Analysts predict that insurers' use of IT and business process outsourcing (BPO) will grow significantly over the next few years.Already, several major agreements have been forged, including a recent deal between Blue Cross & Blue Shield of Rhode Island and Perot Systems Corp.

At press time, the two companies had finalized their contract for Perot Systems, Plano, Texas, to manage the bulk of the Providence, R.I.-based health plan's IT and business process operations.

Under the 10-year arrangement, valued at $570 million, Perot Systems will deploy its DIAMOND enterprise technology and transform the health insurer's back-office operations.

"The scope of the outsourcing (arrangement) is . . . basically our whole claims processing cycle, which is everything from getting a claim in-to paying it," says David Zink, CIO and governance executive at Blue Cross & Blue Shield of Rhode Island.

That includes both information technology and business process functions associated with document services, mail services, claims processing, membership enrollment, and cash disbursements.

Effective June 1, Perot Systems also hired all 600 Blue Cross & Blue Shield of Rhode Island employees affected by the outsourcing deal.

The health insurer is retaining management of its Web development and call center operations because these areas as more strategic, Zink says.

"We're trying to transform ourselves from a claims processor into a health and wellness company that is interested in the health and wellness of the residents of the state of Rhode Island," he says. "We're outsourcing the tactical portions of the company so we can concentrate on our core competencies and transform the business."

A new focus

Transforming the business will involve creating health and wellness programs-some of which will be announced this summer-aimed at changing the behavior of Blue Cross & Blue Shield of Rhode Island's members.

"If we can impact and change their behavior, they will actually improve their health over time-and thus eliminate the claim in the first place," Zink says.

"It's great to be able to reduce your premium costs and it's great to be able to pay a claim fast. But it would be better to not even have a claim," he says. "And how do you do that? You improve the health of the people."

While Blue Cross & Blue Shield of Rhode Island puts its efforts into improving the health of its members, Perot Systems will handle the the health plan's claims operations and replace its back-office systems.

Perot's DIAMOND enterprise system will replace 70-80 IT systems and thousands of applications that make up the health plan's claims infrastructure, Zink says.

Based on Web architecture, DIAMOND interconnects providers, payers, employers and consumers for real-time claim adjudication and secure data sharing and transaction processing.

The cost of implementing such a system on its own is estimated between $30 million and $50 million by the health plan.

Instead, through this outsourcing arrangement, Blue Cross & Blue Shield of Rhode Island is essentially getting the new system free, Zink says.

In addition, the company plans to save another $100 million in hard costs by outsourcing to Perot, as well gaining the intangible benefit of being able to focus on its new strategic direction rather than spending its resources on the tactical processes of paying a claim better, says Zink.

He expects the system to be in production in 18 months. And, in a phased approach, all 650,000 plan members will be transferred to the new system within about 36 months, as group contracts are renewed.

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