Beyond BPO: The next evolution to yield greater cost savings

By:  Liz Farrell, Director, Strategic Product Management, Optum and Belur Manjappa Chittaranjan, Vice President, Strategic Product Management, Optum

This is the 4th blog of our eight part series “Bending the Cost Curve with Comprehensive Sourcing.”

Business Process Outsourcing (BPO) is a recognized approach to reduce costs. Across industries, organizations have seen the value of having vendors handle aspects of their operations so they can focus on their core capabilities. However, with this model, actual cost savings can be diminished due to:

  • Technology — BPO is typically delivered on legacy technology that is highly fragmented (some would say “duct taped”) and increasingly complex. Moreover, it is also capital intensive to acquire, implement and upgrade.
  • Inflexibility — Traditional BPO requires longer times to implement process changes — time that erodes competitive advantage in a rapidly changing market.
  • Lack of alignment — Siloed efforts may yield initial savings and process improvements; however, these efforts sub-optimize the operational and financial effectiveness and efficiency needed to meet business challenges and the changing market place.

The difference BPaaS delivers

That’s where traditional BPO models are giving way to Business Process as a Service (BPaaS) —a strategy that focuses on total cost of ownership and pushes vendors to deliver higher-value business outcomes. Like BPO, BPaaS performs core and adjacent administrative functions. But BPaaS does so by addressing all three challenges above. Here’s how:

  1. The modern health administration technology platform — Because BPaaS is delivered via a cloud-based model, you get the latest technology for little or no capital investment on the payer’s part and the vendor is responsible for keeping the technology current. What’s more, this model enables a payer to keep its data in house, not accessible by multiple vendors, as it would be with BPO — thus greatly reducing security concerns from multiple data interactions.
  2. “aaS” to deliver flexibility and speed — With BPaaS, services are consumed as a service, making the BPaaS process more flexible and aligned to revenue/membership as compared to BPO. New opportunities require highly scalable ways to manage resources and update processes and technology. Cloud-based technology and services allow a payer to more easily and less expensively expand and contract as needed.
  3. Incentives to drive alignment — Historically, BPO pricing was based on transactions or even priced per headcount. That’s a key difference with BPaaS, where — with per member per month (PMPM) pricing model —a vendor is incented to find efficiencies, not just employ more people. In this model, the payer and vendor partner to determine the best service approaches and ensure a positive experience for all stakeholders, while identifying and managing efficiencies across the system over time.

Would BPaaS benefit your organization?

Ask yourself these questions.

  • Do you have the time, budget and resources to modernize? BPaaS is built on a modern, agile technology platform that creates a streamlined experience for all who interact with it.
  • Is a competitive advantage a priority in the markets you serve? BPaaS enables you to compete and win with lower cost and more innovation against larger companies.
  • Are you able to grow quickly with minimal internal pains? It’s not enough to just reduce costs. To increase revenue, you have to expand. BPaaS provides the flexibility and scalability to fuel growth.

Make 1 + 1 = 5

Comprehensive BPaaS enables savings beyond reducing administrative and IT costs by adding value drivers to also achieve medical expense savings and incent innovation. This includes payment integrity and care management to create a truly comprehensive model that delivers full-spectrum cost impact.

But you don’t have to dive into the deep end right away. You can create the BPaaS implementation approach that best reflects your strategic goals. One health plan may want to increase data collaboration as a priority. Another may seek to reduce overpayments. Your goals drive the BPaaS strategy, timeline and implementation plan that is right for you.

Optum partners with payers like you to provide the BPaaS solution 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 Authors:

Belur Manjappa Chittaranjan, Vice President, Strategic Product Management, Optum

B.M. Chittaranjan has deep expertise in providing IT solutions to health plan and health care provider markets. With more than 20 years of experience managing business process and technology outsourcing for marquis clients, B.M. is now leading the Business Process as a Service product portfolio at Optum, servicing the health care insurance market.

Liz Farrell, Director, Strategic Product Management, Optum

Liz Farrell has more than 13 years of health care experience. She currently leads the Value-Based Care as a Service product at Optum, serving the provider and risk-bearing entity market.


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