A core concept of cloud computing is the ability to scale up or down your computing resources depending on what's needed. Paul Horvath, CTO of TC3 Health, explained how his company uses cloud computing in a recent interview with InformationWeek.

TC3 (Total Claims Capture and Control) Health is in the business of helping insurance companies identify such things as inaccurate health care payouts and fraudulent claims. Its core business system, which it calls TrueClaim cost containment platform, used to run on an in-house SQL server "that would scale up to a million claims a day without a whole lot of effort," Horvath said.

About a year ago, TC3 decided to improve its claim analysis capabilities by scouring more historical data related to claims. That meant going back to health care companies to get more records, and "that's when the massive files came in," Horvath said. While customers loved the new service, Horvath had to figure out a way to process everyday data related to tens of millions of claims without buying a lot more servers.

He chose Amazon Web Services to do that processing, giving him the flexibility of scaling server power as needed in Amazon's Elastic Compute Cloud. Health care providers and insurers send the raw data to TC3. Using an abstraction layer that sits on the database from a company called Pervasive Software, any data related to cost containment is extracted, formatted, and sent to Amazon EC2 for processing. The abstraction layer prevents certain personal information from going to Amazon to keep TC3 in compliance with the Health Insurance Portability and Accountability Act.

TC3 uses the software and services of a company called RightScale to monitor its systems in the cloud, and scale up and down based on the computing power it needs. Amazon reports the results of the processed claims back to a database at TC3. Business analysts then mine the data and develop reports from it that help insurance companies and others involved in health care payouts detect fraud, manage out-of-network claims, and model predictions related to payouts.

TC3 lists among its customers The Loomis Co., Automated Benefit Services, AIG Medical Excess, The ODS Cos., and Deseret Mutual Benefit Administrators.

For some additional perspective on TC3's strategy, InformationWeek has launched a Web site called Plug Into the Cloud, which is dedicated to understanding cloud computing strategies.