December 8, 1997
Oxford Health Overhauls IT In Attempt To Recover
New systems will double claims-processing capacity
Oxford's IT overhaul, which includes replacing Siemens Pyramid machines with three Sequent multiprocessors, illustrates how important IT has become for the health industry.
The new systems will double Oxford's capacity for claims processing, billing, and other key applications to support a membership that has soared 20-fold to almost 2 million in five years, says Kevin Hickey, the company's executive VP of operations and technology.
Inadequate capacity of Oxford's Pyramid systems delayed claims processing and led to "significant down
time," Hickey says. "Everything slowed down as we added users and processing requirements." Also, a year-long project to migrate Pick-based applications to Oracle resulted in data corruption that went largely unnoticed until it was time to renew group memberships, Hickey says.
Because of the problems, he says, the company underestimated the payments it would have to make and overestimated premium revenue, contributing to a third-quarter loss of $78.2 million. Oxford's IT staff has done "massive data cleanups" and has now caught up, with help from outside contractors, Hickey says.
Big IT problems are not uncommon in health care. One cause is the complex data related to complicated health-care contracts, says Jim Anderson, a consultant in Andersen Consulting's health-care practice. And in an industry undergoing massive consolidation, many providers have problems integrating systems of acquired companies.
Two weeks ago, Pacificare Health Systems Inc. in Santa Ana, Calif., said it was taking a $115 m
illion to $145 million charge related to its acquisition of FHP International Inc. FHP's claims-processing operations were "out of sync" with medical costs paid by the company, says a Pacificare spokeswoman.
Paul LeFort, CIO of United Healthcare Corp. in Minneapolis, says that after about a dozen acquisitions, United has learned how to make the process as painless as possible-but has "lots of scar tissue" to show for it. "We outsource our data centers to IBM and Unisys and our network to AT&T," he says. "When we need more horsepower, we call them up."
With additional reporting by
Martin J. Garvey
xford Health Systems was set to flip the switch last week on new business systems it hopes will get its fast-growing health-maintenance business back on track, after a dismal third quarter linked to problems with an earlier IT setup.
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