most insurers. Many insurers must also change their business model to accommodate the individual and small business markets in light of the individual mandate and State Insurance Exchanges. An example is Cigna spending $25M to market to individuals with a new slogan called “Go You.”

Pharmacy Benefit Managers have their own share of struggles too. Competition is fierce as PBMs constantly battle with each other over large contracts. A high risk to mitigate is the loss of large contracts and the uncertainty about future revenues. A recent example that received press coverage was MEDCO’s announcement that they had lost UnitedHealth Group’s contract, which accounted for 17% of MEDCO’s revenues in 2010.

Various federal laws, including the Patient Protection and

Affordable Care Act, have put the healthcare industry and its

performance at the center of the nation’s agenda. Lack of

care and coverage, and the high cost of healthcare, continues

to humble all segments of the industry. These concerns have

made the issue of healthcare a national priority.

With change however, comes the chance to seize upon new

strategies and market opportunities. In this case, there

is an unprecedented opportunity to level the playing field

and enjoy the same rewards as large multi-billion dollar

companies. Conversely, traditional industry giants will need

to focus on utilizing their resources in a way that secures

future growth in a more equitable market.

Running a business successfully is obviously based on a

plethora of criterion. Michael Porter’s generic strategies as

described in his book Competitive Advantage: Creating and

Sustaining Superior Performance covers three of them (i.e.,

Niche, Cost, and Differentiation). However, regardless of the

type or the duration of your strategy, if you are currently not

Figure 2: Market Segment Pressure Snapshot

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geared up for CAMPing or in the process for doing so then

you might want to reexamine your strategy. They are four

essential ingredients for becoming an astute competitor in

today’s business climate and to win market share:

Cloud Computing

Advanced Analytics

Mobility

Process Improvement

CAMPing is a hybrid strategy that allows a company to

combine Information Technology and Business Processes to

strengthen its internal and external capabilities. If executed

in harmony, the four elements are intertwined and advance

each other. Let’s examine each element in detail and

highlight the reasons why they are the essential ingredients

for success in today’s business climate.

Cloud CoMPutInGAccording to Forrester Research, the global cloud computing market is expected to be worth $241B by

2020, nearly six times its value in 2011. In simple terms, Cloud Computing is a “ready to use hardware and software environment” that comes in different flavors (e.g., private, public, or hybrid). The old era of waiting months to secure and provision hardware and software resources for a service deployment or product rollout are gone forever. Regardless of the size of your wallet or needs, you can use the Cloud to your advantage.

Let me use an example to better explain Cloud Computing. Imagine a warehouse with an unlimited quantity of groceries that can be delivered to you, your family, and your friends anytime you need them, 24 hours a day, 7 days a week, with no blackouts. This warehouse is always fully stocked, and problems of supply never arise. When you need something, you get it. Now imagine that you didn’t have to pay to build the warehouse, stock its shelves, or maintain its inventory. You didn’t have to hire people to run the warehouse or pay for utilities or insurance. You didn’t have to pay for its security and protect it against theft or intrusions.

Figure 3: US Healthcare National Agenda

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And if the warehouse caught on fire and was destroyed, you would have instant access to another warehouse just like the one that was destroyed. Cloud computing supplies a similar hardware, software, and a total data center infrastructure for businesses. This model can accommodate all of your needs, and utilizes a “pay as you go” payment structure.

Cloud computing provides a means to level the playing field. Smaller and medium size companies such as some Health Plans and large physician’s offices can now have access to the same impressive infrastructure that large corporations have (e.g., Tier IV datacenters). Typically, large corporations suffer from internal struggles over how to allocate expensive, exclusive computer hardware and software. But with Cloud Computing, these struggles disappear as the provision of hardware resources will become a lot easier.

Cloud Computing is a paradigm shift in how business and IT interact with each other, and it will greatly improve their relationship, for example:

Service Level Agreements used by Cloud vendors are legally binding and adherence to those agreements directly impacts their survival. This in turn results in superior services and maximum uptime for their customers. Business continuity, (automatic failover to a redundant site)disaster recovery, and the proper backing up and restoring of your corporate data will become their responsibility.

The time to production accelerates as the planning, preparation, supply, and provisioning of date center resources are outsourced to a vendor that is legally obligated to meet their Service Level Agreements. This is also true with internal Clouds as most IT organizations will require less time to prepare a data center environment for their

internal customers through virtualization.

Figure 4

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The various Cloud Computing models have introduced a bevy of opportunities and benefits for vendors, businesses, and Information Technology organizations and they will have a promising place in the evolution of information and data processing.

There are several vendors who are excelling at Cloud Computing and providing Infrastructure as a Service (IaaS). For a thorough understanding of the strength and weaknesses of these vendors you can refer to the Gartner report titled Magic Quadrant for Cloud Infrastructure as a Service and Web Hosting.

Without utilizing Cloud Computing as an integrated part of your strategy, you will diminish your speed of time-to-market and gradually lose to your competitors who use the Cloud to their advantage.

AdvAnCEd AnAlytICsAnalytics is the application of statistical tools and techniques to healthcare-related data in order to study past situations (e.g., operational performance or clinical outcomes) to improve the quality and efficiency of future processes and performance. It is no longer an option to be capable of performing advanced analytics;

it is an imperative to sustaining a business advantage.

The HITECH Act through its EHR Incentive Program has brought to the industry a proliferation of the meaningful use of Electronic Health Records. The Office of the National Coordinator, through its National Standards & a massive injection of funding to regional communities and state governments, has enhanced the sustainability and existence of 100’s of private and state government based Health Information Exchanges.

Recent healthcare reform initiatives such as the Shared Savings Program, Accountable Care Organizations (ACO), Minimum Loss Ratios, the State Insurance Exchanges have changed the competitive landscape of the industry. They have brought with them a growing demand for accurate, timely, and readily available financial and clinical information analysis.

Insurance companies, pharmacy chains, PBMs, physicians, patients, and government agencies, have all been impacted by these two laws. As a result, all major industry participants must be prepared to use new analytical tools to systematically analyze in an effort to support the mission and responsibilities of their organizations.

Figure 5

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Each business or government agency generally develops its own methods of data analytics to solve problems. For example, a health insurance company may have a database for millions of claims paid. Computer program and algorithms could be run to identify false claims requiring investigation. Centers for Disease Control & Prevention might use advanced analytics so its scientists studying a potential cure for cancer can analyze the test results of hundreds, thousands, or even millions of patients.

If you combine the information analyses and reporting requirements that are common to all of these companies and the ones that are segment specific you come up with an example list of what is being presented to you on Figure 7. How well an organization can review large amounts of raw data for new industry trends or customer behavior,, and then generate a plan of action to maximize this knowledge will determine which organizations will maintain a competitive edge in this new healthcare market.

It is no longer an option but a business imperative for companies to have adequate capabilities in terms of their analytic resources, tools, and technologies.

In September of last year, WellPoint and IBM announced an agreement to create the first commercial application of IBM’s Watson technology. “Under the agreement, WellPoint will develop and launch Watson-based solutions to help improve patient care through the delivery of up-to-date, evidence-based health care for millions of Americans.” This is advanced analytics at its best.

“New solutions incorporating Watson are being developed to have the ability to look at massive amounts of medical literature, population health data, and even a patient’s health record, in compliance with applicable privacy and security laws, to answer profoundly complex questions. Watson can sift through an equivalent of about 1 million books or roughly 200 million pages of data, and analyze this information

Figure 6

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and provide precise responses in less than three seconds. Using this extraordinary capability WellPoint is expected to enable Watson to allow physicians to easily coordinate medical data programmed into Watson with specified patient factors, to help identify the most likely diagnosis and treatment options in complex cases. Watson is expected to serve as a powerful tool in the physician’s decision making process.”

“There are breathtaking advances in medical science and clinical knowledge, however; this clinical information is not always used in the care of patients. Imagine having the ability to take in all the information around a patient’s medical care -- symptoms, findings, patient interviews and diagnostic studies. Then, imagine using Watson analytic capabilities to consider all of the prior cases, the state-of-the-art clinical knowledge in the medical literature and clinical best practices to help a physician advance a diagnosis and guide a course of treatment,” said Sam Nussbaum, M.D., WellPoint’s Chief Medical Officer. “We believe this will be an invaluable resource for our partnering physicians and will dramatically enhance the quality and effectiveness of medical care they deliver to our members.”

There is a direct correlation between a company’s Analytics Maturity level and their competiveness. In the May 2009 Aberdeen Group report titled: Executive Dashboards – The Key to Unlocking Double Digit Profit Growth, the top pressures faced by business executives are divided into two key topics:

There is a need to increase confidence in the decisions made by an organization,

and

There is a need to increase the speed at which access to vital decision making data can be made available.

Healthcare organizations must ask themselves what their Analytics Maturity Level is, and strive for the next maturity level in order to facilitate decision making and the speed with which access to vital decision making data is made available. As the volume and availability of healthcare data continues to grow (e.g., EHR’s, Health Information and Insurance Exchanges), and as the breadth of digital data increases (e.g., point-of-care encounters, medical claims, lab results, genetic markers) there is an increased and currently unanswered need for more and better analytical tools.

Figure 7

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MoBIlIty During the last several years the large and rapid emergence of mobile applications for the healthcare industry has been more than impressive. The proliferation and consumption of handheld devices such as smart phones, tablets, and PDAs has had a major impact on the growth of mobile healthcare, or mHealth technologies.

However, the utilization and application of mobile technologies varies significantly between different industry segments. This is evidenced by a large number of customer service related mobile applications that have been developed and introduced to the market by health plans, insurers, and pharmacy chains versus the number of mobile applications that have been developed and introduced for clinical support and patient medical information. This is primarily due to the stringent regulations enacted by HIPAA and HITECH to protect the privacy and security of patients’ Protected Health Information (PHI), when such information is being transmitted over a wireless infrastructure.

Payers have made great strides in developing a broad spectrum of mobile applications to make it easier for their customers to manage their healthcare needs. Almost all of the large Healthcare insurance companies such as Aetna, Cigna, Humana, WellPoint, and United Healthcare provide a combination of the following services through their mobile applications:

Find an in-network doctor, hospital, or urgent care facility

Check claims status

View coverage details including benefits and out of pocket expenses such as deductibles, co-insurance, and co-pay

Schedule an appointment with a provider

ID card details

Spending account balances

Find a pharmacy

However, this high adoption rate of mobile technologies has not resulted in a high number of consumers who use them. In an online survey conducted by North American Technographics Healthcare in the 3rd quarter of 2011, less than 3% of non-elderly commercially insured consumers used their cell phones to inquire about their health insurance coverage, find a provider, price a drug, or schedule a health appointment. This trend will diminish overtime as more consumers will find the convenience of using such applications irresistible, making them a routine way to maintain their healthcare needs and services.

The affordability of developing mobile applications is a major disadvantage for smaller health plans and organizations that do not have the internal Information Technology resources and the scale to get a desirable return on their investments. Over time those organizations that invest heavily in mobile applications will have a competitive advantage over their smaller and less resourceful counterparts. Studies have shown that age is a strong predictor of mobile sophistication, and with generations X and Y growing up with computers as an integral part of their social life,it will become very difficult for most companies to gain and sustain market share without offering mobile applications.

Providers, including hospitals, physicians, and physician offices, have increased their use of handheld devices. Handheld devices such as tablets and smart phones have changed how medicine is practiced. In January 2011, The New York Times reported there were 17,000 health-related mobile applications. It is forecasted that the number of users of mobile health services would reach 500 million by 2015.

Already, 72% of American doctors have a Smartphone, with that number expected to rise by another 8% within two years. Physicians already use or would like to use Smartphones for four primary reasons: communication, transaction, knowledge, and integration. A majority of physicians would like to see their patients use remote

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monitoring devices to gather information about their blood sugars, weight, and vital signs and electronically communicate that information to their providers. They would like to have access to evidenced-based medicine knowledge at the point of care and be able to use their Smartphones for ePrescribing. Although there has been a lot of successful deployment of mobile technologies in hospitals, an area that has not matured due to security and privacy issues is the integration of Smartphones and tablets with EHR’s. Doctors, nurses, lab technicians, and other important hospital staff would like to access patient records, including medical history, x-rays, and other lab results, right from their iPads. This would greatly reduce, if not outright eliminate, the need for charts and other paperwork.

The potential of using mobile devices and applications in healthcare is unlimited and growing in all of its sectors. The mobile healthcare market was at $2.1 billion in 2011. There is an increasing trend to use mobile healthcare for general monitoring, Personal Emergency Response Systems (PERS), Telemedicine, Health and Fitness Software, and reducing medical errors in care delivery.

Those providers, payers, and PBMs who embrace mobile technologies and applications to reduce their cost of doing business, streamline their operations and processes, and to provide a more efficient, higher quality care to their members, patients, beneficiaries, and customers will gain a huge competitive advantage.

Figure 8: National Health Information Network Future State

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ProCEss rEdEsIGn The lowest common denominator for the existence of a company regardless of its size, products, or industry is that it provides a service that is in demand by society at large. The degree to which a company’s internal processes are optimized directly impacts what standing a company holds in its industry. This standing is measured by various ratios and indicators (e.g., financial, operational, mechanical).

In the Healthcare industry, how well or poorly a process is performed could mean everything from a patient dying due to a medical error all the way to successful research that results in a cure for a chronic disease. It could mean that a patient’s medical claims get processed on a timely basis all the way to violating laws and regulations that bring with it a hefty financial penalty.

At the macro level , p lanning, designing, and implementing even multiple processes seems to be a simple task. However, when you combine processes with people, technologies, and add a time dimension, complexities arise. The degree of these complexities is dependent on where a company is in their life cycle and

how well their processes are managed and controlled. Start-ups, for example, have the luxury of planning, designing, and implementing their processes from the start and then making sure that their processes grow as the company grows in an efficient and effective fashion. On the other hand, larger Healthcare organizations such as multibillion dollar insurance companies or PBMs already have 100’s if not 1000’s of internal processes that run their operations.

A current example of how internal processes can make or break an industry are the silos that payers, providers, pharmacies, and PBMs have created when providing healthcare services to a patient or beneficiary. Currently the industry has been very volume-driven and transaction based mainly focusing on financials. Here patients are not usually at the center of attention. They are treated and cared for in a very fragmented and disconnected healthcare system. Patients become identified only by transactions made with diagnostic and procedure codes, which traverse through electronic claims, and become housed in paper records and folders. This results in an abundance of paper work, administrative overhead and isolated views of the patients’ total health. It is an environment that fosters medical errors, inefficiencies, and higher costs of care.

Figure 9

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For the above scenario, the needs and services required by a patient can be placed at the center of focus, and the internal and external processes can be designed around those needs and services.

An efficient and effective business process that produces the desired goals and objectives of an organization is the single most important ammunition in the war of winning a market share. Companies can hire the smartest employees, purchase the most sophisticated technologies, and apply the best management techniques to run their operations, but if the underlying process that is at the core of their business operations is broken, inefficient, or weak, they will simply waste time and resources. In simple terms, a company is only as good as its internal business processes. Those Healthcare organizations that have ingrained a principle of continuous procedural improvement into their cultures have consistently outperformed those that don’t.

Those who have already contributed to or successfully implemented effective business processes will find the above assertion to be overly obvious. However, business processes are like fresh fruits. With the passage of time they become rotten. Fruits need to be refrigerated, consumed, replaced or frozen. Business processes should be reviewed, assessed, and revised often.

A multitude of healthcare organizations have adopted various quality assurance and process improvement initiatives. Some have been successful and some have failed. Some have been small in scope and others at an enterprise level. Regardless of the previous attempts, experiences, and results, there are three steps that most companies should take to stay ahead of their competitors:

Create current state process maps for all of your core business functions to create a base for reference, regardless if they are broken or not.

Develop a systematic program to examine those processes on an annual basis, including requirements for resources, identification of tools and techniques (e.g., Six Sigma and BPM), and a plan that can be repeated annually.

Make the systematic program a core part of your company’s strategy and support its objectives at the Board level.

It is not being naïve to suggest that it is as simple as the above three steps to take control of your business processes and to refine them annually. It is however naïve to think that it will be simple to execute the above plan. The good news is that the results of the first iteration of these steps feed into the subsequent ones to create an incremental added benefit effect that are invaluable to the long-term success of a company.

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About HeadstrongHeadstrong is a global consulting and IT services company with a specialized focus in capital markets. With three decades of do-

main expertise, Headstrong is the world’s leading offshore outsourcing company for the financial services and securities industry.

Headstrong delivers targeted domain solutions and a full complement of services, from strategy and business consulting to

technology and operations, using multi-shore resources and global project management tools, methods and standards. Head-

strong maintains operations in seven countries, with extensive offshore and nearshore capabilities and 4,000 employees globally.

Our parent company, Genpact, offers an industry leading set of services that enable us to create transformative change for

our clients. Our expanded global footprint allows us to deliver from more locations and our overall scale gives us the ability

to staff projects more quickly with exactly the right people. For more information, visit www.headstrong.com or e-mail at

[email protected].

About GenpactGenpact is a global leader in business process and technology management. Our entire organization of over 53,000+ employees is

focused on process and engaged in improving client processes and driving business impact. We look at process as a science and our

proprietary Smart Enterprise Processes (SEPSM) employs a scientific, highly granular approach to managing business processes.

Genpact couples its deep process knowledge, insights and best practices with focused IT capabilities, targeted analytics and

pragmatic reengineering to deliver a comprehensive solution. Our broad portfolio consists of both enterprise G&A and industry-

specific services. In every area, we go from meeting simple transactional needs to providing process management capabilities,

where complex decision making and keen judgment are required. Services are seamlessly delivered from a global network of

centers in 13 countries to meet a client’s business objectives, cultural and language needs, and cost reduction strategy.

Genpact’s culture is uniquely ingrained in Lean Six Sigma, the capability having been driven through the organization and lever-

aged in all we do in a highly visible manner. Our mindset is 100 percent customer-centric, demonstrated daily through our comfort

with destroying our own revenue to deliver greater efficiency, the 100 percent empowerment of our employees to do what is

needed for the client, and the fact we don’t let a contract get in the way of client success.

The Company enjoys a rich heritage, tracing its beginnings to 1997, when it was an independent business unit of the General

Electric Company (GE). Built from the ground up, the organization was charted to provide business process management capa-

bilities that would deliver outstanding efficiencies to all of GE’s businesses. The company became independent in January 2005,

bringing process strength to companies outside of GE, and was successfully listed on the NYSE in August 2007 under the trading

symbol ‘G’. Today, the Company manages over 3,000 processes for more than 400 clients worldwide.

Are You Ready to Go CAMPing?www.headstrong.com

2012

© 2012 Headstrong Corporation. “Headstrong”, logo and designs are registered trademarks of Headstrong Corporation. All other names and logos may be trademarks of other companies. All rights reserved.

This paper was originally published at http://www.headstrong.com

13

John reza, MBAHeadstrong Healthcare Leadership

Healthcare domain Consulting [email protected]

+1 312 373 4490

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Gear Up for CAMPing!