Payers Embrace Healthcare IT for Cost Optimization, Member Engagement

Payers are investing in healthcare IT resources to support cost optimization and improve member experience, according to a study from EY-Parthenon and KLAS Research.

As payers face operational and financial pressures, they are turning to healthcare IT solutions for help. Researchers sought to understand what strategies payers prioritize, how much they spend on healthcare IT resources, and what future investments look like.

The study findings reflect responses from over 100 executives across payer entities serving commercial, Medicare, and Medicaid populations. Around 70 percent of respondents were traditional payers; the remaining were provider-sponsored, third-party administrators, and management services organizations.

Cost optimization is a top-three strategic goal for 72 percent of payers, with many focused on controlling medical and administrative costs. Payers must prioritize member engagement to achieve cost optimization with strategies like prior authorization and personalized care plans. Nearly half of respondents plan to focus on improving member experience and growing their membership base over the next two years.

With these strategies in mind, payers of all sizes and across all lines of business expect to increase their overall spending on healthcare IT by 3 to 5 percent in the next two years. The top drivers of increased healthcare IT spending include the need to integrate new technologies, reduce workforce burden, keep up with the growing demand for member enablement, and comply with regulatory changes.

Payers are prioritizing areas of investment that align with their strategic goals. For example, 51 percent of respondents note member engagement as a significant investment area. Payers are also automating processes like prior authorization and streamlining internal system interoperability to help reduce administrative costs.

The top investment area over the next two years is solutions that reduce and control medical spending, including payment integrity, condition management, and utilization management.

When it comes to leveraging healthcare IT, payers can choose to outsource the operations to third-party vendors or manage them in-house. Around 80 percent of respondents outsource some of their operations to a third-party vendor. For operations with significant revenue, regulatory, or compliance linkages, vendors often act as second checks for payers.

National and tech-oriented payers are more likely to manage operations in-house than other payers, though they report using third-party support for clinically focused functions.

Most payers are planning to replace, upgrade, or add on to their solutions without changing the overall number of vendors they work with, the study indicated. When selecting a healthcare IT vendor, payers are most interested in internal and external interoperability, price, reporting analytics, and ease of use.

Despite the growing interest in healthcare IT, payers have reservations regarding generative artificial intelligence (AI) capabilities in solutions. Payers are aware that they must conduct thorough research before adopting generative AI capabilities and establish clear oversight processes, given the implication this AI can have on members. In addition, Healthcare IT vendors must showcase reliable, traceable outcomes to attract payers, according to the study.

Payers who do not invest in healthcare IT face the risk of falling behind competitors on margins, cost structure, and value to members. Identifying areas that would benefit from healthcare IT resources may help payers overcome operational headwinds.