The Paper Shuffle
Executive Summary
Executive Summary
Despite a relentless rise in premiums well beyond the rate of inflation in the last decade, the return for the money spent on health plans is not resulting in better service or better coverage for members. Health plans are facing unprecedented pressure to deliver new value that is defined in terms of lowering medical costs, decreasing administrative waste, and improving the medical outcomes of the members they serve. However, inefficient, paper-based administrative processes carried over from the last decade threaten the future success of health plansthey can no longer afford to base their profits on premium hikes.
The Market Expects More from Health Plans
Its becoming clearer every day that todays market demands more value from health plans. Why? Because stakeholders realize that, despite a relentless rise in premiums well beyond the rate of inflation in the last decade, the return for the money spent on health plans is not resulting in better service or better coverage. Consider these facts:
The United States still spends more on healthcare in both real dollars and as a percentage of GDPthan any other nation in the world.
Healthcare costs now constitute 14.9% GDP; on track to hit 18.4% by 2013.2
While the United States ranks number one in the world for healthcare spending ($1.7 trillion), it ranks only 48th in life expectancy.
Employers and consumers who purchase healthcare benefits in the United States see a widening gap between the high costs of healthcare benefits and the results theyre getting in return for their healthcare dollar investments.
And when it comes to customer service, employers and consumers seldom experience the same or better level of service
Future Profit Sources for Healthplans
Improving productivity
Enhancing decision making
Offering superior customer service
Increasing retention rates
Ensuring healthier members
Establishing better medical outcomes
The Threats Posed by Administrative Inefficiency
Inefficient administrative processes that have been carried over from the last decade threaten the future success of health plans. These manually intensive tasks rely on paper-based communication. As a result, they:
Cost Too Much
Impede Growth
Increase Service Failures
Is Going Paperless Realistic?
Is it realistic to believe that paper can be completely eliminated from all of the business processes taking place in healthcare organizations
One reason why paper cant be eliminated quite yet is the requirement for a physical signature on business documents. To many legal departments, and in many states, a wet signature is required to authorize a contractual agreement. Federal legislation, however, does allow electronic signatures in many transactions, so it is increasingly possible that a companys policyrather than state or federal lawcan be the barrier to eliminating requirements for a physical signature.
Were a long way away from eliminating paper, but there are some compelling ways to address this issue today in order to become more efficient and effective in the future.
Intuitively, most of us would agree that excessive volumes of paper related to any business process creates problems. Paper is expensive. Paper takes up a lot of space. Paper can get lost. And most importantly for health plans, paper makes automating business processes more difficult and inefficient because it must be transferred physicallyfrom the member, to the broker, to the sales rep, to the underwriter, and so on.
You can quantify value by first measuring, and then reducing the number of times employees have to touch or handle paper for every transaction, whether its a new application or an enrollment form. In reducing touches, you reduce costs significantly by becoming more efficient and effective. Health plans that learn how to improve their internal processes and productivity by streamlining paper-based transactions will outperform competitors, gain market share by reducing churn, and retain more employees and members.
Unnecessary Paper Touches Cause Delays
In a very simple example, lets assume that five stakeholders are usually involved every time a new member joins and is enrolled in a health plan. The broker, sales executive, sales assistant, and underwriter move the group or individual along the enrollment processfrom suspect to prospect to member. The process is presented visually in the diagram below.
The prospective member fills out an application and gives it to the broker, who passes it on to the sales executive, who hands it off to the sales administrator. Three touches into the transaction, nobody has yet done anything to actually enroll the prospective member.
As part of the enrollment process, its likely that the sales administrator will enter information manually about the prospective member, which is then passed along to the underwriter.
Once you calculate the cost of your administrative employees, calculate the cost of your sales employees, and then your underwriting employees. These numbers provide a framework for quantifying the total employee cost of touching paper.
Quantifying Transaction Costs
The next step in quantifying the value of streamlining a paper-intensive process begins by measuring transaction costs. The following diagram highlights some benchmark numbers to use when considering these costs. While there are many flavors of determining transaction costs throughout the healthcare industry, the figures here offer a conservative starting point.
For our example, a paper transaction costs approximately $30, a telephone costs approximately $10, and an electronic transaction (for example, entering someone's information directly to the underwriting division on an electronic form) is 25 cents. These are dramatic differences that can have a huge impact on both your costs and your profits. To read more about the costs associated with web-based transactions visit: www.healthcare-informatics.com/issues/2000/06_00/dejesus.htm
Calculating the Total Cost of Enrolling New Members
Its worthwhile to see if someone in your organization has already quantified the actual cost of a transaction in your company today using similar numbers. Its likely that the results would be close to the figures used above. What would this potentially mean for your organization?
Once you determine how often an employee touches an application, you then need to find out how many applications that person processes each month.While its relatively easy to determine the number of applications processed per month, its more difficult to calculate exactly how many touches are required for each transaction. The overriding fact when dealing with paper, however, is that youre often going to end up with missing information, or illegible information at some point.
In the following calculations, well build on earlier examples to determine the total costs of a manual paper process inside the average healthcare organization. In making these calculations, consider how they might be applied to improve the processes in your organization.
The following basic equation can be used to calculate transaction costs:
(Touches x Time) x Cost = Full Time Employee Value
For the purpose of the following discussion, assume that stakeholders along the application and enrollment process touch a small group application approximately eight times in total. In the preceding example, remember that it took 10 touches just to get one piece of missing information, so eight touches is conservative. Lets also assume that one touch takes approximately 15 minutes. Using these numbers, if an administrative employee processes 50 applications per month, the costs of a fully burdened employee will be $50,000a reasonable estimate. The calculation looks like this:
(8 touches x 15 minutes) x 50 applications = 6,000 minutes = 100 hrs = 12.5 days
An average employee works approximately 22 days per month, or 250 work days per year.
In this example, the administrative employee costs $200 per day. The calculation for full time employee value looks like this:
Time x Cost = (12.5 days x $200) = $2,500
For the average administrative employee to process 50 applications, the cost is $2,500.52.0$ =01$ =03$ =
Reducing Costs by Reducing Touches
The preceding calculations provide a general idea of enrollment costs for the average healthcare organization. In the equations we used, what would the implications be if you could reduce the number of times that your administrative employees touch applications by halffrom eight times to four times? Consider the equations again:
(4 touches x 15 minutes) x 50 applications = 3,000 minutes = 50 hours = 6.25 days
Time x Cost = (6.25 days x $200) = $1,250.00
For every 50 applications processed, the time saved would be 6.25 days and the costs saved would be $1,250.00. Remember, this reflects the savings for just one administrative employee. Consider the same type of savings with sales executives and underwriters across all of your enrollment divisions. Think about the implications of reducing the number of times all of these people have to touch paper applicationsenrollment forms, applications, statementsjust to quote and enroll new members.
The savings add up quickly. Suddenly, it is possible to quantify the value of investing in smart technology. However, lets keep in mind that investing in technology is not only justified by cost savings but also by productivity gains. Things like time savings, the ability to redeploy employees to more value-added duties and increased customer satisfaction are important when considering your return on investment.
Building Value by Building Relationships
The broker solicits the prospective business and then approaches a handful of companies for proposals to evaluate their healthcare coverage. At this point the person becomes a prospect.
The sales executive then becomes involved with the broker and they begin gathering information from the new prospect. The information comes into the company and a proposal is generated.
If the rates are favorable and the coverage is what the prospect is looking for, the prospect begins the enrollment process.
As the prospect goes through the enrollment process, he or she eventually becomes a member who is entitled to receive member materials, such as summary plan descriptions, benefits summaries, benefits booklets, membership cards, and so on.
Once members begin to use their health coveragethey visit a physician, they go to the dentist, they visit the emergency roomthey are officially accessing their health benefits. Once members access benefits, they have claims. They have a reason to call your customer service representatives or your nursing staff. At this point your organization pushes information out to members and pulls information in from their interactions with you. This evolving relationship is characterized by education and information
When your relationship with the new group reaches the 11th month, a renewal usually takes place.
Unfortunately, this is the time when healthcare organizations go back to their members and say we value your business so much that were going to raise your rates by 25%! Sounds facetious. However, this tends to be the reality in todays market.
If you havent built value during the time an individual has progressed from being a suspect to a prospect to a member, by the time the renewal comes up there is a much higher probability of losing the member. This means losing the opportunity to recoup the cost of sales, losing market share, and allowing your competitors to get into your book of business.
Improving Customer Service to Increase Loyalty
When a health plan raises rates continuously without improving service, the first members to leave are typically those who are healthier risks. They have more options. So during the first 11 months of this cycle, it is critical to build value. And smart technology tailored for healthcare payers allows you to build this kind of value. The best way to do this is by gathering information early and putting it into a single database where everyone can access it to get a complete picture of the individuals needs and preferences. For example, putting renewal alerts into place well before the 11th month provide employees with visibility, while building your competitive edge before renewal season begins.
When the prospect becomes a member, he or she is treated uniquelyno matter what the touch point with your company is. Suddenly you have a very complete picture, a 360-degree view of your members. The better the service is, the less likely it is that someone will leave, even though rates may have to increase from time to time.
Price sensitivity in the marketplace is something we all have to live with, but poor customer service is likely to drive people away. Great customer service builds loyalty and increases the likelihood that members will stay with your organization when rates increase. This is also important to your broker distribution channel because they want to build their book of business with reliable carriers.
You can create an outstanding customer experience by giving everyone inside your company the ability to know exactly what individual members prefer and expect from your organization.
Conclusion
Eventually, all healthcare organizations will have to compete on the basis of improved efficiency and better customer service. The current system is simply being crushed under its own weight. Those that move early will have the advantage of improved outcomes, increased market share, growing membership, and an increasing bottom line. When you streamline a paper intensive process, you receive all of these benefits, but you also receive something else: improved employee morale. When people are more efficient and effective, doing less busy work, it has a powerful impact on how they feel about their jobs.
Specifically, this offers the following benefits to healthcare organizations:
Paper and manual touches are reduced,
Streamlines paper-intensive processes.
Membership increases
Member data across sales, underwriting, enrollment
Members get better service
Your employees are happier and are working smarter
Time and administrative dollars are savedthe time and costs saved are even higher for underwriters. Putting underwriters in control of electronic information enables them to spend time more effectively, which improves underwriting outcomes.
Brokers are more loyal because they are given the right tools for success. They are able to process more business and reduce costs inside the brokerage as well.
Management has powerful reporting tools that improve
by: CDC Pivotal CRM
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