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The rise of the bundled systems

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Perhaps the biggest surprise finding of the 2018 RMIS Report that my partner Pat O’Neill of Redhand Advisors and I recently released was the degree to which third-party administrator systems have closed the gap on their unbundled or independent counterparts.

To be sure, the unbundled vendors had plenty of new technology and functions to showcase, but the biggest movement since my last comprehensive functional review in 2015 was with the third-party administrators’ usage of their RMIS.

Why is this happening? After all, bundled providers have traditionally provided their systems as part of their overall offering of services. Most are cost-center oriented.

Here are some of the reasons:

1. The system constantly touches the client

TPA systems are in constant touch with their clients. Clients depend on them for checking claim status, printing status reports and monitoring dashboards, among other things. According the report, more than two-thirds of users have a bundled RMIS that they use every day.

2. Technology as a prime differentiator

In the past, TPAs were compared solely on how well claims services were provided, pricing differences, office locations, expertise in certain lines of business and so forth. Their rudimentary systems only provided basic claims management information.

But over the past several years, TPAs are going beyond their core claims management function and are now providing other information: data analytics, managed care, environmental health and safety, exposure management, enterprise risk management and even self-administration in certain situations. In short, they’re becoming more like an unbundled provider.

For instance, Gallagher Bassett Services Inc. is taking things to a new level. Its Luminos RMIS, which is a privately labeled Origami Risk L.L.C. system, can provide an unbundled system approach for some of its clients. It is essentially a hybrid RMIS that spans both the bundled and unbundled sectors. One key industry analyst called that “industry disrupting” in a positive way.

CorVel Corp. took a different, but equally interesting, approach. It has a proprietary system called Care MC but approached its design from the managed care rather than the claims perspective. The system goes beyond claims management, providing medical cost containment, strategic outcomes and predictive modeling. In short, they went deep into claims and medical management functionality.

Other TPAs featured in the report have also all increased their functionality and improved their technical appearance over the past three years. The improvements have been industrywide. This trend will continue.

3. Improved revenue stream

TPAs are starting to realize that, instead of being just a cost center, they can become a profit center as well, because their systems and reports are providing a true value-added component to their client base. An unbundled RMIS can help clients lower their cost of risk. Data from our latest report show that 50% of user respondents have achieved significant return on investment on their RMIS investment. TPAs can claim this power by using more powerful systems that encompass more than the basic claims management function. Reducing total cost of risk is a major objective of most risk managers. For this, TPAs can charge a commensurate fee for that value. I believe that we will see this occur more and more during the coming years.

4. Archaic infrastructure forces improvement

Effective competition requires appropriate technology investments. We have seen many of the insurers and TPAs finally get away from older legacy-based systems over the past few years and invest in better platforms and applications, including mobile technology. That is a primary reason for the narrowing of the gap. The unbundled market must continually look to new technology to keep ahead of the competition, but that seems to be the case now with the TPAs and insurers. I know of insurers and TPAs that are planning major investments in their basic claims and RMIS systems in the coming year to keep pace or exceed their competition.

5. More options available

The “build vs. buy” option is much better now than it was years ago. With improved available tools from Microsoft Corp., Oracle Corp. and others, building a system is still an attractive option for many bundled providers. Broadspire Services Inc., CCMSI, Helmsman Management Services L.L.C. and ESIS Inc. all did this. But the other feasible option is to leverage and private-label an existing unbundled RMIS. York Risk Services Group Inc. and Gallagher Bassett chose this route. Either way, the pure web products that result from either option look much better, are easier to learn and use, and produce far better results than their predecessor systems.

6. Information is power

This is probably a redundant point, but I wanted to make it because it is so important. Today, TPAs and insurers alike are competing against each other to provide the most robust combination of claims administration, loss control, managed care and data analytics. They are probing into the unbundled system provider realm of functions including integrated risk, environmental health and safety, exposure analysis and policy management.

Within the next five years, I predict that TPAs and insurers alike will be offering new information-oriented services to their client bases and leveraging their RMIS to do so.

The RMIS marketplace may be mature, but it is constantly evolving. The unbundled vendors seek their own areas of dominance with areas of focus. The competition is solid and bodes well for the ultimate buyer, but the bundled sector is in transition.

TPAs are investing significant dollars into improving their system offerings, and we are likely to see more changes announced soon. The same is true for insurers, which are also seeking to improve their systems.

In short, we are very excited about what we’re seeing in the bundled sector. TPAs and insurers are seeing the opportunity of providing more services and value add to their client base. It looks like the unbundled vendors need to now worry about more competitors. That is a good thing for the buyers.

Increased competition is always a good thing. After all, as the great Walt Disney once said: “I have been up against tough competition all my life. I wouldn't know how to get along without it.”

David A. Tweedy is director of RMIS Consulting at Bickmore Risk Services, a risk management consulting firm. Based in Providence, Rhode Island, for the past 35 years, he has conducted regular comprehensive reviews of risk management information systems. The latest report was released last month and is available at www.rmisreport.com. The RMIS Report is a guide to understanding the market and the vendors and does not endorse or attempt to rank the vendors. Mr. Tweedy can be reached at dtweedy@bickmore.com and 401-965-3402.