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Managed care plays catch-up with IT

HMOs and other types of managed care constitute a large and growing part of the $1 trillion per year healthcare market. However, they have not invested in information technology - a key ingredient of knowledge management - as heavily as other industries. Managed care organizations (MCOs) invest only 2% to 3% of their revenues in information technology, vs. an average of 4% to 5% throughout industry.

Because HMOs (health maintenance organizations) are both transaction-intensive and information-intensive, the apparent lack of motivation is surprising. However, for the past few years, HMOs have focused primarily on attracting new members in an intense scramble for marketshare. In some cases, premiums have even been reduced. The result has been slim or non-existent profit margins and minimal investment in the kind of high technology that could actually boost both administrative and clinical performance.

Now, managed care is taking another look at IT, and growth rates of 20% are being projected. That presents great opportunities for administrative and clinical knowledge management, with resulting improvements in customer service and medical outcome.

Building blocks of KM applications

At the base of the knowledge management pyramid is the capture of all information electronically. If that can be done from the start, an organization frees resources that can be devoted to understanding the data rather than to capturing it. The Internet has, of course, been a vital tool for supporting that move. Some health insurance companies now permit members to enroll online, for example, which means the data is electronic right from the start. Also, the data entry burden is shifted from the insurance company to the employer or the individual.

A variety of electronic processing techniques, including workflow applications and electronic claims processing, are in full force at many HMOs. Some HMOs offer a 24-hour call-in service that helps members decide whether they need to see a doctor. Medical support personnel go through a series of branching questions to arrive at a conclusion. The decision trees are based on a knowledgebase of symptoms maintained in a database. The service is popular with members because it is always available, and with providers because unnecessary calls are eliminated.

Data warehouses containing claims, financial information and clinical data are being used for analytical purposes ranging from membership trends to utilization of medical services. At a higher level, the data can be used with a decision support software product to assist in strategic business planning.

Over the past two years, HMOs have moved away from the concept of using their databases to offer clinical guidance to healthcare. According to a recent InterStudy (www.hmodata.com) analysis of 140 HMOs, only 40% of them were using their databases for that purpose in 1997, down from 50% in 1995. InterStudy Director Richard Hamer explained, "In 1995, HMOs were exploring this possibility and doing pilot studies, but now they have backed off and are emphasizing the area they know best, administration."

That retreat may be temporary, however. Of the $1 trillion spent on healthcare, 85% is for medical services and only 15% for administrative activities (although HMOs spend more on administration than do fee-for-service medical plans). Thus, a 10% reduction in medical expenditures saves a lot more dollars than a 10% improvement in administrative efficiency.

Dislodging pended claims

One of the biggest administrative problems in the health insurance industry is "pended claims," which are those that do not make it through routine processing. A well-established exception processing system at CIGNA (www.cigna .com) is helping the company keep up with a growing caseload and integrate new acquisitions. Most claims go through an automated processing system without a hitch, but if a claim is held up for a minor reason, such as a misspelling, the system cannot resolve it. Although the cause of the delay may be minor, the impact on customer satisfaction is not - thus the motivation to solve the problem. The source of the delay in processing pended claims is primarily in getting them to the person who can solve the problem. Faxing or overnight mail were adding to the paper glut and creating points in the workflow at which documents could be delayed or lost.

CIGNA’ s Yvon Lemieux realized the potential to handle those transactions better, having worked in process control in the pharmaceutical industry, which requires complex but precise tracking. When he began work on the project, workflow was not widely applied to transactions in the insurance industry. After a review of available products, he settled on Staffware’ s (www.staffwarecorp.com) workflow product, in part because it supported Unix and was scalable to the enterprise level.

Now at CIGNA, when a claim does not go through because of missing or incorrect information, it is automatically routed to the right person for resolution using a set of pre-defined decision criteria. Depending on what’ s missing, the claim may go to the provider, eligibility services or the health plan.

CIGNA’ s system paid for itself in a year. To an amazing degree, the savings were simply in the elimination of overnight mail expenses. It also improved customer service - turnaround time was reduced to 48 hours from a previous average of 11 to 30 days. The Staffware system has allowed CIGNA to maintain that record despite an ever increasing caseload. In addition, HealthSource, an acquired firm, will make use of the same system, smoothing the task of integrating the new company into CIGNA’ s operations.

Electronic claims submission

CIGNA subsidiary MCC Behavioral Care manages mental health, substance abuse and employee assistance programs for employers and HMOs. In summer 1998, the company began investigating the possibility of receiving claims electronically. At the same time, Brand Software (www.brandsoftware.com), a practice management software vendor, was interested in piloting its new electronic claims submission product. Launched in January 1999, the venture has attracted a growing number of providers.

"A big advantage for us," said Dirk Niles, MCC’ s director of electronic commerce, "is the fact that the claims must be complete or they won’ t go through." The process has therefore reduced the time MCC must spend identifying and returning incomplete claims. MCC guarantees a 15-day processing time, which is a big advantage to healthcare providers. And the steps the providers go through in creating the claims are virtually identical to those used in creating a paper claim, so the new procedure does not disrupt existing procedures. For MCC, having the data in electronic form right from the start allows immediate integration into a data warehouse where it can be used in future analyses. The company plans to accept claims from other practice management software products in the near future.

Privacy issues that are a concern with any personal medical information become even more intense for behavioral care. The Health Care Financing Administration (HCFA, www.hcfa.gov) only recently approved transmission of medical records over the Internet. The data sent to MCC Behavioral Care from providers is encrypted by the practice management software to ensure privacy. Now that 70% of providers have Internet access, the percent of claims submitted electronically is likely to grow dramatically.

MCC Behavioral Care also has a strong data warehouse team and has developed a clinical database called the Clinical Quality Information System (CQIS). "We don’ t want to second guess providers," said Niles, "but we have a rich information base that can’ t possibly be available to a single provider. We want to take advantage of the database to help providers deliver high-quality care." He concurs with InterStudy’ s conclusion that using that data to assist providers is not widespread. However, he believes that after the Y2K information systems issues are resolved, managed care companies might take a renewed interest in exploiting their clinical data. Particularly for behavioral care, early intervention can improve outcomes and reduce treatment costs. MCC promotes a partnership model in which the managed care organization and providers team up to produce high-quality, cost-effective care.

Mining patient data: multiple motives

Although the concept of a clinical database shared by HMOs and providers has not materialized yet, managed care organizations are using clinical data from claims in a variety of ways. Data warehouses are used to flag unusual cases, for example.

"HMOs are making good progress in episodic analyses," said InterStudy’ s Richard Hamer. "If they look at everything associated with a particular illness, including lab work, pharmaceuticals and doctor visits, it’ s possible to pick up trends that are not apparent from examining individual claims." A diabetic who sees a series of specialists but lacks coordinated care will incur higher costs and, at the same time, receive less effective care. If an HMO reviews the claims that form the illness episode, treatment can become more clinically effective as well as more cost-effective.

However, doctors and patients alike have objected to administrators making medical decisions, and juries have been severe when companies denied care inappropriately. Thus the interface between HMOs and healthcare providers remains somewhat adversarial, and disease management is still an emerging discipline.

Promising software

Along with the human challenges are technological challenges. Many software products are designed for assessing just one disease, for example, which limits their use. Claims data does not necessarily contain sufficient clinical data to allow a clear determination of the most appropriate treatment.

An area that has promise over the near term embodies one of the original principles of HMOs - that of health maintenance. A database can trigger a reminder to the patient, via the physician, that a child needs immunization or a woman needs a mammogram. Preventive care is a less sensitive issue than disease management and may move more quickly toward automation.

Employers offer health benefits not only to attract and retain employees, but also to keep their employees healthy and productive. Therefore, employers have a strong incentive to promote positive outcomes, as well as to help contain premium increases.

Employers are looking closely at ways of coordinating health, workers compensation and disability insurance. To date, those three components have been administered with little regard to their true interrelationships. Howard Veit of Towers Perrin (www.towers.com), a human resources management consulting firm, estimates that 30% of total health costs result from lack of coordination.

One ambitious software product from InfoMedtrics (www.infomedtrics.com) is designed to integrate data from multiple areas into a single repository called the Healthcare Information Center (HCIC). The HCIC is created using three InfoMedtrics software components: the Loading Dock, which automates the process of extracting data from existing databases; a highly integrated large-scale data warehouse; and a Shipping Dock, which automates the process of generating summary information, analyses and reports.

Five modules are available depending on user requirements: clinical data repository, group health, disability, workers compensation, and occupational health and safety. At the front end, Cognos’ (www.cognos.com) Impromptu and Powerplay, Microstrategy’ s (www.strategy.com) DSS Agent, SAS EIS, or any ODBC-compliant tool can be used for analysis. Sold to systems integrators rather than to users, the system is designed to provide a core group of data storage and analytical capabilities that covers 80% of what the user would need, and to be customizable for the rest.

Ohio program

The Ohio Bureau of Workers Compensation (www.bwc.state.oh.us) has been operating under a managed care model (employers who are not self-insured select a private MCO plan) since 1996, following a $2 billion deficit in 1995. Workers compensation premiums have declined, and the Ohio program is now operating with a surplus through use of managed care. To take healthcare management to the next level, the Ohio Bureau is implementing an InfoMedtrics HCIC database to compare treatments and outcomes across different participating MCOs. Because the system integrates all available workers compensation data, it will be able to do such things as correlate days of lost work with various treatment strategies. The Ohio bureau plans to develop treatment guidelines for physicians, and will also respond to information requests from the MCOs.

"Knowledge exists when you have alternatives generated by information that is reliable and valid, when you have the opportunity to act, and when you can measure the consequences of those actions," said InfoMedtrics’ President Bernard Wess Jr. That is the ultimate goal of any knowledge management system, and the tools for attaining that goal are getting better and better. z

KM and performance have strong links

In a recent report on medical group performance, the Medical Group Management Association (www.mgma.com) noted that financially better performing medical organizations have:

  • a broad perspective of their operations,
  • continuous quality improvement,
  • a high level of strategic planning and financial management,
  • customer-focused innovation,
  • coordination and trust between physicians and administrators.

All of those characteristics rely heavily on effective knowledge management. Founded in 1926, MGMA represents medical group practices nationwide, with about 8,300 healthcare organizations and 21,000 individual members representing nearly 210,000 physicians. MGMA’ s purpose is to improve the effectiveness of medical group practices and the knowledge and skills of the individuals who manage them.



Health Management Technology www.healthmgttech.com Covers a wide range of IT solutions and issues in healthcare.

Health Data Management Magazine hdm.fgray.com Articles on the use of technology to improve care and control costs. Currently has a discussion group on the role of document management systems in healthcare.

Healthcare Informatics www.healthcare-informatics.com Provides information for executives and managers on the IT decision-making team in healthcare.


Healthcare Informatics McCormick Place, Chicago, April 28 to 29 www.healthcare-informatics.com

Professional societies

National Center for Quality Assurance www.ncqa.org Measures quality of patient service by major healthcare companies and providers.

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