Black Book Research: IT Outsourcing Poised for Growth in Healthcare Payer Sector | Healthcare Informatics Magazine | Health IT | Information Technology Skip to content Skip to navigation

Black Book Research: IT Outsourcing Poised for Growth in Healthcare Payer Sector

November 23, 2015
by Rajiv Leventhal
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A new Black Book Research report estimates the demands of data security, population health and value-based benefits solutions—and revenue cycle modernization—will drive the payer IT outsourcing market in excess of $60 billion by the end of 2017.

The survey included more than 800 health plan IT outsourcing users from Q2 to Q4 2015 to determine trends in the shifting marketplace of service providers and client expectations. According to Black Book, the 40 percent predicted growth in next two years is due to the idea that better software solutions have accelerated IT expenses faster than anticipated with no corresponding lift in revenues for many health plans. "Health insurance niche software and services vendors are once again offering outsourcing as a cure-all for organizational cost controls," Doug Brown, managing partner of Black Book Research Group, said in a statement.

Still, less than one in 10 of health plan IT executives surveyed are considering full or end-to-end off-shored solutions. With concerns over hostile offshore locations and escalating health data security and privacy issues, fewer payers are entertaining having a third party overseas corporation between them and their IT nervous systems in 2016, the report found. Until as recently as January, 75 percent of reporting health plans were cautious of major outsourcing initiatives, particularly using offshore vendors as data breaches increased their fears of unsafe operations.

However, Black Book found that health plans are budgeting at least 20 percent increases in outsourcing spends for 2016 for service models and functions including application support, desktop support, and help desk support. Nearly 80 percent of larger health plans could turn to outsourced vendors for help desk support in the next 12 months, the survey found.

The largest increases from both large insurers and small health plans are projected to be in security and privacy projects, and cloud initiatives, both expected to grow to over 50 percent of all new outsourcing business initiatives for 2016 in managed care organizations.

Additionally, new project strategies and reforms are pushing payers to focus on three additional outsourcing areas by Q3 2016: comprehensive software in core administration, care and network management, and constituent engagement, Black Book found. It expects that by 2018, half of all health plans will demand substantial risk sharing with their outsourcing providers as operational efficiency will become critical at four in 10 of the nation's small health insurers and plans, resulting in the development of more intense data-driven payer strategies.   

"Changing government regulations are leading insurers to outsource more IT functions including big data and data base management, analytics as a service, mobile applications, population health, and security solutions," said Brown. While many industries began utilizing IT outsourcing as a concept by the 1990s, healthcare payers did not immediately embrace it. "The decision health insurance companies have been among the slowest to adopting outsourcing," said Brown. "However, shrinking margins, higher claim disbursement, and increasing competition have forced health insurers to look at outsourcing at this point in time to prove efficiencies and focus resources toward the core functions of product development and innovation."

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