Barak Obama’s administration is expected to spend $50 billion to modernize the health care system, focusing in part on upgrading information technology for “EHR” for electronic health record, and “PHR” for personal [electronic] health record.  

Business process engineering will be a critical component.  Before IT can change, a clear understanding of existing or “As Is” process modeling and a new “To Be” or future state vision must be determined.  As you can imagine, if health care claims are currently being processed via paper, and in the future you expect to process them electronically, the workflow of health insurance company staff, as well as health providers and patients will have to change.  The ability to facilitate meetings with key stakeholders and produce Process Models that enable simulation and what if scenarios are key competencies to help health insurers meet this challenge.

Emergence of a Retail Market in Healthcare

A retail market is rapidly emerging in healthcare as consumers pay a greater share of total costs.

Per-person health spending in the United States has reached $7,110 in 2006 and is expected to climb to $12,320 in 2015.  More than 46 million Americans are uninsured and growing numbers of employers are dropping coverage or thinning benefits.

With healthcare spending rapidly approaching 20 percent of the U.S. Gross National Product, healthcare has reached a crossroads. Either free-market forces will solve the current affordability crisis or the federal government may impose a solution. If the industry hopes to solve the affordability crisis, healthcare payer organizations will have to rethink their roles and fundamentally change the way they provide value in the supply chain. To sustain their role at the center of the healthcare supply chain, payers must lead the industry’s transformation by deploying solutions that enhance their revenue growth and improve the customer experience.

The Need for Innovation in Health Care

The emergence of a retail market necessitates that companies currently offering healthcare solutions undertake innovative integration with new entrants to the value chain (such as financial institutions and payment processors) in order to offer viable, enabling solutions. If payers fail to keep pace with the changing market, they risk losing business to market leaders. Or worse, as healthcare and financial services converge, payers eventually could find themselves replaced. If payers do remain at the center of the supply chain, they can ensure that all stakeholders work in an efficient, streamlined fashion to not only administer claims, but also to facilitate transactions, reduce costs, pay providers and ultimately enhance the health of plan members. 

Integrated Healthcare Management (see IHA) is the systematic application of processes and shared information to optimize the coordination of benefits and care for the healthcare consumer.  No World Borders applies our talent and process knowledge to help improve the flow of information from doctors to payers and funds from payers to doctors, in partnership with leading health care solutions firms.

U.S. healthcare includes significant variability in how healthcare is delivered and in the results it achieves, largely due to divisions among the constituents in the healthcare supply chain: the consumers who use the system, the providers who give care, the employers and consumers who purchase healthcare, and the health plans that pay for services.

Integrated Healthcare Management is a framework that connects all of the healthcare supply chain constituents so that they can collaborate on and coordinate benefits and care.  No World Borders is partnering with companies to provide its consulting services to  give payers the software, services, and blueprint required to power Integrated Healthcare Management, and lead the transformation of healthcare.  

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Finding the Devil in the Detail of Financial Statements

It has often been said that “the devil is in the detail.”  Somewhere, buried among all the data in mortgage backed securities (MBS) lie the devils that destroyed the American economy.  Every issuer of MBS which are really pools of residential or commercial loans packaged together and sold as a single asset—is required to file a free writing prospectus (FWP), which lists the detail about every mortgage in the pool.

Dissecting the Non-Standard Free Writing Prospectus (FWP)

An FWP contains endless columns of pure data, most of which don’t even track from page to page. And each FWP is different: The banks have no uniform information that they’re required to present in their filing. Even issuers do report the same data, they use entirely different languages.

As a loan moves through the many participants in the MBS supply chain, each member of the chain — originators, retail banks, wholesale banks, issuers, servicers and ratings agencies — decides what to report publicly and when to report it.

The participants report different formats, data labels (or tags), different ways of tracking the status of the collateral and even different models for tracking the identity of the individual loans.  Therefore, a loan can receive as many as five unique IDs between its origination and when it is bundled into an MBS. There has been no centralized regulator that validates or collects all of this data. There is no central repository that can be queried.  Therefore, it is difficult to track the status of a single loan in an MBS — even if it is in default — because each participant has different and disconnected components of the data.

One of the only ways to assess the devil of risk hiding in the detail is to build a spreadsheet identifies in a common format the risk (and therefore quality) of the individual loans pooled into an MBS, giving  the ability to evaluate loan location, borrower’s proof of income, interest rate, appraisal value, pre-payment risk, credit score, etc.   If you were willing to do your homework in such a way on hundreds or perhaps thousands of loans, you could then compare the FWPs in a way that would have been nearly impossible before.   And, if you had done this early enough – say, 2007 – you could have seen a nationwide crisis in the making.   As adjustable-rate mortgage rates ballooned, countless home-owners would default on their loans, rending the securities built on them worthless.

Lack of Transparency Created Advantages for a Few

Those who did their homework in 2007 did not share their findings because they wanted a trading edge. If more people had access to the same data-crunching tools, this crisis could have perhaps been mitigated if not avoided: Risky MBS could have been exposed, and banks would want to protect their reputations and stop offering them. With complete data including much more frequent sharing of loan status, the market may have self-regulated as risk-fearing investors fled from firms holding or issuing the risky securities.

Technology and Process Can Enable Transparency

Hypothetically, if all businesses used XML to tag their every move, from each car sold by GM to every MBS held by AIG, companies would not be able to keep investors in the dark as easily the way Enron did.  The Sarbanes Oxley legislation was aimed at holding executives accountable and providing stimulus to “application controls” and “general controls” on technology to ensure accuracy.  However SOX does not address transparency in reporting.

Enter XBRL, a set of tags that standardizes financial information. XBRL completes the picture and picks up where SOX regulations end.  XBRL was conceptualized by an accountant in 1998 as a way  automate tedious reporting auditing processes.  Today, handfuls of companies report their information in XBRL to the SEC, the real power will be realized only when all companies use it to track of report their numbers to investors and regulators.

When regulators required filings in XBRL it found that the time it took auditors to review a bank’s quarterly financial information dropped from about 70 days to two.

In December 2008, the SEC announced that by June, 2009 every company with a market capitalization over $5 billion is required to submit all filings XBRL. And publicly traded companies and mutual funds must follow by 2011.   In the end, every investor will have the same ability as  a hedge fund manager to export, manipulate, aggregate and analyze financial data. Blogs changed news reporting because now anyone can be is a reporter. With XBRL, anyone can be a financial analyst.

Related posts:

1. A need for Financial Transparency

2. Getting to XBRL for companies, an implementation guide – See our blog post on implementing XBRL

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