Selecting the right information technology to support a health care organization’s business objectives sometimes involves carefully measuring whether the technology offers a tangible return on investment. For example, AmeriBen/IEC Group, which has a third-party administrator subsidiary, invested in claims analysis technology after an extensive test determined the software would help it save money by avoiding paying fraudulent claims.
But sometimes, the ROI justification is more difficult to determine. As a result, some health care organizations aren’t messing with such detailed calculations when identifying the right technologies for their business objectives, says Marc Holland, program director, health care provider I.T. research, at Health Industry Insights, a subsidiary of Framingham, Mass.-based consulting firm IDC.
However, there’s no other “silver bullet” strategy that they are using either, Holland contends.
“Mature organizations still do some kind of business case analysis on every capital investment,” he says. “But most use other various techniques to analyze the costs and benefits for I.T. alternatives. And those can include both a quantitative and qualitative analysis of the technology.”
In selecting I.T., some health care organizations are weighing such potential benefits as improved customer satisfaction for hospitalized patients or improved efficiency in an emergency department or other unit. Others are investing in emerging technologies, such as next-generation wireless networks, that they’ve concluded are essential for providing better access to clinical data at the point of care.
ROI Still Used
Four years ago, AmeriBen/IEC Group didn’t know how much money its TPA subsidiary was losing to claims fraud, abuse and overpayments.
The Meridian, Idaho-based company, which administers benefit plans for more than 70 employers and universities, didn’t have the ability to analyze claims for such issues, says Jon Aubrey, senior vice president.
The company had claims processing and editing software, but these technologies weren’t able to evaluate claims history, which is required to assess possible fraud, abuse and overpayments. And AmeriBen/IEC didn’t have the time or resources to do it manually, Aubrey adds.
“Our systems show us the equivalent of a still image in a camera, rather than the entire video we’d need to do such analysis,” he says.
When the TPA received a call from a vendor that offers claims analysis technology, it immediately gave the system a test run. For three months, AmeriBen/IEC used software from HealthCare Insight LLC, Sandy, Utah, free with 60 of its employers.
Although an analysis report from the pilot showed the software helped the TPA refrain from paying 1% to 2% of its claims because of fraud, abuse and overpayment, the quick savings didn’t immediately translate to a green light to purchase it.
Instead, AmeriBen/IEC first wanted to ensure its staff could handle managing the technology in addition to its claims systems. Additionally, the TPA wanted to see if the employers it serves would be willing to pay for the use of the software so the savings could go further.
“TPA profit margins are slim,” Aubrey says. “So to absorb the costs associated with the software, we had to ask our clients to pay for the service.”
After satisfying all its purchase prerequisites, AmeriBen/IEC decided to fully implement the system in mid-2004. Now about 70% of its employer clients are paying the TPA to use the analysis service with their claims.
Qualitative Impact
In addition to determining its ROI, AmeriBen/IEC also wanted to measure the impact its potential technology purchase would have on staff before signing off on it. So while the vendor’s staff integrated the analysis software with the TPA’s existing claims systems for the pilot, it also educated AmeriBen/IEC staff on how to manage the new application.
After concluding that running the software would be too much for the TPA’s staff, its executives asked if the vendor could host it for them via the application service provider computing model, Aubrey says. “During the trial period, it was taking several claims processing employees to run the software,” he says. “So we set up a process where the vendor did more of the work. Now we have one full-time claims processor and one that just works on the HCI software.”
The processor dedicated to the analysis software reviews a report each morning from the application that displays the possible fraud, abuse and overpayment claims from the previous day’s claims. The report divides the accusations into six categories and highlights the amount of money the TPA can save if each one isn’t paid.
AmeriBen/IEC also developed a plan to help it recoup more of this savings. Now it bills every employer a percentage of the value of their fraud, abuse or overpayment claims the software found each month.
“Some months their fee is higher for the service,” Aubrey says. “And if they aren’t seeing any savings from it they don’t pay. But that’s never happened.”
AmeriBen/IEC also uses the software to track which providers are submitting fraudulent, abusive or overpayment claims and is disclosing the information to its employer clients. Such information has given the TPA more credibility in its market, Aubrey contends.
“The software has helped us gain new customers and improve relationships with existing ones,” he says. “It’s really differentiated us from our competitors in the market.”
In addition to ROI, some health care CIOs say customer satisfaction comes into play when they identify technologies to support various business objectives.
Marlton, N.J.-based Virtua Health, for one, needed to update the in-room televisions across the four hospitals in its delivery system. But executives wanted the technology to also help staff better communicate with patients, says John Bloomer, vice president and CIO.
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