A Look at What's Driving Payers' Use of Analytics Solutions in 2014

Nancy Fabozzi, Principal Analyst, Connected HealthThe ACA is one of the key drivers of widespread and growing interest in analytics across the healthcare landscape.  Frost & Sullivan has looked extensively at analytics from the provider perspective. We are currently conducting research to drill down and better understand what’s happening on the payer side.

In early November 2013, we conducted an online survey followed up by a live focus group with around 20 C-suite executives from leading commercial payer organizations across the U.S. Our goal was to gain insights into how the health insurance industry is approaching the use of analytics solutions going into 2014.

For the purpose of our research, we defined analytics solutions as core platform solutions for “big data” functions, point solutions designed to address specific business needs, and external analytics vendors that payer organizations use to provide services or expertise. Some of the issues we delved into with our panel include current (2013) and planned (2014) investments for analytics solutions, vendors and products deployed, and common challenges in implementing analytics initiatives. We also looked at the top business drivers that are motivating payers’ use of analytics today and accelerating that use going forward.

Select Research Findings

Not surprisingly, our panel said they will be devoting more financial resources to analytics in the future. Our online survey revealed that over half of respondents (60 percent) said they plan to increase their investment in analytics in 2014 versus 2013; 40 percent said they would hold current (2013) investments steady; and no respondent said they plan to decrease their investment in analytics.  Our ongoing monitoring of this market leads us to believe that these findings are likely indicative of similar trends among the broader payer industry.

In terms of the top market drivers for payer analytics solutions, our respondents zeroed in on several areas. First, the need for managing new levels of risk resulting from ACA came out as the number one concern for our respondents. Participants in our focus group continuously referred to their need to leverage robust analytics solutions (namely, predictive and comparative analytics tools) that can help them better understand and manage issues around risk modeling, the post enrollment risk environment and exchange risk structures. Given some of the patient demographic data we are seeing coming out of the exchanges, we can confidently assume that our findings here also apply to the wider payer market.

The second most commonly mentioned driver for payer analytics pertains to reporting and compliance for two key national quality initiatives — the Healthcare Effectiveness Data and Information Set (HEDIS) from the National Committee for Quality Assurance (NCQA) and Star Ratings program from CMS. HEDIS measures help payers evaluate and benchmark the quality of their services while CMS Star Ratings are used to compare Medicare Advantage Plans and Prescription Drug Plans. CMS is increasingly tying reimbursement for Medicare services to patient outcomes; thus, payers’ Star Ratings are being used by CMS to determine reimbursement to payers. As part of the Star Ratings program, in 2012, payers became eligible for bonus payments from CMS for high (4 or 5 stars) ratings. CMS also reports scores and compares health plans based on performance.

While HEDIS and Star Ratings are not the only quality initiatives payers have to manage, they did seem to be the two that are most important to our respondents. Analytics solutions needed to drive excellence in quality metrics must be capable of integrating claims, operational, and clinical data. In addition, the need to access and incorporate various unstructured data elements is becoming more critical, further driving the need for next-generation analytics solutions.

A third area of importance for payers is the need for analytics solutions to identify and drill down on cost drivers at the condition, member, physician, and hospital level, thus representing a great expansion in the depth and breadth of data needed to be accessed and analyzed.

A New Role for Payers

The impact of the ACA and the cascade of dynamic changes ensuing from that legislation will permanently shift the historic schism between payers and providers as both entities adapt to new realities and imperatives around the need to share and analyze each other’s data. Our conversations with payers have shown that they fully understand that their future role must encompass new methods of helping providers deliver better care at a lower overall cost. Payers must also strive to work with providers to get members engaged in managing and improving their own health status. The industry is truly on the cusp of a new era where payers are transforming from being seen primarily as claims payment entities to being seen as true partners for patients and providers.

In terms of analytics, payers need to move beyond their historic focus on retrospective utilization review that often encumbers providers to taking a more proactive role in engaging and supporting providers with data for population health. The key question for payers in this new environment is do they really understand the dynamics of what it takes to successfully assume this new role? In particular, do payers know how to deploy and leverage next-generation analytics solutions when they have primarily been focused on looking at data from a non-clinical perspective, that is, traditional business intelligence and financial analytics.

These are some of the key questions our research hopes to address. Frost & Sullivan will be running a series of studies around payer analytics. We plan to share some top line findings with the readers of HIMSS Business Edge throughout 2014. This first article has summarized the most critical market drivers for the use of payer analytics.

In our next article, we will look closer at some of the challenges payers are facing as they develop more robust analytics capabilities to support their new mission around stronger partnerships with providers and patients.

Nancy has extensive experience conducting strategic healthcare market research for leading global management consultancies, healthcare corporations and provider organizations.  In her current role as Principal Analyst for Frost & Sullivan’s Connected Health practice, Nancy focuses on U.S. healthcare reform and the digital transformation of healthcare, including clinical and financial IT solutions used by healthcare payers, providers and consumers. To learn more about Frost & Sullivan’s Connected Health research program, please click here or email Nancy.

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