Thursday, February 26, 2015
("Gartner is the world's leading information technology research and
January 28, 2015
Market Guide for Healthcare Payers' Core Administrative Processing Systems
Analyst: Constance Sjoquist
Payer CIOs need to enhance, append or replace their existing core
administrative systems to more effectively compete in an increasingly
complex healthcare environment. Vendors are developing newer or
re-engineering existing solutions to meet this demand.
Historically, the vendor options for core claims administrative systems
have been somewhat limited. A handful of legacy solutions have dominated
the payer space for years. Often highly customized to a payer's unique
business environment or utilized only for a specific line of business
(LOB), core administration systems have been expensive and difficult to
replace, upgrade, enhance or consolidate without incurring significant
risk or downtime.
In the last several years, an enormous amount of change has occurred in
the healthcare market and is impacting payers' requirements of their
core administrative solutions. New demands include the need to comply
with an increased number of regulatory requirements, manage a growing
number of contractual arrangements and support new distribution
channels. Payers are finding it necessary to make the shift from a
historical group to a largely individual membership base and are seeking
new and differentiated capabilities that will help ensure they can
remain relevant and competitive.
In response, vendors in the healthcare core administrative space have
begun to significantly shift their product strategy or market focus to
address new payer challenges. While this has brought about innovation
and choice, it has also led to a disparate market, causing confusion
over what exactly the essential elements of a core administrative system
are. Vendors that once dominated the market have recently merged or have
been acquired, causing uncertainty around their future product road
maps. Some vendors have completely dropped their product offerings for a
particular LOB or have shifted their technology strategy to offer only
nonlicensed software solutions.
Gartner receives a steady volume of inquiries and requests for
information on core administrative vendors, as these run the business
applications that necessitate an enormous amount of a payer's IT
resources and budget. Healthcare payers are looking to modernize their
application portfolios, comply with government regulations and lower
their cost of doing business. Payers are also seeking functionality that
will allow them to support new health models, such as accountable care
organizations (ACOs), pay for performance (PFP) and value-based networks
(VBNs). Inquiries focus on who can provide new technology approaches to
the development, deployment and management of existing core
administrative applications, as well as which vendors offer solutions to
support future payer needs.
Core administrative vendors are challenged to adapt and develop their
solutions to address these disruptive changes in the healthcare
industry, as well as to adapt to rapid advancements in technology.
Industry disruptions include:
* The shift from a wholesale (group) to a retail (consumer) decision
maker requiring greater support for user-specific preferences
* Demand for transparency tools to support member enrollment, care and
* Providers becoming risk-bearing entities requiring real-time
information on payment and reconciliation in their provider applications
that parallels payers' application status
* Establishment of payer/provider contractual arrangements requiring
increased coordination of information and workflows and greater
accountability of services and payments
* Ongoing regulation and compliance changes requiring timely updates,
audits and reports
* The expanding number of distribution channels requiring increased
support for enrollment and related services
The healthcare market is expected to continue along a path of rapid
change and innovation. There is great uncertainty as to where the market
is headed and what technologies will be necessary to adapt and succeed.
Core administrative vendors are aggressively vying for position and are
competing to manage current expectations and address future client demands.
Comment by Don McCanne
This report from Gartner is instructive in that it demonstrates the
profound increase in administrative complexity in health care, much of
which is directly attributable to a dependency on markets as opposed
what we would have under a publicly administered single payer system.
Administrative functions in health care are essential, but it is the
private sector that has created a bureaucratic quagmire. Gartner is just
trying to help the private sector make sense of it.
This does not let the government off the hook. By supporting the current
fragmented, dysfunctional model of health care financing, the government
is placing a greater burden on the private sector. We are all paying the
price in higher costs and in bearing the the burden of systemic
inefficiencies. By design, a single payer system would reduce this
at 12:44 PM