Study: IT Spending Soars In Managed Care

Managed-care organizations doubled their IT spending between 1999 and 2001, says a benchmarking study released this week by Cap Gemini Ernst & Young.

The 2002 Managed Care Benchmarking Study says much of the spending is related to managed-care organizations becoming compliant with the privacy, security, and electronic transaction requirements of the federal Health Insurance Portability and Accountability Act.

However, as those companies consolidate or replace systems to meet HIPAA compliance, "they are also evaluating what else they should be doing," says Cap Gemini VP Peter Kongstvedt, the author of the study.

Among the IT investments being made along with HIPAA-related spending are improvements to sales and marketing systems, data warehouses, and medical-management systems, he says. For instance, related to data warehousing and medical-management systems, many managed-care organizations have built or are developing "predictive modeling" applications for disease management and preventative care programs.

Such applications ultimately can help members better manage their health problems and avoid expensive health complications. For instance, these applications can trigger physician reminders that a diabetic patient should have regular blood testing, Kongstvedt says.

Managed-care organizations include health-care payers, such as insurance companies, health maintenance organizations and Blue Cross-Blue Shield companies. For the study, Cap Gemini surveyed nine large managed-care organizations that provide health coverage to 16 million individuals in the United States. It compared spending for 12 months in 1999 with 12 months in 2001.The survey was fielded in 2002 and analysis was completed and released this week.

The organizations' mean IT spending in 2001 was 2.9% of revenue. More specifically, they spent an average of $5.41 per member, per month on IT in 2001, 92% more than in 1999.

Kongstvedt says that while some of the uptick in IT spending might represent one-time HIPAA-compliance related work, the increase "is more than a blip." That's because managed-care organizations must maintain compliance and are continuing to automate processes that are still predominately manual, such as billing and member enrollment.