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How health care payers are focusing IT spending as costs rise

Download the 2023 EY-Parthenon and KLAS Research Payer Tech Study to discover where payers are making strategic IT investments to drive growth.

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About The 2023 EY-Parthenon and KLAS Payer Tech Study

Health care payers face many challenges that are fundamentally affecting their core business model – higher than expected medical costs from rising demand for health care services and specialty drugs, disruption from employers’ move to self-insurance and providers taking on more risk, increased competition from big tech and an increasingly stringent regulatory landscape. Combined, these macroeconomic forces and industry trends are putting pressures on payer margins, forcing them to re-consider their cost models and growth options, and re-evaluate the underlying capabilities that enable them to achieve these.

With these trends in mind, EY-Parthenon professionals and KLAS Research interviewed and surveyed executives from a diverse mix of payers – across types (traditional vs. provider sponsored vs. tech-first), sizes and scope of coverage (nationals, regionals, Blues, etc.) and lines of business (LoB) – to understand their overall strategic priorities, the impact on spend for health care IT (HCIT) solutions, and the future outlook for specific subsegments of solutions.

Though cost is currently top of mind, payers are also focused on long-term growth; strategies for growth vary from LoB expansion to business model expansion, with the preferred strategy being closely correlated to payer size and the inherent access to resources and capital.

A key for us will be streamlining our processes using both technology and AI to help drive our automation. That is one of our priorities because we have fallen behind on it. We still have a lot of manual report deliveries, manual processes, and manual validation tools. We want to decrease our application stack, and automation is a driver of that

Chief Technology Officer, provider-sponsored health plan

Image 1: Nearly 72% of surveyed payer executives say cost optimization is one of their top three priorities.
Image 2: 49% consider integrating cutting edge tech to be among the top three priorities.
Image 3: 51% say member engagement is a substantially significant area of investment.
Image 4: Common thread: payers prioritize improved, efficient resources – with a particular emphasis on HCIT solutions (tech and tech-enabled services).

HCIT investment questions that the report can help answer

The 2023 EY-Parthenon and KLAS Research Payer Tech Study report can shed additional light on the following questions that may be useful for a range of stakeholders within the health care ecosystem:

Demographics

The analyses and findings shared in this report are based on 102 clean and complete responses to the survey from relevant respondents. A clean and complete response is one where the respondent has taken then time to go through the survey and provide thoughtful responses. We screen out any response suspected of straightlining (i.e., selecting the same response option for each question) or those completed significantly under the anticipated time required to complete the survey.

The survey includes responses from multiple payer entities (national, Blue Cross Blue Shield (BCBS), non-BCBS regional, third-party administrator (TPA) and management services organizations (MSOs), etc.) servicing commercial (self-insured and fully insured), Medicare and Medicaid lines of business. Approximately 70% of the responses came from traditional payers (national, BCBS, non-BCBS regional), while the rest consisted of provider sponsored, new age, and TPA and MSOs.

Payers were segmented by the primary LoB served (40% or higher of total covered lives), as well as by the size of the total covered lives, as follows:

Jumbo: 10.0m+ covered lives

Large: 3.0m–9.9m covered lives

Medium: 500,000–2.9m covered lives

Small: <500,000 covered lives

Respondents included were either the primary decision-maker or played a significant role in the decision-making process for HCIT vendors at their organization.

Title of respondents surveyed: C-suite (CEO, CFO, etc.), president, executive or senior vice president, director

Methodology

The survey consisted of ~60 questions on a range of topics pertaining to HCIT investment themes and objectives, both historically and within the near term. Respondents were also asked to reflect on their experience using and evaluating specific HCIT solutions to explore HCIT investments at a micro level.

The target audience was provided screener questions to identify those who had relevant experience and involvement in selecting

HCIT solutions within their payer organization

The survey was web based and was fielded over the course of 1.5 weeks. Responses were then recorded and segmented to pull insights from across the payer size, plan type and LoBs primarily served.

Supporting research

Survey findings were complemented by primary research from KLAS, which conducted outreach phone calls with 22 decision-makers from payers of all sizes and various types (national, regional, BCBS, Accountable Care Organizations (ACOs), provider sponsored) across the US to further understand the rationale behind payers’ HCIT investments and strategies.

Acknowledgements and contributions

The authors would like to thank the following team members for their invaluable contributions: subject-matter advisors Mallory Caldwell, Melinda Durr, Dan Shoenholz and Abby Johnson of Ernst & Young LLP. EY-Parthenon research contributors Chantel Brown, Caroline Skinner, Nickolas G. Monterroso, Fedjine M. Victor and Max J. Fuster. KLAS Research contributors Aurene Wilford, Joe Van De Graaff, Rebecca Hammond and Joel Sanchez.

We thank all survey respondents and interviewees for their contributions to this initiative.

Produced in collaboration with KLAS Research.

KLAS is a research and insights firm on a global mission to improve healthcare. Working with thousands of healthcare professionals and clinicians, KLAS gathers data and insights on software and services to deliver timely reports and performance data that represent provider and payer voices and act as catalysts for improving vendor performance. The KLAS research team publishes reports covering the most pressing questions facing healthcare technology today, including emerging technology insights, that provide early insights on the future of healthcare technology solutions. KLAS also fosters measurement and collaboration between healthcare providers and payers and best practice adoption. Learn more at klasresearch.com.

The team

Anirudh Goel
Principal, EY-Parthenon, Ernst & Young LLP

Deblina Ghosh
Principal, EY-Parthenon, Ernst & Young LLP

Niyati Upadhyayula
Director, EY-Parthenon, Ernst & Young LLP

Jennifer Hickenlooper
Senior Insights Director, KLAS Research

Ruirui Sun, Ph.D.,
Insights Manager, KLAS Research

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