The Strategy Nearly Every Health Plan Considers: Outsource vs. Insource

Slim margins, fewer resources, and consolidation have made it harder for health plans to compete. Could balancing outsource vs insource efforts accelerate their goals?

With shrinking margins, fewer and fewer internal experts, and increasing consolidation, health plans may find it harder than ever to compete. These limitations give rise to unique challenges, however unique solutions have emerged to overcome even the most insurmountable hurdles. To ensure your health plan thrives in the current healthcare climate, you may have considered the relative benefits of outsource vs. insource strategies in their potential to transform your payment integrity results.

Health Plans Face Challenges with Scaling

We hear regularly how legacy technology, “less is more” mentalities and lack of resources are top of mind for many health plans. The enormity of these struggles seemed to accelerate alongside the influx of millions of newly insured Americans that accompanied the passing of the Affordable Care Act. In its wake, many health plans discovered their largely manual processes could not scale to meet the growing concern around improper payments and wasteful healthcare spending.

Time has shown that the pace of change hasn’t stopped since. Even before the COVID-19 crisis hit, a stream of regulations continued to overwhelm the limited resources at most health plans. Compliance with the information blocking rules, for instance, can distract from other high-value activities – no matter the potential long-term benefits of both initiatives. Increased consolidation makes it more difficult to compete, while heightening the necessity to do so. Perhaps now more than ever, lack of resources continues to be a major barrier for many health plans.

Altogether, the writing is on the wall: the future of healthcare requires claims processing modernization, data aggregation, information security and the ability to lead the transition to alternative payment models and gains in population health improvements – all with great urgency, says Healthcare Finance. Health plans understand these directives and acutely feel the need to catch up, but inadequate technology, staffing shortages, competing capital projects, and combinations of these and other factors hold them back from progressing at the desired rate.

Weighing Outsource vs. Insource

Whether it’s transitioning more efforts prepay, going beyond compliance to proactively address FWA, or streamlining workflows to reduce administrative complexity, scalable processes that hold the potential to transform results are accessible to all payers – not just heavily-resourced health plans. But what offers the best path to maximizing your health plan’s cost containment goals? Let’s explore outsourcing vs. insourcing your payment integrity efforts.

How does payer outsourcing work?

Payer outsourcing involves a health plan contracting with a third-party vendor for claims processing and other functions. In this model, an outside group of focused experts perform what otherwise would be an “overhead expense” in the form of technology investiture and staffing/resources. As the pressure to optimize has increased, payer outsourcing has expanded beyond business process outsourcing (BPO) to include innovative technology and real-time resources that don’t require an up-front capital investment.

Health plans are increasingly outsourcing some or all parts of their payment integrity program, including FWA, coordination of benefits, itemized bill review and more – for prepay and post-pay. Just look at Oscar Health, a startup health insurance company that made news relying on an insourced/outsourced model (along with advanced technology) to provide a more efficient healthcare experience.

“The end goal is to process claims efficiently so doctors spend less time hunting down payments for the care they already gave, and reduce errors so consumers never have to deal with denied claims or paying for services they never received,” writes Oscar Health.

Impressively, if your health plan is significantly under-resourced, an outsource to insource model can help you achieve serious traction in revenue gains without hiring additional personnel, adding expertise or immediately acquiring technology on your own. It’s a strategy that many innovative startups rely on, and one that also works well for health plans at all stages of maturity.

How can I effectively insource?

Insourcing in this case, simply put, involves conducting payment integrity processes with your health plan’s own resources. If your health plan has pursued an internalization strategy in the past without much success or with limited gains, you aren’t alone. Legacy business models that rely largely on manual processes hinder innovation. But acquiring an advanced technology platform designed specifically for health plans can help you scale your internal resources.

Starting with foundational functionality that addresses your most pressing need first ensures ROI, smooths user adoption and makes the most of limited resources. Dramatically reducing manual processes and achieving mutual value with suppliers allow you to reduce your administrative overhead and tackle payment integrity in the most cost-effective manner.

Especially if you can acquire technology that works out-of-the-box for your needs and accommodates configurability without development, you can accelerate your speed to value. No matter your motivations, the potential for doubling or tripling your recoveries creates a solid case for insourcing.

Under-resourced health plans face unique challenges but benefit from unique solutions that transcend the outsource vs. insource argument.

The Smart Solution: Start Wherever You Are

Now that we have taken some time to weigh the outsource vs. insource argument, you might start to realize that elements of both strategies hold potential for your health plan. And that’s not surprising. Even the big national plans only started formalizing centralized payment integrity functions 10 years ago, so there’s still time to catch up and multiple ways to get there.

The vast majority of our clients find their path lies down a hybrid model of outsource-to-insource or pursuing both concurrently in an optimized combination of the two. For instance, you may find it easier to internalize data mining with the right enabling technology that helps you streamline workflows and realize efficiencies. On the other hand, your health plan may decide to always outsource complex medical records reviews because of the specialized resources it requires.

Statistics back up our experience with this hybrid approach to payment integrity; claims management – including payer services and product development – holds the largest market share of healthcare BPO. Fortunately, no matter your choice, the first step is the same. “For the same reason you outsource claims processing, find a trusted partner with expertise and advanced technology to ease your payment integrity burden,” says Jason Medlin, vice president of strategy and marketing at ClarisHealth.

A partner and a platform that allows you the flexibility to decide – service by service – whether to outsource or insource based on your cost-benefit analysis will better poise your health plan to scale effectively. Contingency-based relationships, like we use at ClarisHealth, are helpful for under-resourced health plans because they don’t require a large capital investment, which makes payment integrity outsourcing far more turn-key and affordable than you may realize. It also is worth noting that many plans will find it beneficial to move quickly on technology implementation as a way to speed overall time to value.

Get a No-Risk Proof of Concept for Pareo

At ClarisHealth, we don’t believe the outcome of the outsource vs. insource debate is necessarily binary. Rather, health plans can strategically outsource and insource select payment integrity efforts based on current resources while making a plan to adjust that mix over time to attain crucial internalization goals. We offer flexible delivery models, including an outsource to insource path, to meet health plans where they are.

Talk to ClarisHealth about Pareo®, our comprehensive payment integrity solution, which makes for a seamless transition to an optimized blend of outsourced and insourced payment integrity.