Computer Sciences Corporation`s Lorna Powe believes medical aid companies could reduce their operating costs by up to 20% and pass savings on to members if they outsource their administration and other information technology (IT)-related back-office services.
IT-related costs currently account for a substantial portion of the total operating costs of medical aid administration companies, according to Powe, head of healthcare for CSC`s operations in South Africa. "If these costs were reduced through outsourcing, medical aid members could benefit from reduced membership fees."
The outsourcing activity could take the form of traditional IT outsourcing or Business Process Outsourcing (BPO), the latter being the current preferred choice of medical aid administrators in the US, according to Powe.
She says the healthcare industry is showing increasing confidence in outsourcing.
"Accountability and clearly defined targets are largely responsible for the industry`s growing acceptance of IT, as is the inclusion of service level agreements (SLAs) in outsourcing contracts. Not only do SLAs clearly define the processes and targeted reductions in processing costs, but failure to meet SLAs results in penalties for the IT company, which gives healthcare companies added piece-of-mind when embarking on large-scale outsourcing contracts."
Powe says outsourcing administrative functions is a cost-effective option because IT companies, such as CSC, leverage technology costs across a number of clients.
"IT companies are often in a better position to negotiate large discounts from global vendors, thereby giving them access to more competitively-priced hardware and software, allowing them to pass these savings on to multiple customers," explains Powe.
She says companies can outsource to CSC as much or as little of the business processing they require. "CSC has successfully demonstrated the value of outsourcing through its relationships with medical scheme operators around the world. Medical aid companies can limit member fee increases by outsourcing applications, data entry, claims, member services and medical management departments to CSC."
One of CSC`s clients, the U.S.-based Gateway Health Plan, decided to outsource its IT and business functions, including claims administration, data centre and software applications, to CSC in 1996. Since then, the company has more than tripled its membership, growing from 80 000 members in 1996 to more than 240 000 in 2004. At the same time, Gateway reduced its administrative cost ratio to below eight percent. The decision to outsource helped Gateway grow without incurring significant upfront costs for hardware, resources and training.
Powe says medical aid costs in South Africa have increased by 10 to 20 % annually over the past five years, making private healthcare coverage affordable to only a privileged few. "Medical aid increases in South Africa are on average higher than in many other parts of the world and there is vast potential for savings within the local industry, particularly when one considers South Africa`s lower labour cost structure.
"And while there is a view that American systems do not always work here, this view should not prevent us from learning from the mistakes of others and from benefiting from the lessons they have learnt."
Currently, CSC`s application, application service provider and BPO services support more than 300 healthcare organizations, representing 30 million covered lives and 150 million claims annually. In South Africa CSC is providing BPO services to several of the company`s U.S.-based clients.
CSC - a large IT company with more than 30 years of experience serving health plans and administrators - has used IT to connect the entire health care chain [c1]and help the health industry achieve superior performance through administrative simplification and improved productivity.
"Medical aid companies that face spiralling healthcare costs and wish to off-load the tedious and confrontational aspects of medical management should consider outsourcing these activities to IT companies. This will allow them to free their staff to focus on new business and products, quality outcomes and client [c2]services," says Powe.
Share