Innovative, unique best practices are the cornerstone in establishing a competitive advantage in the claim marketplace. Organizations that want to achieve and sustain a leadership position are demanding claim systems with powerful customization capabilities, which enable them to tailor the software to meet the needs of their proprietary claim strategy.

At one time, policies and procedures for making day-to-day claim decisions were hard-coded into a claim system. Changing a process meant re-tooling the software, a task only a programmer could perform. In today's business climate, organizations must respond quickly, without waiting for IT assistance. These organizations need the ability to implement process changes on their own and on the fly.

Advanced claim systems provide a wide breadth of features and functions, with powerful, easy-to-use customization options. To maximize your system's capabilities, there are several considerations to optimally align a system with your business needs.

A Plan to Optimize

As claim management becomes more sophisticated, operational needs have exceeded traditional capabilities. Organizations are developing a strategic plan to select, implement, and customize advanced systems, so their IT infrastructure minimizes data and functional redundancies, and supports the organization's unique vision, strategy, and objectives. The plan also emphasizes the importance of automating administrative functions and seamlessly sharing information across the claim value chain.

When selecting a new system, an organization must consider the spectrum of products and their respective potential for customization. Traditionally, a framework model does not offer many built-in, out-of-the-box functions. Organizations that purchase this type of system end up building a majority of the proprietary framework.

Shrink-wrap systems, on the other hand, provide in-depth insurance intellectual property (IP), allowing organizations to quickly implement common processes, workflows, and claim practices. Customizations to shrink-wrap systems, however, require the vendor's involvement and, if the system is significantly modified, upgrades to newer versions became cumbersome, if not impossible without losing the customizations that were made.

Lastly, there is a third “hybrid” option that provides both powerful customization capabilities and insurance IP. An organization that implements a hybrid model reaps the benefits of significant existing functionality and optimal customization of the system without jeopardizing future upgrades.

If an organization chooses to re-engineer an existing application, it should use this opportunity to consciously question every existing process, procedure, and workflow, and when appropriate, plan to redesign for each process to achieve improved efficiency and performance.

Streamline Workflow, Reduce Workload

A key goal of many organizations is to achieve a high level of claim-processing “throughput,” meaning simple, straightforward claims are processed without any human intervention. To achieve high throughput, a claim system must be configured to automatically review incoming claims, ensuring that they fit the criteria of being simple and straightforward — such as a one-doctor visit, medical-only claim. If the claim meets the defined conditions, it is immediately routed for payment and closed. Organizations then can focus adjuster time and resources on more sophisticated claims that require special handling.

An ideal claim system also will offer related insurance functions, such as risk management, medical bill review, event reporting, document imaging, policy underwriting, and case management in one integrated platform. Clients then can pick and chose the modules that service their unique workflow, processes, and business objectives.

By bringing together a wide breadth of features, functions, and data, organizations have more capability to optimize end-to-end efficiency and performance. A consolidated platform also minimizes the need for and cost of system integration, as well reduces the time to market with new system capabilities.

A system also must provide an organization with the flexibility to configure the look and feel of the user interface. Since one of the primary functions of a claim system is to act as a data repository, the screens must provide flexibility for collecting an assortment of data. Organizations should be able to change the labels, order, security, and formulas for various fields, as well as add entire screens to ensure the complete capture of claim information.

At the organizational level, management should be able to restrict user access and functionality within the system. For example, certain users may be granted view-only capabilities. User restrictions help to ensure quality control and enforce regulatory compliance. For example, one organization configured its claim system so that adjusters could not indiscriminately set a high reserve or change reserves without first triggering a supervisory review. Such restrictions also enable more consistency throughout the claim organization.

Integration Hubs & Business Rules

Claim organizations want integration among their various systems. To enable consolidation, a claim system must be highly interoperable and easily interface with related applications, such as human resources and finance systems.

Today, organizations are using data integration methods to create a centralized claim hub. For example, browser-based technology incorporates various system features and functionality, and related applications — such as payroll or managed care systems — are essentially “plugged into” the browser-based backbone using electronic data interfaces (EDI) or web services to link the systems together.

The claim hub collects and stores data in one centralized location, allowing various stakeholders to gain access and exchange information via a single point of entry. From the hub, organizations perform real-time claim audits, which enable claim managers to fine-tune operations, achieve a tighter lifecycle, and ensure that cost containment occurs at key junctures of the claim process.

Many claim organizations also use business rules to monitor activity, trigger alerts, and automate workflow. These organizations want even more power and flexibility to automate increasingly complex processes and decisions. Advanced business rules offer more sophisticated business logic to automate multi-variable decisions. These rules also allow organizations to respond quickly to changing market conditions by enabling users to configure and modify rules on the fly.

There are generally two types of rules engines: embedded (proprietary) and independent (third party). An embedded rules engine is an intrinsic part of the claim software, and is tightly integrated within the application. Independent rules engines, as the name suggests, are independent of the claim system. Although they provide more flexibility and robust customization capabilities, configuring these rules requires more technical expertise.

With access to both types of rules engines, organizations have greater potential for growth and expansion due to efficient processes and workflows. Business rules enable organizations to gain more control over critical business processes and decision points, which allows them to improve market responsiveness and achieve competitive advantages.

Additional Challenges

The biggest challenge is often identifying where claims are coming from and how to effectively reduce and prevent them in the future. In order to leverage their vast amount of claim data, organizations need sophisticated data analytics and reporting capabilities to break down and comprehend their claim activity.

Through the Internet, organizations automatically generate and distribute regularly scheduled reports to stakeholders. These reports are designed to outline activity by accident type, injury code, and department. Reports also track key performance indicators and identify cost drivers, as well as areas of high claim frequency and severity. Using these analytical tools, organizations derive the knowledge and insight they need to target critical areas with loss-prevention programs.

Many organizations may require the added flexibility to outsource specific claim management tasks or applications. To meet this need, organizations are turning to next-generation outsourcing models. For example, business process outsourcing (BPO) enables organizations to contract out a specific business function to a third party, such as medical bill review.

For software applications, many claim organizations use a “Software as a Service” (SaaS) model, in which they essentially subscribe to a browser-based application and outsource the maintenance of this application to the software vendor. SaaS enables organizations to immediately leverage a sophisticated application without the time or cost of having to build the infrastructure from the ground up.

Customizable claim systems enable organizations to handle an increased volume of transactions without jeopardizing performance or requiring additional staff. Automation and workflow management tools inherent in these systems increase adjuster productivity and significantly impact the bottom line. In the end, powerful claim management and streamlined workflow enables organizations to operate in a cost-efficient manner, and positions them to be market leaders far into the future.

Randy Wheeler is CEO of Valley Oak Systems, Inc., an Aon company. He may be reached at rwheeler@valleyoak.com, www.valleyoak.com.

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