Background
Sherlock Company’s performance benchmarks help health plans to determine whether they operate at best practice and provide insight as to what functional areas represent the most attractive opportunities for management focus. Our earliest benchmarking was of publicly traded firms and Blue Cross Blue Shield Plans based on 1997 data, and to date our experience comprises 300 health plan years.
The benchmarks facilitate comparisons and assist in the management of health plan administrative expenses. They are useful to operational and financial managers of health plans, consultants and third-party vendors as well as to Boards and persons charged with corporate finance responsibilities, including strategic planners and investment bankers.
Focus on administration is increasingly central to the success of health plans because:
- Health plans have less ability to make sharp reductions in the cost of medical care. Moreover, health plans often find that customers are unwilling to reward medical cost containment with larger membership if that cost containment is achieved through limited panels or aggressive utilization control protocols.
- Employers are, however, interested in having health plans reduce the cost of transaction processing in such areas as member relations, enrollment and claims. The continuing popularity of ASO / ASC arrangements is testimony to this fact.
- The increasing importance of consumer-directed healthcare emphasizes the importance of the low cost of transaction processing.
- As the growth rates in tightly controlled managed care products have declined, marketing related functional areas, such as sales, marketing, commissions and advertising are subject to increasing scrutiny.
- The efficiencies brought about through the widespread use of Internet technologies make the management of administrative expenses as much of a base-level requirement as a competitive advantage.
- While health insurance plans have always been in the public eye, the current political environment has provided an unusual degree of scrutiny of their administrative costs. While some politicians favor steps to provide insurance to people not now covered by health plans, this entails a significant costs. Since increasing taxes and decreasing payments to providers are politically unacceptable, reductions in administrative expenses are an attractive alternative.
The
SEER studies are composed of universes of Blue Cross Blue Shield Plans, Larger health plans, Medicare-oriented, Medicaid plans and Provider-sponsored health plans. Combined, these reports analyze the administrative expenses of health plans serving more than 35 million members. Data compiled in
SEER is provided by companies who elect to participate and, in return, receive copies of the analysis.
