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How payers can thrive by tackling common transformation challenges

Overcoming these hurdles can drive sustainable growth and customer-centric success.


In brief
  • Payers face margin pressures, regulatory challenges and strategic misalignments, all threatening long-term growth.
  • Embracing transformation with foresight can align payer initiatives to strategic goals, unlocking value and efficiency.
  • Strategic steps and systems thinking enable companies to optimize resources, drive change and secure competitive advantage.

Across today’s health care landscape, payers are facing shifting marketplace dynamics, significant regulatory pressures and other challenges. The resulting financial strain and margin erosion have led to both slowing top-line revenue growth and increasing medical and administrative expenditures, threatening health plans’ ability to invest in the customer-centric capabilities needed to win business.

Figure 1: Margin pressures for payers

Margin pressures for payers

Amid these headwinds, the old paradigm of deploying strategies designed to simply sustain the business is no longer a viable option for payers, impeding their ability to maintain financial sustainability and drive long-term growth. To succeed in this environment, companies must embrace a transformation mindset with intention and foresight. This proactive approach will enable payer organizations to not only survive in the present but also thrive for the long term.

 

The imperative for business transformation

Historically, payers have largely operated with a mindset focused on simply sustaining their siloed business functions. This stay-the-course approach has allowed established business units, which are often siloed, to make unilateral capability decisions and mature processes within their respective domain. In today’s environment, this course of action can significantly hinder companies’ ability to transform intentionally and build value. For instance, payers often launch well-intentioned but unstructured initiatives that are not clearly aligned to a broader organizational strategy. Examples of these misguided efforts include the following:

  • Consolidating technologies across the organization without also rationalizing related business operations
  • Developing strategies to address business needs and regulatory requirements but failing to assess their impact on the company’s current operations and tech infrastructure
  • Duplicating capabilities across business units instead of streamlining how they are sourced and shared across the organization

Based on EY experience, as much as 40% to 60% of payers’ pipeline initiatives lack strategic alignment or a clear value proposition, thereby siphoning off resources from programs with higher potential. In the wake of these missteps, companies are seeing significant challenges around weeding their portfolios effectively, allocating capital strategically and optimizing the most promising opportunities quickly. This stagnation leaves many payers ill-equipped to invest in the very capabilities that drive strategic business growth.

 

Transformation challenges: understanding the why

As payers seek to understand whether their organization is equipped to transform with confidence, there are several key questions company leaders should be asking:

  • Do we regularly leverage a standardized way to determine where to allocate limited resources across the organization?
  • Do we regularly demonstrate the ability to quickly identify requirements and optimal solutions to achieve business needs, develop a business case and clear value proposition for these solutions, and create a roadmap to drive approvals and activation?
  • Does our organization regularly collaborate with ease across functional areas to mitigate redundant and overly complex tech infrastructure and operations?
  • Do we regularly demonstrate the ability to effectively anticipate the change management and operational readiness impact of initiatives so that we implement efficiently and maximize benefit realization?

For payer organizations that didn’t respond to these questions with a confident “yes,” understanding the root causes as early as possible in the portfolio management or project lifecycle (and before making any major investments in technology and other business expenditures) will be key (see Figure 2).

 

Figure 2: Common root causes of transformation challenges

Common root causes of transformation challenges

A path forward for payer organizations

Transforming the business both intentionally and proactively to achieve financial sustainability and long-term growth requires a series of deliberate steps. The below actions can enable payers to confirm alignment with larger strategic objectives more quickly, gather key cross-functional perspectives, and set a strong foundation for successful delivery and improved speed to benefit realization.

1. Clearly articulate the company’s future aspirations to drive competitive advantage and long-term growth, including the role of levers such as membership growth, reimbursement optimization, revenue diversification opportunities, operational efficiency and medical cost management.

2. Employ systems thinking to determine what elements of the company’s commercial strategy and internal operating model (across talent, process, governance, data and technology) need to change to drive the organization’s future aspirations.

3. Define initiatives to drive change, evaluating and prioritizing these initiatives based on standardized criteria aligned to strategic objectives and regulatory requirements.

4. Rationalize the company’s portfolio and identify new programs and services that should be initiated, existing program and services that should be continued, and existing programs and services that should be ceased to unlock funds that are currently aligned to initiatives that won’t deliver clear value.

5. Leverage these newly unlocked resources as a means of self-funding to rapidly validate and mature the highest-value initiatives through an integrated business architecture and tech architecture lens.

6. Identify lessons learned and operationalize insights gained from steps 1–5.

Summary 

Confidently navigating the complexities of today’s payer market is key to unlocking long-term growth and value. Payers that effectively identify and remediate the root causes of the inefficiencies described above, tactically align with the organization’s broader strategic objectives, and critically analyze changes through an integrated business architecture and technology architecture lens will be best positioned to thrive in this environment. The future belongs to those who act decisively, morphing challenges into opportunities for sustained success.

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