Transforming Healthcare

Insurance companies are positioned to assume a leadership role in transforming the U.S. healthcare system over the next 10 years, according to industry experts. By investing in technology to support consumer-directed healthcare, insurers will redefine the relationships among payers, providers and patients, and create the foundation of a technology architecture to support a nationwide health information network. "Insurers will have a prominent role to play investing in the technology to drive the future of the healthcare industry," says DeLays Brandman, vice president of strategic sourcing health plans at First Consulting Group (Long Beach, Calif.).

Already, initiatives are under way to speed the adoption of technology to support electronic medical records (EMRs), which a growing number of observers believe could lead to lower health costs and better patient care. Last month, national coordinator for health information technology Dr. David Brailer announced limited funding for the establishment of an IT architecture for a nationwide health information network. And, several Regional Health Information Operations (RHIOs) - cooperatives of providers, payers and vendors that will be charged with forming the infrastructure to support the exchange of EMRs - are preparing to experiment with standards. Adding to the momentum, in the aftermath of Hurricane Katrina's devastation, payers have been pressured to finance the technology necessary for providers to begin reformatting records in electronic form.

No Pain, No Gain

Implementing EMRs will be expensive, especially for insurers, according to First Consulting Group's Brandman. "The cost of implementing from current structures would break down to providers paying 20 percent and insurance companies paying 80 percent of the bill," she says, "though it may be a while before they see an initial return on the investment." However, because insurers already have the technology in place, they "will really reap the benefits of electronic medical records more than the providers," Brandman contends. "Electronic medical records will provide insurers with just another route to audit information."

To relieve some of the cost burden, Brailer awarded three contracts totaling $17.5 million to public and private groups working to accelerate the formation of RHIOs and the adoption of health information technology. But many think the money is not enough. "[It] is a drop in the bucket," says John Phelan, a technology and management consultant at Milliman Consulting (Seattle). "We have been immature in implementing technology into the health insurance and medical fields - we will have a long way to go before electronic medical records really make an impact."

According to Bruce Goodman, senior vice president and chief service information officer at Humana (Louisville, Ky.; $5.4 billion in assets), it is the consumer who will pay for the technology in the end. "The American taxpayer will wind up footing the bill one way or the other," he contends. "You're looking at an increase in either premiums, or taxes, or insurance charges."

To keep healthcare costs in check and improve service, many insurers have embarked on initiatives to enable consumer-directed healthcare. Such technology investments also are likely to lay the foundation for the use of EMRs, notes Terry Hunter, CEO of ConnectYourCare (Timonium, Md.), a provider of consumer-directed health plan platforms to employers, health plans and administrators. Consumer-directed healthcare will help provide a relevant educational and informational framework for developing the preliminary architecture of EMRs, he says.

According to Humana's Goodman, consumer-directed health plans and personal health records have been instrumental in setting up the framework for EMRs. "We started personal health records to help consumers manage their care five years ago. We can move these data elements into a combined electronic medical record," he says. "If we can get the pipes laid to start administrative transactions, then we can lay down an infrastructure for clinical transactions, and then we can add more to the pipeline." But, before that can happen, standards must be established to govern it. The contracts awarded by Brailer largely are intended to support the development of criteria and standards for the implementation, use and storage of electronic health records, the lack of which are major obstacles to the adoption of EMRs.

"I don't see health insurance providers getting access to medical records anytime soon - not until there's a standardization system in place," says Katy Henrickson, senior analyst of healthcare research for Forrester (Cambridge, Mass.), who believes that the federal government must tackle standardization before insurance companies enter the equation. "The government has got a lot to figure out before insurance companies get involved, [such as] fine-tuning HIPAA compliance and getting physicians to use electronic medical records."

Laying the Groundwork

Brailer and the federal government are hoping that the RHIO pilot programs will provide the groundwork for standardization. "An RHIO, essentially, is the grid - the underlying architecture - that helps people who are using electronic health records move them from place to place, interact with HIPAA-compliant transactions between physicians and health plans, and ultimately make things available to a consumer," explains Carol McCall, VP of Humana's Center for Health Metrics. Humana is piloting an RHIO in 2006 as part of a joint venture with Navigy (Jacksonville, Fla.), a wholly owned subsidiary of Blue Cross Blue Shield of Florida (Jacksonville).

For many insurers involved in EMR initiatives, the immediate needs of consumers have prevailed over the issue of cost. The devastating effects of Hurricane Katrina and fears about the impact of Hurricane Rita, spurred Richardson, Texas-based Blue Cross and Blue Shield of Texas (BCBSTX) to develop electronic health records for the catastrophe management of 830,000 members' files. Joe Taylor, VP of enterprise business processes at Health Care Services Corp., which includes BCBS of Illinois, New Mexico and Texas, says the company originally planned to roll out electronic patient clinical summaries in 2006. "We decided, because of the issues with Katrina, a special rollout was necessary for our members in the projected path of Rita," he relates.

The weekend before Rita hit, MEDecision (Wayne, Pa.) and BCBSTX developed electronic patient clinical summaries for BCBSTX members in Rita's path. "We did this to protect our members' records," says Taylor. "Initially, the infrastructure will be very expensive. But, in the long run, there will be a payoff for everyone, especially the patient."

To some, the future of health insurance companies rests on their decisions of whether or not to invest in EMR technology. "Theoretically, we should be able to pull up our medical history and claims like we can pull up our bank account online or check our account balance at an ATM," says First Consulting Group's Brandman. "But, because of the way healthcare providers keep records - in big manila folders - healthcare hasn't been similarly accessible."

As the healthcare and operational benefits of EMRs become increasingly clear - and pressure from consumers, providers and the government builds - insurers will be forced to invest in EMR technology, contends Brandman. "I think insurance companies will have to go here if they are going to survive," she says.