Hospitals, Payers and Health 2.0

January 13, 2010


Olivier LAURENT - CEO at Coligane group


Patients in the U.S. have several kinds of third party payers that have been broadly classified into Medicare, Medicaid, private insurance or uninsured. The healthcare system in the U.S. has been notorious for being inefficient and ineffective wherein partly it is because of the various influences that affect the traditional management techniques.1, 2 The managed health care plans and providers in the US and other parts of the world generally sell their services to multiple payers which include employers, Medicaid plans, and Medicare. The employers and Medicaid account for 90% of the total number of enrolled payers. 3 It has been noted that majority of the payers have different objectives and use different contracting practices, while hospitals on the other side have some elements of the quality that are common for all payers. 3 Thereby a need arises for enhancing proper communication and setting up of common guidelines between the hospitals and the payers. The concepts such as Health 2.0 are offering this ability wherein the interaction between the payers and the hospitals become smoother which is ultimately beneficial for the healthcare consumer.

Interaction process

In simple terms the interactions between the hospitals and the payers begin at the instant a patient or a healthcare consumer enters the hospital premises. Incidentally, the interactions begin much earlier with hospitals that offer the Health 2.0 concept wherein patients can schedule their appointments and complete the preauthorization forms much before they visit the hospital. In case of preauthorization, the payers contact the hospitals for clarification of the current needs of the consumer and provide the authorization for the current procedures at the hospital. If preauthorization is not approved then the consumer goes on to make the claim through the hospital or personally wherein the patient health records are quite crucial. This means that a lot of interaction occurs between the hospital, payer and the consumer for the payments to be made. With the introduction of Health 2.0 much of this process is going to become simpler, easier and faster.

Payments for services

The hospitals, small practice groups and individual practitioners follow different kinds of payment services such as fee for service, episode payment, comprehensive care payment and many others.4 It has been believed that about 40% of patients don’t pay their doctors as they are not able to understand what they owe. This on one side, most of the claims made by the hospitals and consumers are denied on several grounds such as improper filing, insufficient information, preexisting illnesses and many more. Major players such as Medicare was noted to deny more number of claims than commercial insurers.5 These problems with the payment for services can be solved to a great extent with the introduction of Health 2.0 concepts at both the payer and provider ends.

The introduction of Electronic Health Records (EHRs) seems to be a positive move, which has simplified a lot of processes. Using EHRs, patients can fill prescriptions, schedule appointments, retrieve test results and send messages to their physicians, among other things.6 These records can be used by the hospitals and payers to process the claims faster and improve the overall healthcare situation. The consumer becomes the key player in the healthcare industry wherein the payer and the provider have to concentrate on retaining them for their growth.

Adoption of Health 2.0 by payers and providers

Some of the researches have revealed that when compared to other stakeholders in the healthcare industry, payers are considered as late adopters of Health 2.0 technology. 6 Another study that reviewed the use of Health 2.0 concepts among individual providers noted that more than 85% of medical groups were using one or more internet-enabled services. The providers indicated that using Health 2.0 services reduced administrative costs, ensured faster payments, and improved quality of care.7 The quality of care and health care systems costs are considered as determinants of customer satisfaction which can benefit the payers as well as the providers.8

Future of payers and hospitals

In the shadow of emerging concepts such as Health 2.0 the future of healthcare would be dependent on the values wherein the payers would have to think about factors such as transparency, healthcare value they provide to their members, and the administrative / financial systems. These have to improve dramatically for sustaining the growing needs of the enlightened healthcare consumer. Payers who don’t adapt to the changing world created by concepts such as Health 2.0 face the fear of their market shares being eroded by Health 2.0 compliant companies.9

The concept of Health 2.0 is all about information collection, sharing, and connecting. This applies quite well to the payers and providers wherein their ability to achieve these will determine their success in the competitive world of today. Scott Shreeve an analyst quotes that “Health 2.0 engages people who have been disenfranchised (patients), disconnected (providers/patients), and discombobulated (payers/regulators).” 9

On the other hand, adapting Health 2.0 concepts will help hospitals to differentiate themselves from other traditional healthcare providers in terms of cost, quality and ease of access. It will enable online and immediate accessibility to everything from pricing, quality reporting, customer service, to outcomes.9 Such information becomes valuable for payers and eases the payment procedures while improving consumer satisfaction.

Need for better interactions

The healthcare industry thrives essentially on the symbiotic yet often conflicting environment that consists of consumers, healthcare providers, and both government and private insurers. 10 The payers are looking for higher investments from hospitals in the IT sector with the reason of integrating isolated data repositories to use patient data in order to improve patient care. Hospitals on the other hand need to show the payers that they are investing wisely in concepts such as Health 2.0 to cut costs while improving the quality of healthcare. This would initiate enhanced contract negotiations and better compensation from the payers.10

Hospitals are in need of integrating clinical information available from a wide variety of departmental systems into a single clinical data repository, which can be used to generate master patient clinical records that are useful for the hospitals, payers and the patients as well. However, most hospitals have been noted to lack the IT skills and resources to create such systems and tend to buy cheaper software that do not answer to the needs of the hospitals.10 What is required is a user friendly system that is easy to install while providing the most complex data demanded.

Innovative portals are the current requirements on the payer side. A number of portals are required by the payers, which include the following:

  • Member portals – for online pre-authorizations, obtaining plan and pricing information, or download relevant forms
  • Physician/hospital portals – for filing claims, checking claim status, track patient data, submit reports and special requests, etc
  • Administrator/company portals – for helping employers to enroll/un-enroll employees, verify premium payments, know about plan changes, pass information to employees, etc
  • Agent/broker portal – to help insurance agents/brokers manage their insurance customers with updated information about the insurance policies, claim status, etc
  • Insurance employee portal – to look into matters and concerns of all the above portals 10


Better communication is the key to success for all relations. The introduction of Health 2.0 has offered many avenues of improvement. In this world where many of the healthcare decisions are taken within a few minutes, integration of the Health 2.0 concepts becomes quite vital for both hospitals and payers. Certain top medical centers such as the Dukes and the Mayo Clinics are already creating patient record data warehouses and datamarts, which would soon be available to physicians, researchers, and pharmaceutical companies, as well as payers and other providers. Creating innovative concepts from Health 2.0 that is user friendly and adapts well to the needs of the payers as well as the hospitals would help foster a better relation between the two and in turn promise better health to all.

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  1. Friedman B, Sood N, Engstrom K, McKenzie D. International Journal of Healthcare Finance and Economics. 2004; 4:231-46.
  2. Studnicki J, Eichelberger C, Fisher J. Complex Adaptive Systems: How Informed Patient Choice Influences the Distribution of Complex Surgical Procedures. In. Ras ZW, Ribarsky W. (eds). Advances in Information and Intelligent Systems. Vol 251. Berlin / Heidelberg: Springer; 2009. p. 3-19.
  3. Glazer J, McGuire TG. Multiple payers, commonality and free-riding in health care: Medicare and private payers. J Health Econ. 2002 Nov; 21(6):1049-69.
  5. Healthcare Economist. Medicare more likely to deny claims than commerical health insurers; June 30, 2008. Available at:
  7. Coye MJ, Jacks G, Everett WE, Akay L. Medical group adoption of Internet services. J Ambul Care Manage. 2001 Oct; 24(4):67-75.
  8. Rivers PA., Glover SH. Health care competition, strategic mission, and patient satisfaction: research model and propositions. Journal of Health Organisation and Management. 2008; 22 (6): 627 – 641.
  9. Health 2.0 Interview Series-Scott Shreeve: “Transparency will prove transformative”. December 13th, 2007. Available at:
  10. Healthcare payers and providers: Vital signs for software developmentAn interview with Tony Bosselait of IBM and Eric Brown of Forrester Research. 16 Apr 2004. Available from:

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