Insurers to Spend Their Way Out of IT Mess

Ann All

A few months back IT Business Edge contributor Loraine Lawson predicted, "We're about to see a run on health care IT that will make the Oklahoma Sooners look like deferential ladies at a tea party." She cited technology vendors' newfound interest in this sector after the federal government's announced plans to spend some $20 billion updating the country's medical records and other IT systems.


As Loraine notes, hospitals and other health care facilities making the migration from paper to digital health records will do much of the spending. But insurers will need to spend some big bucks as well if they want to comply with new requirements introduced under health care reform, such as a ban on denials of coverage based on pre-existing medical conditions.


The law calls for $240 billion in taxes and Medicare cuts on insurers over the next decade, which will force insurers to update their aging IT systems (one word: mainframes) in hopes of cutting costs and boosting efficiencies, according to several experts interviewed in a Bloomberg News item published on SFGate. The article cites IDC Health Insights' prediction that insurer spending on data technology will jump 24 percent by 2013, to $11.3 billion.


Many smaller insurers are nonprofits that haven't been able to invest much in IT, while large companies have multiple, redundant IT systems thanks to mergers and acquisitions. When Gartner surveyed 60 insurers in December 2008, it found 70 percent had at least two back-end claims systems while 32 percent had four or more. Gartner analyst Joanne Galimi says many health insurers rely on manual processes, paper records and workarounds.


Insurers must also comply with ICD-10, a federally mandated system for classifying patients' medical conditions. The change will add thousands of disease codes in late 2013, which will require insurers to change "virtually every core application," says Maureen O'Neil, another Gartner analyst.


Hopefully these IT upgrades will result in improved customer service, such as faster claims processing or more self-service capabilities.


However, it sounds to me as if process improvements, not just IT upgrades, are in order. Perhaps insurers could improve efficiency and cut costs by using continuous performance improvement, a methodology successfully employed by a growing number of hospitals. The basic premise behind CPI (often called lean) is to look for opportunities for continuous small improvements that will cut waste and improve customer experience. Employees and often customers are encouraged to contribute ideas. Standardizing processes is a key focus

Add Comment      Leave a comment on this blog post
Sep 2, 2010 7:11 AM Jeremy Engdahl-Johnson Jeremy Engdahl-Johnson  says:

There's no way to eliminate the risk and uncertainty of the move to ICD-10, but there are four steps organizations can take throughout ICD-10 implementation to manage the risk.   More at


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