Beyond the back office: Why medical cost is so often overlooked

By: Eric Peterson, Vice President of Health Care Operations Marketing, Optum

This is the 2nd blog of our eight part series “Bending the Cost Curve with Comprehensive Sourcing.”

When you think of effective sourcing, likely the focus is reducing administrative costs. From claims administration to customer service to IT support, specific cost reduction efforts have helped improve administrative efficiency over the years.  But what about medical costs – that 80-85% of the equation that can be holding you back from sustainable growth?

Many payers view functions that help manage medical expenses like network, utilization and care/disease management as core competencies … those areas where they bring value to their clients. But what if those are the very areas that can yield the most cost optimization in a sourcing strategy? After all, there was a time when it was unusual to fully source pharmacy benefit management. Now it’s simply sound strategy to contain pharmaceutical costs.

Stronger together

Consider specialty areas of care management where a payer may have less experience (for example transplants, behavioral health or cancer).  Aligning with a partner experienced in these areas can ensure best practices are implemented with care programs.

There are also opportunities to drive network enhancements that don’t require giving up control where a payer’s strengths exist.  For example, every network has markets, geographies or specialty areas where improvement opportunities exist.  Sourcing strategies can help fill gaps and bring in centers of excellence to improve costs per claim in underperforming areas.

Think beyond P&L siloes

The risk in having a siloed mentality when approaching sourcing opportunities is that improvements in one area can lead to inefficiencies or ineffectiveness in others. That’s why a comprehensive approach – one that considers administrative and medical expense as part of a total cost management strategy – drives the greatest value.

In the “Achieve Breakthrough Savings for Payers” webinar where we review Everest research findings, participants were polled on whether they had considered the value of a comprehensive sourcing approach. None had, but now all are.

What part of the medical/administrative cost equation should you consider sourcing? What exponential value could you derive from a comprehensive strategy that aligns administrative best practices with medical expense management?

Optum partners with payers like you to provide the solutions and guidance to unlock your ideal cost-saving value drivers. Learn more in this blog series and the resources below.



Read the Everest White Paper

Addressing Payer Costs through a Comprehensive Model: A Blueprint for Achieving Breakthrough Cost Savings

Watch Jimit Arora, Partner, Everest Group

Identifying the Most Optimal Sourcing Model from a TCO Perspective

View the Everest Infographic

Payers Can Save Up to 7x More through a Comprehensive Model

Connect with Optum to modernize your health care ecosystem.


Catch up now on the articles you’ve missed in our “Bending the Cost Curve with Comprehensive Sourcing” series:

Part 1: A case for thinking big: Driving breakthrough cost savings 

Part 2: Beyond the back office: Why medical cost is so often overlooked

Part 3: Enabling success: The importance of IT infrastructure

Part 4: Beyond BPO: The next evolution to yield greater cost savings

Part 5: Reducing Total Cost of Ownership: Business intelligence is the differentiator

Part 6: Barriers to best-in-class: The case for articulating your full value

Part 7: Gaining traction: How to discuss comprehensive sourcing with stakeholders

Part 8: Achieve breakthrough cost savings: Five first steps


About the Author:

Eric Peterson, Vice President, Health Care Operations Marketing, Optum

In his role at Optum, Eric Peterson leads a team focused on clearly and distinctly representing our capabilities in the areas of claims payment, quality optimization, operational best practices, technology innovation and member/patient engagement. Before joining Optum in 2013, Eric most recently worked for Anthem Blue Cross Blue Shield in various roles spanning corporate development, corporate strategy and marketing over seven years.

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