Choosing the Right Partner: Debunking Common Fears About Outsourcing Health Plan Operations

March 31, 2022 Emily Rafferty

A "smartsourced," true partnership approach can address the pitfalls associated with traditional outsourcing.

These are trying times for health plans that favor a go-it-alone approach for their operations. Plans looking to move into new markets, expand key capabilities or simply replace employees lost to the "Great Resignation" must compete for talent in an ultra-tight labor market, then pay higher wages that ratchet up their administrative loss ratios. While a global labor strategy might relieve those financial pressures and tap into new pools of talent, plans may not have the scale to pull it off.

Further, those plans looking to pivot into new business lines may lack the bench strength to do so effectively. Meanwhile, their ability to act nimbly to meet today's ever-changing administrative needs and regulatory requirements, insulate themselves from emerging competitors, and drive deeper integration with providers, is stymied by unwieldy patchworks of technology vendors.

In many cases, health plan executives would love nothing more than to align with an outsourcing partner that has the people, programs and technology to help steer the plan through such challenges. Why not swap 15 vendors for one partner with its own platform and team to help run it? Why struggle to master alternative payment models when you can bring in someone who can show you the way? Yet, common fears can lead those executives to balk, worried that a bad outsourcing deal may just trade one set of headaches for another. For a plan accustomed to fixing its own problems—however imperfectly—placing faith in an outside partner can be intimidating.

Such worries are understandable, but they can be overcome. Many are tied to common perceptions of outsourcing as a tradeoff—saving money in return for giving up control or compromising on quality. However, with the right partner these issues can be avoided, especially if you work with a team that offers a "smart-sourcing" model. Smart-sourcing agreements are created strategically and with a holistic view: which capabilities should be outsourced, which high-performing functions should stay in-house, and how will they all integrate to help the plan succeed? These partnerships also build in structures for accountability, so the partner and plan work in tandem, not in silos or at odds with one another. 

If you are considering the help of a truly strategic health plan partnership, here are four common fears and reasons they shouldn't keep you up at night.

Fear #1: I'm going to lose control of day-to-day health plan operations

As enticing as it may be to bring in an operating partner and an integrated IT platform, it's logical to worry about loss of control. Such fears are rooted in the traditional outsourcing model—you pay a vendor to perform a service, and they take it off your hands. Yet, that dynamic doesn't work when you’re handing over major portions of your health plan operations. You want visibility into what's happening every day, and you need to be part of the decision-making process.

At the foundation of a smart-sourced partnership should be a strategic agreement that ensures the partner is accountable for the plan's performance. That agreement should outline mutual goals, concrete metrics and business objectives—as well as financial incentives that align the partner with your goals. Your partner should bring in a group of experts who serve as part of the health plan's core operations team. At the same time, the plan should retain visibility into daily operations and a seat at the table when decisions are made. For example, rather than waiting for reports that come from behind a black curtain, your senior managers and project teams should be part of regular meetings and check-ins, so your actions are fully informed by the latest intelligence from your partner team. If the partner is running your pharmacy benefit management operations, the plan should have a spot on the committee that decides which drugs are on formulary. Similar checks and balances should be in place in other functions you hand to a smart-sourcing partner.

Fear #2: I'm going to lose access to crucial data

We've heard stories from health plans (not our partners) frustrated by their inability to directly access data from vendors' systems. After all, they see it as their own data. Unfortunately, some vendors disagree. As a result, the plans have no ability to independently mine their data or take a deeper dive into results that they've been presented. The barriers foster suspicion that the reports they're seeing are meant to make the vendor look better or help it sell an additional service.

This is entirely avoidable. Transparency is the key to a successful relationship with your business partner. An operational partner should give payors and care teams direct access to raw data so they can keep tabs on activity, utilization trends and more, and draw their own conclusions. Providing this access will not only foster trust but also address the first fear we discussed—helping the plan maintain control.

Fear #3: I will have a never-ending reliance on the outsourcing partner

Some health plan vendors' business models depend on you using their platform, teams and services for as long as possible, and perhaps longer than necessary. While an evergreen relationship with an administrative partner may be beneficial to you, and more beneficial to the vendor, this should never be the only business model.

There can also be instances when your business ultimately wants to build and run its own plan or line of business but lacks the experience or resources to do so. A smart-sourcing solution to the problem may involve implementing a "build-operate-transfer" model in which your partner provides the IT platform, operational expertise and other necessary resources and expertise to get started. The partner would also help integrate the new business processes with the rest of your plan and pair functional experts with each member of your team to train them to run the new operations. A flexible relationship can be set up with the end goal of you eventually resuming full control of the system that you have implemented together with the partner.

Fear #4: My plan will have to lay off valuable workers and will lose institutional knowledge as a result

With their focus on the bottom line, traditional outsourcing approaches can sometimes displace workers who are high performers. These employees possess valuable knowledge of your plan, not to mention the nuances of its member population and provider networks. The outsourced vendor will know their own business well and may prefer to swim in their own lanes, not taking the time to understand your product and the markets where you operate.

In a smart-sourcing relationship, your administrative partner will work with you to evaluate current capabilities and ensure that you can move the work without losing institutional knowledge or bench strength. Do you have a high-performing team of care managers? Why not keep them in place, while integrating them with the new clinical and administrative platforms? Your partner should be seen as an extension of your capabilities, enhancing and strengthening your offerings, and help you optimize talent resources, making room for you and your employees to grow.

Most Importantly…

Smart-sourcing the right aspects of your health plan administration to a strategic partner should create a symbiotic relationship that is built on trust and transparency. When choosing a partner, keep their product and service offerings in mind, but be sure to assess a good cultural fit and define important relationship parameters that are built into your contract and project scope. With the right partner, plans will get access to industry-leading expertise and technology while continuing to steer their own strategic priorities.

About the Author

Emily Rafferty

As president and chief operating officer of Evolent Health Services, Emily is responsible for the overall partner lifecycle, supporting new and existing partner growth strategy, implementation and ongoing market operations. She also has direct accountability for the Evolent Health Services Pharmacy Services team. Emily has been with Evolent for more than five years and previously led the Advisory Services team, working closely with provider organizations to define their value-based strategy as well as designing and building the capabilities required to successfully manage value-based contracts. Prior to joining Evolent, Emily was VP of Provider Consulting at Optum, working closely with health systems in revenue cycle strategy and process design, inclusive of clinical documentation improvement. Emily has deep experience working closely with Medicare Advantage health plans, ranging from strategy and design to network build and contracting to building CMS-compliant programs and operations.

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