Single Payer System - What does it mean to outsourcing?

Will US move to a single payer system - the answer to that question is like plucking the petals of a flower, if you pluck a democrat petal the answer is "Yes". Assuming we are moving to some kind of single payer system, I wanted to share my thoughts on its meaning to IT outsourcing and offshoring companies.

Today commercial payers other than the big 4-5 are struggling to keep margins up. Many of the blues for the first time are looking at cost as primary selecting criteria for initiatives. There are impending layoffs to save costs and improve margins. The payers operating margin seems to be on the downward curve. The Obama administration is going to accelerate the downward margin curve by bringing in every payer's ultimate nightmare - more competition "The Single Payer System"

While it may sound doom to payers, its going to be great for outsourcing. Traditionally most of the payers have lagged behind in adopting cross industry best practices. They would now be compelled to look at making their operations and infrastructure state of art - at least cost wise. Following are the big areas of opportunity I see for outsourcing companies

• Infrastructure - ITO deals ranging from $30M to $150M+
• Application support deals - ranging from $20M to $60M+
• Legacy Modernization deals - addressing the ICD-10 demon - $15M-$40M+
• Claims Intake and BPO - $30M-$60M+

The big question is what should the outsourcing companies do to position themselves for these opportunities, following are a few thoughts

• Buckle up and invest in building domain competency
• Have a proof of concept pool of investment money to win initial projects
• Hire more sales folks that understand payers
• Establish relationships now to capitalize when the outsourcing mania starts

The blended consulting rates for payers are typically in the ballpark of $70+, leveraging global sourcing solutions can get the rates down to $45+ to be competitive.

Happy selling, Payers is where the deals are...