Payer Core Administration Decision Insights: A First Wave of Change? - Cover

Payer Core Administration Decision Insights: A First Wave of Change?

In terms of hot markets, Payer Core Administration isn’t necessarily the first one that comes to mind. It is a historic market and is quite different from other healthcare IT markets. The technology is often 15–40 years old. Payer Core Administration solutions were born for another time, and health plans and vendors are realizing that these solutions need to be updated, revamped, or replaced for modern value-based care.

Health plans have traditionally been very hesitant to move away from the solutions for several reasons. Many have become used to their systems, and the cost and effort required to change systems are significant. And, perhaps most importantly, there haven’t been any vendor heroes with new technology that health plans could move to. That, however, is starting to change.

KLAS recently looked at health plans’ purchasing decisions surrounding older and newer players in the market in the Decision Insights: Payer Core Administration Platforms 2020 report. In this report, we examine each vendor, their approaches, and the factors influencing decisions.

Drivers of Change

A couple of major trends are driving decisions in the Payer Core Administration market. First is the fact that health plans need to be ready for value-based care so that they can put members into the picture and take risks. Many health plans have been sitting on the old technology that they have, but they need flexible solutions that can help them successfully offer and manage lines of business.

Another factor that is accelerating purchasing decisions is that health plans are starting to believe that there are solutions that can work better for their current environment. Newer vendors are offering different things from the more established players, and even those players are now offering new delivery models where they build solutions for health plans. Older vendors have traditionally acquired a lot of other products in a sort of land-grab approach, but those vendors are beginning to actually farm that land and use the acquired technology.

One interesting insight from this report is that among the decisions analyzed for the report, about half were replacements. This doesn’t mean that half of the health plans in the country are considering replacing their system—many may just be adding on to their existing product. But clearly health plans think that spending the energy and money to migrate from an existing product to a new platform is worthwhile.

Life Cycle of Decisions

Health plans are certainly looking at solutions in a different way than they did before, but many are still in the early stages of making a decision. Before now, there hasn’t been a lot of activity in the Payer Core Administration market, so there isn’t much historic data in terms of trends. This has also traditionally been a low-scoring market, so health plans may be waiting to see how other plans’ implementations go, since there isn’t much guarantee that a new system will be better than an older system.

Why are health plans beginning to make decisions now? Value-based care has been around for 5–8 years, so the need for an updated Payer Core Administration solution isn’t necessarily new. New decisions may be different, but as far as replacements go, health plans have a lengthy process for making decisions because changing solutions is like performing a major surgery. But in the past several years, health plans have likely had enough time to consider other platforms, and the decisions that have been brewing in that time are now coming to fruition.

Future of the Market

new opportunity consideration rate vs high energy/positive commentary from current clients

Right now, health plans are very uncertain about success because there aren’t necessarily many examples of it. The ideal functionality and service-delivery models are starting to emerge, but migrations and replacements are still new. Health plans are waiting to hear that the new solutions work, that other health plans got them up, and that those solutions made the health plans’ experiences better. The chart above gives a good idea of what the current landscape looks like in terms of possible market changes.

In this environment of change, the Payer Core Administration market should be looking for safety and success, not just a new shiny platform or service-delivery model. As KLAS continues to monitor the trends in this market, we encourage payers to carefully consider which vendors and solutions will best fulfill their needs. For more details on specific vendors and solutions, please read the full report.

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