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How Health Plans Can Create Scalable and Competitive Products that Enable Affordable and High-Quality Care

By Sam Muppalla – Vice President, McKesson Health Solutions Network Performance Management

[Part 6 in a 6 part series]

Over the past few weeks, I’ve covered a lot of ground in this ME-P series of six essays. We looked at the pressures on health plans and the ways in which those pressures are forcing a new dynamic in how the plans create new, scalable competitive products that enable affordable, high-quality care. We talked about some of the innovations that leading health plans are bringing to the areas of product, network, care model and reimbursement designs.

The pilot initiatives in these areas continue to show positive results. The next level of scaling requires an integrated and automated approach to enable health plans to deploy, manage and maintain these innovations in a much more rapid fashion. This all has to be done without increasing health plan costs while delivering new value to a health plan’s customers, providers and members.

Affordable Care Can be Achieved

It is our position at NPM that achieving this alignment will deliver affordable care. Additionally, through this alignment, health plans will gain a competitive and cost savings leadership position. Through collaborative and independent research with our health plan partners, we have identified three main areas of competitive and cost savings leadership. The potential cost savings of achieving alignment are impressive. For example, working with a regional Blues plan with three million members, the potential cost savings due to achieving an integrated approach to network design were projected to be:

Administrative Cost Savings [Total Potential Annual Savings = $13 million to $25 million]

• Provider data administration cost reductions: $5 million to $10 million
• Provider outreach cost reductions: $0.75 million to $1.25 million
• Contract management cost reductions: $1 million to $3 million
• Administrative reimbursement cost reductions: $3 million to $5 million
• Provider service cost reductions: $1.5 million to $2.5 million
• Credentialing cost reductions: $1.5 million to $3 million

Medical Cost Savings [Total Potential Annual Savings = $45 million to $100 million]

• Streamlined member health advocacy: $5 million to $10 million
• Pay for Performance: $15 million to $40 million
• Network design and performance improvements: $25 million to $50 million

Provider IT Cost Savings [Total Potential Annual Savings = $.5 million to $2.5 million]

• Redundant system consolidations: $0.25 million to $2 million
• IT change management cost reductions: $0.25 million to $0.5 million

The total aggregated annual potential for savings is between $59 million and $127 million.

Some Final Thoughts

In 2009, the National Health Expenditure (NHE) rose to $2.5 trillion or 17.6 percent of the Gross Domestic Product (GDP) with private health insurance accounting for 32 percent of the NHE. Yet all of this spending is not translating into any measure of higher quality care as the World Health Organization (WHO) also ranks the U.S. as 72nd in overall level of health in the world. To affect high-quality, affordable care, health plans must be able to harness innovative product, network, care model and reimbursement designs. Network design is the critical element that will orchestrate the operational scaling of innovation. Therefore, automation of network design and efficient implementation of it through end-to-end integration will be crucial to success of health plans in the post reform world.

Assessment

Thanks for taking the time to follow me, and the ME-P, on this journey. If you’ve joined us late in the discussion, fear not. We’ve collected all the related threads in the Unlocking Affordable Care by Aligning Products white paper, which you can download by visiting our website at http://ow.ly/7MFKb.

MORE: Strategic Management Improvement

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Filed under: Experts Invited, Health Economics, Information Technology, Practice Management | Tagged: Integrated Medical Provider Management‏, McKesson Health Solutions Network Performance Management, National Health Expenditure, Sam Muppalla, WHO | 1 Comment »