In the first part of 1997, a nightmare computer upgrade at Oxford Health Plans delayed claims processing and left providers clamoring for millions of dollars in payments. Three years later, the 1.5 million-enrollee health plan is confident enough in its revamped claims system to keep it out of a major outsourcing contract it signed last week.
In deciding to hand off management of most of its information systems to an outside company, Trumball, Conn.-based Oxford joins a growing number of healthcare organizations that are opting to let someone else preside over the computers, networks and data centers.
Oxford's newly named information technology partner is Computer Sciences Corp., an El Segundo, Calif.-based consulting and information services firm. Under their five-year contract, CSC will assume responsibility for the bulk of Oxford's information systems, with the exception of a few items such as claims processing and Internet operations. Officials from both companies declined to disclose the financial terms of the contract.
"We are keeping the functions in- house that provide us with a competitive advantage," said Maria Shydlo, an Oxford spokeswoman.
Oxford's claims processing system--which was the source of so much trouble three years ago when the company's rapid growth strained its computing horsepower--is now paying claims in just seven days on average, Shydlo said.
The problem in 1997 was a computer system upgrade that created a substantial backlog of claims and made it difficult to generate bills, which hindered Oxford's ability to collect premium revenue.
With the system working so effectively, Shydlo said, it was a strategic decision to keep the claims engine in-house.
Those who follow technology outsourcing trends said they believe more healthcare organizations are warming up to the idea that it's best to focus on what you know.
"(Healthcare organizations) are not in business to run a data center, and if they can find someone who can guarantee performance at or near the price they would pay internally, it does make sense to look elsewhere," said Mark Anderson, chief executive officer of Houston-based Anderson Consulting Group, a healthcare advisory firm.
The difficulty of recruiting and retaining qualified information systems professionals is growing, Anderson said. That, he said, gives hospitals and health plans even more motivation to partner with companies that do have the necessary resources.
In September, the University of California Los Angeles Medical Center looked to Irvine, Calif-based Certus Corp. for those resources in a $15 million outsourcing contract.
On the health plan side, Brookline, Mass.-based Harvard Pilgrim Health Care signed a $700 million information technology outsourcing contract with Dallas-based Perot Systems in October 1999.
In connection with the Oxford-CSC deal, 150 of Oxford's 350 information systems professionals will become employees of CSC. The remaining 200 will stay on with Oxford, Shydlo said.
Oxford posted a $319.9 million profit on total premium revenue of $4.1 billion in 1999. That's a major turnaround from 1997, when the computer problems hit. In that year, Oxford posted a net loss of $291.3 million on premium revenue of $4.2 billion.