New SAS research report shows path to transform US health plans

Advanced analytics vital to success, profitability in post-reform health plan industry

CARY, NC  (Jun. 15, 2011)  – Health care reform. Rising medical costs. An uncertain economy. US health plans navigating a transforming industry should study how other industries have successfully applied advanced analytics. So says a new research report by SAS, the leader in business analytics.

An earlier study sponsored by SAS – The Implications of Reform on the US Health Insurance Industry  – highlighted health plan executives’ perspectives on fundamental changes to plans’ business processes, including “bending” the medical cost curve to a more acceptable level and shifting to a retail business model to meet consumer needs. 

Released today, Tackling US Health Plan Challenges with Advanced Analytics  examines business case studies from other industries facing similar scenarios. The new report addresses problems outlined in the initial study and provides specific examples of how other industries have used analytics to modify core processes in support of business transformation.

"Advanced analytics will play a key role in developing transformation strategies in response to the rapidly changing health care industry," said Allen Naidoo, PhD, Vice President, Business and Clinical Informatics, at Independent Health, in Buffalo, NY. "We need to learn how other industries have navigated complex regulatory changes to secure a competitive advantage as health reform continues to evolve our industry. Gaining valuable customer insights is, and will continue to be, essential to deploy products and services that meet their current and future needs and help reduce medical expense."

The structural changes required of health plans are being driven by more than the reform effort: the growing cost of care and economic uncertainty are also driving the adoption of health analytics.

"Health care reform – extending care to 30 million Americans – requires fundamental change in how plans do business. Requirements for cost control, a shifting customer base and a turbulent economy make the challenge particularly complex," said Sarah Rittman, Senior Industry Consultant for the SAS Center for Health Analytics and Insights (CHAI): "Traditional decision making may simply be obsolete. Plans require analytics to dynamically forecast risk and model customer behavior with precision."

Becoming retailers

Pre-reform, US health plans were wholesalers, marketing to employers and brokers who in turn offered products to workers and consumers. Reform introduces federal subsidies and health insurance exchanges, where individuals are the buyers. Consequently, plans must adopt a retail business model, though risk and uncertainty permeate the process.

The report compares health plans becoming retailers to a financial institution moving from reactive to proactive risk management. No longer able to accept the exposure caused by its inability to identify potential problem areas before they became problems, the financial institution deployed analytics to uncover risks. The company could then proactively intervene to help borrowers avoid default.

The cost curve

Health plan leaders also face a dilemma: how to control costs while simultaneously improving health outcomes. They know that, as costs continue to rise at an unsustainable level, managing expenses at a plan member level is vital to keeping premiums affordable. The report found that advanced analytics can help plans determine in advance which interventions, benefit designs and management programs offer the best return on investment.

"Given the enormous pressures on the industry, health plans urgently need to increase their use of data and analytics to drive action," said Marc Pierce, founder and President of Stonegate Advisors, a health and wellness industry research and strategy firm. "To be successful, plans must immediately and aggressively embrace analytics to drive better business decisions, new business models and optimal profitability."

The report described one health plan that has adopted analytics to aggressively negotiate on behalf of its customers, saving nearly $200 million annually. Using analytics, the plan can better understand claims information, defend its reimbursement rates and spot billing problems.

The report was released today at the annual conference of America's Health Insurance Plans (AHIP) in San Francisco. SAS CHAI’s Rittman and Stonegate Advisors’ Pierce will co-present the study findings at the conference on Friday, June 17, at 11 a.m. SAS will exhibit in booth 424.

SAS in Health Analytics

SAS is the industry leader in health analytics software and services, delivering best-in-class solutions for improving medical care, strengthening financial performance, deepening customer relationships and pursuing medical innovations. All of the top 25 health plans and pharmaceutical companies depend on SAS^® for strategic insights into health outcomes, profitability, and customer preferences and behaviors that produce useful intelligence for business transformation and growth.

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