A matter of trust. (Viewpoint).

Turn over my data to someone else? House software hundreds of miles away? Let a vendor perform critical business processes? Sounds scary, doesn't it? Yet this is what application service providers (ASP) have built businesses on.

Application hosting and outsourcing are entrenched in

Yet application hosting was viewed with suspicion by the healthcare industry just a few years ago. Data security and systems availability were specific concerns, but what it boiled down to was a perceived lack of control--over information, operations, staff--that made health plans uncomfortable.

According to Gartner, those who outsource do so because their organizations lack time and skills to implement systems as quickly as needed. In the end, some healthcare payers made the leap of faith to application hosting because fast implementation of complicated systems became critical for competitive reasons. Payers needed to save money and still deliver quality services--and they were running out of options to make that happen.

Nowadays, we have found that worries about application hosting have largely disappeared. Recent experience shows that healthcare payers usually look for application hosting and business process support, rather than turnkey service. The question today doesn't appear to be whether to outsource, but rather with whom to outsource.

Business Partners

ASPs have shown the healthcare industry we can do what we say we can do. We have delivered increasingly complex technology, such as N-tier payer solutions. We have made data available to those who should see it and kept it safe from those who shouldn't. We have met performance standards that guarantee systems are available and quality work gets done on time. We have spotted and implemented process improvements, such as how to speed referrals or get more accurate files from providers, for our customers.

We have shown that we aren't just vendors. We are business partners that help health plans to operate more effectively.

Because we have met our commitments, we have received support from influential sources. For example, a Hewitt Associates study suggests that outsourcing adds strategic value, instills best practices and improves quality and service. We also think health plans are listening to the CIOs they have hired from outside the industry who have had positive experiences with ASPs and see them as an effective complement to in-house IT resources.

In fact, we believe healthcare ASPs have benefited from a general trend toward outsourcing. Outsourcing started small, with maintenance services and food services, for example, but companies focusing on core competencies have driven it deep into their organizations. A quick search of the Web shows companies outsource virtually any job in any function and continue to spend more money doing it.

Higher Performance

We expect challenges to the healthcare industry to remain the same in the near future: cost-control, consumer choice, complying with regulations including HIPAA, and prompt pay requirements. Tactics to meet those challenges will vary from plan to plan. Some might establish a defined contribution plan to manage costs for employers and offer control and flexibility to consumers. Others might move to Web-based administrative systems.

Whatever the tactics, all health plans will examine operations to make sure they are even more effective. To maintain the trust we have established, ASPs must do the same.

We must offer more than basic payer applications. Customized solutions, value-added applications and full business process outsourcing will be key to further acceptance of outsourcers. To offer those solutions quickly and cost-effectively, we will need to partner with companies that have developed innovative applications, rather than building everything in-house.

We must deal with increasingly complex technology. Payer software will continue to develop. Partnering for new applications means building interfaces to those applications. For example, my company is working to integrate Web Exchange, which will allow health plan constituents to perform transactions via the Internet, into our main payer products. Also, new healthcare models such as defined contribution plans bring technology challenges. To support one such plan, my company developed a process to allow a claim to link to all possible fund reimbursements without multiple submissions.

We must meet higher performance standards. Health plans seeking competitive advantage want to improve member service and provider relations, and one way to do that is to pay claims quickly and accurately. Customers want applications and data to be available virtually 100 percent of the time; 98 percent is no longer good enough. They want claims to be processed in 14 days, not 21 or 30. Those standards may be tough, but we need to achieve them to retain customer confidence.

Finally, we must always remember that health plans need to control costs. We need to give them information that helps them recognize their true costs and drive down expenses. While for competitive reasons health plans can be reluctant to reveal ROI information, several have been more willing recently to share their costs so we can understand how to help them save money--and ASPs and business process outsourcers do that. One study from IDC on general ASP implementations shows outsourced hosted applications brought a 404 percent return on investment over five years.

The rewards of keeping the healthcare industry's trust will be great. Gartner predicts that by 2007, 60 percent of healthcare organizations will likely spend more on external IT support, consulting and outsourcing services than on internal staff.

With the possibilities for growth, we have only ourselves to blame if we fail. Solutions may not always be obvious or easy, but it's our job to understand what our customers need and provide it--consistently, dependably, reliably.

After all, it's a matter of trust.

Brenda Smoker is chief operating officer at Synertech, an application services provider and business process outsourcer to the healthcare payer industry, Harrisburg, PA.