Point of View

Health plan survival depends on adopting digital technologies

September 10, 2021

Core administrative process systems (CAPS) are central to every US health plan—big or small—managing their businesses by enabling technology to deliver for their value chain. CAPS have been around for more than 40, and they have steadily become highly complicated as health plans evolved. While CAPS have incorporated newer technologies, they have lagged significantly, eventually becoming a liability for most health plans.

In an HFS Webinar discussion on a beautiful August morning, HFS Research led a panel of health plan and technology experts in dissecting the understanding of a potential alternative to CAPS and its value proposition—a healthcare digital platform, the integration of applications and emerging technologies to provide a tailored healthcare solution that drives business outcomes.

Webinar panelists included

  • Nick Carey-Sheppard, Sr. Advisor, Conversation Design, CVS Health
  • Joshua Zalen, VP IT Service Operations, Independent Health
  • Venky Ananth, SVP and Head of Healthcare, Infosys
  • Saurabh Gupta, President, HFS Research
  • Melissa O’Brien, Research Leader, HFS Research (Moderator)
CAPS are just not cutting it anymore, and the situation is getting dire

Panelist Saurabh Gupta, President HFS Research, suggested the pandemic has shined a big light on impacts to the triple aim of healthcare (cost of care, health outcomes, and experience of care). The prevalence of chronic conditions has increased, co-morbidities are becoming more complex, and mortality rates were ticking up even before COVID-19. At the same time, the cost of care accelerated at two to three times inflation in the last several years. Inflexibility, a growing operations talent gap, and the increasing costs of CAPS have not helped health plans.

To compound disease prevalence, access to healthcare has gotten challenging despite telehealth. Panelist Joshua Zalen, VP of IT Service Operations at Independent Health, indicated that non-profit community health plans such as Independent Health singularly focus on improving the community’s health and well-being. Their ability to reach individuals in under-served areas requires capabilities that are not typically part of CAPS.

Health plans face disruption. More than 75% of large employers (with more than 500 employees) are self-insured, covering about 50 million employees, while government-sponsored plans such as Medicare and Medicaid continue to expand with expectations for higher-value care. For example, panelist Venky Ananth, SVP and Head of Healthcare at Infosys, alluded to the need for reinvention, citing the evolution of Walmart’s e-commerce adoption to battle Amazon.

These are just some of the drivers for increased urgency in addressing the need to explore alternate solutions for CAPS that 90% of health plan CXO are biased toward (see Exhibit 1).

Exhibit 1: More than 90% of health plan CXOs perceive that a digital platform strategy is very important

Sample set: 100 C-level healthcare payer executives in the US
Source: HFS Research in partnership with Infosys, 2021

The mantra “this is how we have always done it” is dangerous to our health and wellness

A health plan value chain is an analog construct reflecting an approach to solving legacy problems. CAPS follow that analog value chain, exacerbating the diluting value of CAPS in modern times. Joshua alluded to the need to rethink business processes, a call to action if health plans fully intend to make a sustainable impact on their membership health and wellness, not to mention their financials.

As Exhibit 2 indicates, despite the CAPS underlying business process to technologically enable the health plan value chain, there are significant red flags. A plurality of health plan CXOs admit that their current CAPS do not address the needs of key functions, including payment integrity (possibly leaking revenues), provider credentialing (impacts to provider networks), population health (membership health translating into higher claims cost and poorer experience), and risk adjustment (inability to manage risk).

Exhibit 2: Significant improvement opportunities across the healthcare payer value chain

Sample set: 100 C-level healthcare payer executives in the US
Source: HFS Research in partnership with Infosys, 2021

Despite glaring examples of the need for change, there are barriers to adopting alternate CAPS solutions. Venky aptly indicated that the lack of progress is driven by organizational inertia wedded to legacy infrastructure, an inability to raise and deploy capital, and skill gaps hampering talent’s ability to drive better outcomes. This unfortunate confluence of not addressing problems that are clear as day even though there are solutions (pay as you go, digital healthcare platforms) encapsulates the state of US healthcare.

Healthcare challenges are unique as snowflakes

The largest cohort of healthcare consumers are seniors (65 years and older). This cohort has traditionally shied away from using technology, a hurdle for providers leveraging digital care delivery for intervention or wellness. Nick Carey-Sheppard, Sr. Advisor, Conversation Design, CVS Health, emphasized the need for inclusive designing that factors seniors into usability, making them more comfortable and increasing adoption.

Nick also indicated that while health enterprises want to reduce call center costs, smart design supports interaction personalization and care journey simplification.

Emerging technology options should help dilute barriers to care, given the options are broad (see Exhibit 3). Consider a person with three jobs or rural communities with no broadband; they will not benefit from the various technology options. A personal touch enabled by technology is going to be a priority in such situations.

Exhibit 3: Cloud is emerging as the “have-to-have” technology for delivering desired business outcomes

Sample set: 100 C-level healthcare payer executives in the US
Source: HFS Research in partnership with Infosys, 2021

The Bottom Line: CAPS capabilities are not suited to health consumers’ service delivery expectations or a health plan’s business objectives. It is a no-brainer to replace them. Despite the challenges, the outcomes will bear out the positive impacts.

Despite boatloads of money invested in modernizing CAPS, building functionality to support new products continue to lack in the flexibility that is critical to supporting both providers and members. The legacy underpinnings make them expensive to maintain and they constantly need other modern applications like a CRM to augment capabilities. These drawbacks impact health plan financials, member health outcomes, and cost of care—the triple aim—as well as provider experience. The time to kick this can down the road has long passed.

Sign in to view or download this research.


Lost your password?


Insight. Inspiration. Impact.

Register now for immediate access of HFS' research, data and forward looking trends.

Get Started