Health plans may find silver lining in CloudSmart ecosystem

By Kareem Syed, managing director, and Russel Jesski, specialist leader, Deloitte Consulting, LLP

A transition to the cloud could help health plans reduce administrative expenses, forge closer connections with customers, and keep member data secure. In addition, the modernization of data, including real-time insights and member trends, could be critical for innovating new products and staying a step ahead of the competition. But the transition to a cloud-based ecosystem could be challenging if the IT staff’s experience is limited to legacy systems.

Legacy IT systems could be an avoidable expense for health plans. Replacing outdated systems with a smart-cloud ecosystem could help reduce administrative costs. Deloitte’s CloudSmart approach is an alternative pathway designed for health plans and other types of organizations that want to transition to a cloud platform without having to commit to a full-fledged transformation initiative. This strategy could help them extract maximum value from their existing data by harnessing cloud capabilities through tailored proof-of-concepts.

If health plans can reduce their overhead costs, they might be better positioned to keep rate hikes in check. Health plan executives, recently surveyed by the Deloitte Center for Health Solutions, agree that rising premiums and out-of-pocket costs could have a significant impact on their organizations this year. About 60% of respondents said investing in emerging technologies such as cloud will be important in 2024, (see The 2024 Outlook for Health Care).

Innovation is often at the core of a health plan’s decision to move to the cloud. The solution can make it possible for companies to update IT systems more easily, which can help them maintain the most current technology. Changes and updates are usually interwoven into the system by the cloud technology partner. But the transition from a legacy IT system to a smart-cloud ecosystem can be particularly complex for health plans, which must secure sensitive protected health information (PHI) and personally identifiable information (PII).

Workforce complexity

Some of the nation’s largest health plans are leveraging cloud technology for their business operations in some shape or form. These health plans are generally moving to cloud more quickly than are medium-to-small-size health plans. While some smaller health plans have started to adopt cloud technology, it is often done in isolation by department. That strategy could add more complexity to an already complicated process. We encourage our clients to take a CloudSmart ecosystem approach to cloud adoption, rather than continuing to add the technology piecemeal. Many cloud platforms now offer artificial intelligence and machine learning support that is seamlessly integrated into the system, allowing payers to remain up-to-date technologically without having to do a hardware overhaul.

But transitioning to a cloud ecosystem can be challenging. Many health plans have long relied on highly customized IT systems that were built inhouse and run on a proprietary or closed platform (often a mainframe) system. They tend to be complicated and often have a multiyear, license-based model. Some IT professionals have spent their entire careers working with the same type of technology. The technical complexity of a cloud platform is often compounded by the limited expertise of an organization’s workforce.

IT decision-makers often struggle to find employees who can keep pace with rapidly evolving technologies. More than 80% of companies have been unable to pursue a digital transformation—including the adoption of cloud technology—due to technological complexities and a workforce that lacks the necessary training, according to a 2022 survey of 650 IT leaders.¹

Six reasons to transition to a cloud ecosystem

We recently helped an integrated health system (plan and provider) move to the CloudSmart ecosystem. The organization is on track to save between $10 million to $20 million over the next 10 years. The transition helped it reduce obsolete applications by 25% with a targeted infrastructure-to-cloud adoption rate of 90%.

Here are six reasons we are encouraging health plan leaders to consider shifting to a CloudSmart ecosystem:

1. Innovation: It is likely that competitors are considering a cloud-first strategy to develop new and innovative products and capabilities to bring to market faster and with lower costs (e.g., wearable tech, behavioral health capabilities).
2. Competition: About 70% of health plan executives expected they would spend more on cloud-based platforms in 2023 than they did the prior year.²
3. Provider and member experience: A cloud platform can help to increase interoperability with plug-and-play cloud tools. This could help drive better provider and member engagement.
4. Analytics and insights: Cloud can help to modernize data (e.g., real time insights, member patterns). Cloud providers tend to offer prepackaged services and tools that can save organizations time and resources including but not limited to machine learning, artificial intelligence, big data analytics, Internet of Things (IoT) platforms, and serverless computing
5. Resilience and reliability: Cloud providers can help ensure high levels of availability, security, reliability, and disaster recovery capabilities. Innovators can focus on building new solutions without worrying about infrastructure failures or data loss.
6. Revenue and growth: By using cloud as an innovation platform health care organizations can unleash innovation for either top line revenue growth or margin improvement by reducing underutilized resources.

Conclusion

Smart-cloud ecosystems are increasingly being used to support the digital transformation that could be essential for competing in the Future of Health.^TM  A health plan that has not moved to a cloud platform will likely find it difficult to participate in the rapidly changing health care ecosystem. It is similar to being the only person in a room who still does not use a smart phone. While the flip-phone might work fine, the technology could be limiting. Continuing to rely on legacy technology could make it difficult to connect with members, health systems, and other stakeholders.

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Endnotes:

¹IT skills gap is forcing leaders to prioritize cloud and security hires, Venture Beat, November 17, 2021

²_{Growth, member experience, and technology optimization rank among top enterprise priorities for healthcare payers, Vital Data Technology, December 27, 2022}

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