Market Guide for Healthcare Payers’ Core Administrative Processing Systems

By Constance Sjoquist
Gartner, January 28, 2015

Payer CIOs need to enhance, append or replace their existing core administrative systems to more effectively compete in an increasingly complex healthcare environment. Vendors are developing newer or re-engineering existing solutions to meet this demand.

Market Direction

Historically, the vendor options for core claims administrative systems have been somewhat limited. A handful of legacy solutions have dominated the payer space for years. Often highly customized to a payer’s unique business environment or utilized only for a specific line of business (LOB), core administration systems have been expensive and difficult to replace, upgrade, enhance or consolidate without incurring significant risk or downtime.

In the last several years, an enormous amount of change has occurred in the healthcare market and is impacting payers’ requirements of their core administrative solutions. New demands include the need to comply with an increased number of regulatory requirements, manage a growing number of contractual arrangements and support new distribution channels. Payers are finding it necessary to make the shift from a historical group to a largely individual membership base and are seeking new and differentiated capabilities that will help ensure they can remain relevant and competitive.

In response, vendors in the healthcare core administrative space have begun to significantly shift their product strategy or market focus to address new payer challenges. While this has brought about innovation and choice, it has also led to a disparate market, causing confusion over what exactly the essential elements of a core administrative system are. Vendors that once dominated the market have recently merged or have been acquired, causing uncertainty around their future product road maps. Some vendors have completely dropped their product offerings for a particular LOB or have shifted their technology strategy to offer only nonlicensed software solutions.

Gartner receives a steady volume of inquiries and requests for information on core administrative vendors, as these run the business applications that necessitate an enormous amount of a payer’s IT resources and budget. Healthcare payers are looking to modernize their application portfolios, comply with government regulations and lower their cost of doing business. Payers are also seeking functionality that will allow them to support new health models, such as accountable care organizations (ACOs), pay for performance (PFP) and value-based networks (VBNs). Inquiries focus on who can provide new technology approaches to the development, deployment and management of existing core administrative applications, as well as which vendors offer solutions to support future payer needs.

Core administrative vendors are challenged to adapt and develop their solutions to address these disruptive changes in the healthcare industry, as well as to adapt to rapid advancements in technology.

Industry disruptions include:

 

  • * The shift from a wholesale (group) to a retail (consumer) decision maker requiring greater support for user-specific preferences
  • * Demand for transparency tools to support member enrollment, care and payment decisions
  • * Providers becoming risk-bearing entities requiring real-time information on payment and reconciliation in their provider applications that parallels payers’ application status
  • * Establishment of payer/provider contractual arrangements requiring increased coordination of information and workflows and greater accountability of services and payments
  • * Ongoing regulation and compliance changes requiring timely updates, audits and reports
  • * The expanding number of distribution channels requiring increased support for enrollment and related services

 

The healthcare market is expected to continue along a path of rapid change and innovation. There is great uncertainty as to where the market is headed and what technologies will be necessary to adapt and succeed. Core administrative vendors are aggressively vying for position and are competing to manage current expectations and address future client demands.

http://www.gartner.com/technology/reprints.do?id=1-28X3CQW&ct=150129&st=sb

This report from Gartner is instructive in that it demonstrates the profound increase in administrative complexity in health care, much of which is directly attributable to a dependency on markets as opposed what we would have under a publicly administered single payer system. Administrative functions in health care are essential, but it is the private sector that has created a bureaucratic quagmire. Gartner is just trying to help the private sector make sense of it.

This does not let the government off the hook. By supporting the current fragmented, dysfunctional model of health care financing, the government is placing a greater burden on the private sector. We are all paying the price in higher costs and in bearing the the burden of systemic inefficiencies. By design, a single payer system would reduce this administrative complexity.