HealthEdge: helping payors embrace new business models (transcript)

This is the transcript of my recent podcast interview with HealthEdge EVP Ray Desrochers.

David Williams: This is David E. Williams, co-founder of MedPharma Partners and author of the Health Business Blog. I’m speaking today with Ray Desrochers. He is executive vice president of sales and marketing at HealthEdge. Ray, thanks for being with me today.

Ray Desrochers: Thanks for having me here David.

Williams: Ray, your company is in an exciting space serving healthcare payors, and there’s certainly no shortage of topics that payors may be concerned about today. How do you think about the overall set of issues that are on payors’ minds, and where does HealthEdge come in?

Desrochers: There’s a lot going on right now across the industry. There’s certainly a lot of anxiety as payors are trying to determine how they’re going to play in the world of next-generation healthcare business models.

This includes everything from value based healthcare, to next-generation consumer based healthcare, to ACOs to payment reform initiatives. Folks are trying understand what all this means, then determine what it could mean to them, and how they might want to participate.

At the same time we’re seeing  a lot of anxiety around regulatory change, thing like ICD-10 as an example. And people are trying to figure out exactly what this is going to mean regardless of what the date is. They’re still going to have to get themselves to a point where they can comply. They’re going to have to remediate their existing system infrastructure.

People are trying to figure out how they are going to do that, how they are going make sure they’re ready for the next variant that comes out, ICD-11 or whatever it might be. And then also how they’re going to participate in the new healthcare economy, particularly one that’s based upon these new healthcare business models.

Williams: HealthEdge is obviously playing in the space, but how broad is your suite of products and services to address these topics?

Desrochers: We offer a complete enterprise class offering for healthcare payors that includes both the core benefit administration claim processing platforms –all the way from enrollment to billing to pricing to claims processing to benefit definition and administration, all the way down the line to customer service.

We also offer a full business intelligence suite to provide transparency inside of the enterprise and also transparency outside of the enterprise, which is something that we think is equally important with these new models. Everyone participating in the models knows where they stand in real time. Last but not the least, we’ve got a set of portal offerings designed to connect everyone involved in the healthcare delivery cycle.

Williams: Certainly with the Affordable Care Act, one area that concerns payors is the medical loss ratio requirement and how that encourages a different set of thinking among health plans. How do you fit into that thinking?

Desrochers: The administrative cost and administration burden that people have been dealing with over the last few years has to change dramatically for folks to succeed. One of the things that a number of organizations are looking at now is how to eliminate all of this system redundancy and how to eliminate all the manual processing that’s going on.

That manual processing includes lots of human error, lots of manual reprocessing and repricing, lots of things that actually take away from core parts of their business. At HealthEdge we have a unique technology that’s built not on a traditional configuration model but on an English-like healthcare specific grammar.  It’s a patented technology so we have the only system on the planet to use that.

It allows an organization to quickly configure almost anything they can imagine. They can make sure they’re doing all their business in an automated way so they don’t need to deal with an out-of-control manual processing burden. It’s not unusual for us to go into situations where we see payors that are at 15%, 20%, 25%, 30% manual processing.

At the industry accepted $6 to $8 per manually processed claim, it doesn’t take a whole a lot of claims to get to a point where it’s a number that does not make any sense. Folks are going to need to investigate how to take advantage of next generation technology and streamline existing infrastructure to serve the market in a cost effective way moving forward.

Williams: People talk about administrative efficiency but some of the new requirements add complexity and take folks in the other direction, especially if they’re reliant on old, inflexible systems and have to deal with a lot manual processes and workarounds.

Can you address that as it relates to Accountable Care Organizations and ICD-10? Where does HealthEdge get involved with those?

Desrochers: ICD-10 is what many in the industry are calling the Y2K of healthcare. We’re moving from 17,000 diagnosis and procedure codes to 155,000 much more complex, much longer diagnosis and procedure codes. If you take a look at the core system that people are dealing with and all of the other systems that touch that then it is an enormous challenge. It’s a challenge that’s not a one-time opportunity, it’s a challenge that’s going to happen over and over again. Today it’s ICD-10, tomorrow it will be ICD-11, and the next day it will be whatever other new standard comes our way.

HealthEdge is trying hard to remove this ongoing challenge as much as possible by providing automated solutions to allow payors to not have to think about it; to be able to trust that their vendor can provide them solutions that as soon as these new standards become applicable, they’re ready.  They’re ready to accept ICD-10 claims for example, something HealthEdge has been doing for about three years now; accepting ICD-10 claims and accepting claims that are both ICD-9 and 10.

The goal is to remove the burden from the payor so they can focus on how to grow the business and successfully participate in the new healthcare economy. The same can be said of all of these next-generation healthcare business models. When payors look at ACOs and value based products, they assume they’re going to have to do some additional manual processing. They plan to band aid, bubble gum, or scotch tape some number of systems around the edges to make it happen. Obviously those are not very good answers because the administrative cost continues out of control. And regardless of how short-term they say any of those band aids are going to be, they never end up that way.

Folks are finding themselves in a never-ending spiral that they can never escape. We recommend instead –regardless of which system you’re looking at, regardless of how you’re going to approach this from a technology standpoint– to pull up a level, and ask, “What am I going to do in my business and ultimately what are the tools, what are the processes what are those techniques that are going to need to be put in place to be successful?” HealthEdge is helping organizations with that.

Change has been one of the things many in the industry had feared over the years. But moving forward successful payors will be the ones that embrace change, to one-up the competition by being first to market in any of these new models; both the ones we know about today and the new ones that will come up tomorrow.

Williams: Payors are known to be conservative when it comes to swapping out core systems. I think about a player like TriZetto that’s out there that’s well established. Despite some of the limitations people are afraid to move away from it. You’re obviously making an argument that change is necessary and those payors that embrace are going to be successful.

But assuming you do compete against TriZetto, how do you differentiate yourself from them? How do you try to coexist with them or persuade payors to move more toward your solutions?

Desrochers: We’ve gone from a world where the conservative payor community didn’t want to change just a few years ago to a world where –as an analyst said– we’ve just entered one of the most significant technology change-out cycles that the payor market has seen in the last 30 years.

We completely believe it. They’ve gone from the conservative, “I don’t want to touch anything, I don’t want to move anything, I don’t want to change,” to a world where they know that if they don’t change, they don’t start to embrace new technology and they don’t figure out how to play in these next generation business models, they’re dead.

They really have to compete. They have to find ways to do this. So a lot of the barriers that existed just a few years ago what people really did not want to move, are coming down. And we are working with organizations you would normally call early adopters, but that nonetheless have determined that this is the only way to truly compete in the 21st healthcare economy. That’s what they are doing, and that’s what we’re seeing.

Williams: There are a lot of smart folks looking at things that way. Another Massachusetts-based company, ikaSystems is out there and has some deep pocketed backers. Do you do the same thing as them or do you take a different angle in approaching the market?

Desrochers: We really don’t see ika at all as an example of what we’re doing. TriZetto your first example, obviously we’re in with them quite a lot. We see them in a number of deals. ika is really a consulting firm. They’re a consulting firm that ultimately can build to order whatever it is you’re looking for. And we are an enterprise class software company.

So while we have implementation and consulting services that are geared to helping you to integrate and deploy the product, we’re not out there doing general consulting per se. We have a commercial enterprise class product and have an investment of over $150 million that’s helped us to build what we believe is a pretty unique piece of technology and the best in the market. It’s really an apple and oranges, apple and oranges type of story there.

Williams: So the similarity is both are serving payors with a need for flexibility beyond what traditional solutions offer, but you’ve taken an enterprise class software approach and ika is offering custom solutions from a consulting standpoint it sounds like.

Desrochers: That’s exactly right. That’s our perception.

Williams: What customer base do you serve?

Desrochers: We have a wide variety of customers based around the country, and a variety of shapes and sizes ranging from small to mid-sized TPAs some larger TPAs, and then all the way up to a number of commercial Medicare and Medicaid plans. So the customer names: FirstCare in Austin, Texas, Neighborhood Health Plan of Rhode Island – it’s all Medicaid, Independent Health in upstate New York, which has a number of different lines of business, POMCO a large TPA about a half a million members based on Syracuse, New York, and the list goes on and on and on.

So really commercial play, government play, Taft-Hartley play, TPA play, it’s a variety of organizations that have a couple of things in common. Number one is a strong desire to take on new business and compete in next generation models without being handcuffed by existing technology. Number two, organizations that want to eliminate manual processing and reduce their administrative spent. Number three, organizations that want to play in this world of ICD-10 or whatever other standards might come their way without needing to endure costly and time consuming migration and conversion efforts. And number four, customers that are looking to compete in a different way when it comes to customer service.

One of the worst kept secrets in the industry is that customer service from payors has been declining rapidly over the last few years. These are good organizations that want to help you and answer your questions correctly, but because of all of the new complexity that we’re seeing in all of these new business models and the systems that are scotch taped and bubble gummed and whatever else together in order to be able to service these models, it’s very, very hard to get answers, particularly answers to questions of any complexity. That’s a huge problem across the industry. We believe as more and more people adopt these models, it’s going to get much, much worse.

Williams: The organizations you described as customers tend to be up smaller than some of the big Blues or national plans. With some of the big segments that you’re not addressing now, is it just a matter of time? Or do you expect to stay with smaller customers?

Desrochers: No, we’re definitely seeing a significant uptake in the larger payor community as well. Regarding the “megas,” the Blues across the country and many others that would consider themselves large payors, we are definitely talking to a number of them right now and I think it’s fair to say that is certainly part of our target market at this point. I think you’ll be seeing a lot of momentum from us in that area.

Williams: That sounds exciting. How would you summarize your biggest opportunities and threats?

Desrochers: From an opportunity standpoint, the market has never been more dynamic, never more in need of next-generation technology solutions, particularly technology that can address all of the things that we’ve talked about today. We happen to have a unique product offering with patented technology, the only one of its kind, and it happens to be able to uniquely address many of these next generation healthcare business needs that we’ve talked about.

The threat is that people stay idle, that people really have the deer in the headlights syndrome and become so confused by the number of options out there that they don’t move; that they’re afraid to move, that they can’t really turn their businesses the way that they have to in order to be successful.

In the last six to 12 to 18 months in particular, it’s become evident that more and more organizations, regardless of size, are realizing that in order to compete in this next generation of healthcare business, they must be ready be ready from a process standpoint, be ready from a system and technology standpoint, be ready from a people standpoint. They have to gear up and tool up to be able to take their fair share of the next generation market.

Williams: This is David Williams. I have been speaking today with Ray Desrochers. He is executive vice president of sales and marketing at HealthEdge. We’ve been talking healthcare payors, new business models and how HealthEdge is positioned to help them out. Ray, thanks so much.

Desrochers: Thanks for having me David.

April 26, 2012

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