The Unintended Consequences of Complex Healthcare Payment Systems

March 21, 2022 - Fragmentation, inefficiency, and complexity are the byproducts of how health payers have arrived at the present moment. Decades of regulation and market forces have created a rather unwieldy collection of technology used to manage healthcare payments.

According to a Deloitte survey of health plan technology leaders, roughly half cite disparate systems and businesses resulting from mergers and acquisitions (54%) and a lack of a defined vision (49%) as significant challenges in the way of digital transformation. It is no wonder then that 68% reported being in the midst of modernizing their core administrative platforms (e.g., claims, billing) today or over the next one to two years. Unfortunately, 29% have plans to modernize later, putting their businesses at risk.

While other industries are moving quickly to modernize their businesses to keep pace with changing regulations and growing consumer expectations, many health plans find themselves weighed down by a mishmash of legacy systems that are becoming increasingly harder to maintain.

“I am a programmer by background, and I was taught very young that complexity breeds fragility. And that is so true for the healthcare system. A structure is weakest at the joints, and in healthcare, there are many joints,” says Eileen Dougherty, Zelis Executive Vice President of Product.

“Unlike most industries, the core of the healthcare industry is the human body,” she continues. “There is no more complex system than that, so the challenge becomes taking the care given to the human body, transforming that into transactional data, and submitting that information through a fractionalized system over outdated technology.”

Unless healthcare organizations can root out the complexity surrounding their core administrative systems, they will find themselves hard-pressed to meet the evolving wants and expectations of healthcare consumers.

“These companies were built to do risk and insurance is their core functionality are now attempting to manage technology for consumer-facing solutions that are just not built to last or scale effectively,” Dougherty warns.

The danger of misalignment

Top-down changes are coming to the health plan space. Recent rulemaking has put in place new rules for payers to provide new levels of transparency around health coverage and cost. What’s more, new legislation threatens payers that fail to comply with rules governing surprise billing. Also coming down the pike are requirements for payers to achieve greater levels of interoperability to empower individuals to take more ownership over their care.

Current administrative platforms are not cut out to keep with change.

“Once the system works, it’s not the priority to upgrade it,” Dougherty observes. “And because of the specialized knowledge of the people who run and maintain those systems, organizations simply can’t upgrade them because they have often lost the institutional knowledge of how it works.”

Historically, misaligned incentives have led to this day of reckoning for payers. In a highly competitive market where plans compete to attract and retain members, the notion of sharing information has long been held to be antithetical to doing business in the space.

“The health insurance industry is competitive, even though the concept of interoperability is noble. Health plans want to drive cost savings for their clients and their clients’ members, but the reality is that a health plan’s top priority is not helping members move seamlessly to another health plan’s coverage,” Dougherty stresses.

“Significant time and energy went into health plan efforts to compile information, build technology, and make all of the technology around it to make their health plan the best in the industry. Now, they are being asked to give away some of their competitive advantage. It’s not a negative thing — it’s just the reality.”

Mitigating complexity and ensuring security

More than a decade has passed since landmark regulation spurred changes to the health plan market. While choice empowers consumers, it adds greater complexity to a system already fraught with inefficiencies.

“Americans wanted diversity and choice in their healthcare space. Interoperability is just a challenge that is more difficult because of that choice and the complexity around it,” Dougherty observes.

But the unintended consequences of complexity for interoperability represent only one major challenge. Another also surrounds data and cybersecurity due to the various systems allowing payers to function today. 

“Fraud and security are a massive challenge for the healthcare industry right now,” Dougherty explains. “In the last five years, the dark web has woken up and realized we have all these healthcare data systems with affiliated payment systems. Suddenly, nefarious attacks have just started coming out of nowhere.”

Given the reliance of health plans on disparate systems to manage core administrative functions, these organizations run the risk of exposing sensitive data, especially protected health information (PHI), if hardware and software are not kept up to date and properly patched against new and emerging exploits. The longer a technology has been on the market, the greater the vulnerabilities it is likely to present to bad actors.

While payers remain averse to risk and have erred on the side of caution when given a choice between innovation and security, their decisions can quickly get in the way of efforts to modernize their platforms.

“In technology solutions, there is always a balance between security and ease of use, and healthcare tends to fall on the security side for many obvious reasons,” says Dougherty.

Complex healthcare payments systems lead to fragility and are likewise prone to fault. With new regulation and legislation creating disincentives for non-compliance, health plans must realize that their current approaches to technology will not enable them to meet changing expectations among members and their provider partners. To deliver a secure and modern digital experience, payers must first make an honest assessment of their current systems and consider whether it is truly capable of enabling success in the years to come.

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About Zelis 

Zelis harnesses data-driven insights and human expertise as scale to optimize every step of the healthcare payment cycle. We partner with more than 700 payers, including the top-5 national health plans, Blues plans, regional health plans, TPAs and self-insured employers, 1.5 million providers and millions of members, enabling the healthcare industry to pay for care, with care.