As health care in the United States has been changing rapidly over the past two decades, so has the way health care has been provided and how it is billed and paid. Large insurance companies and private physicians have given way to HMOs and Managed Care Plans and the TPA (Third Party Administrator) has been prospering. A TPA (like Blair Mill) exists to administer all the health care functions for a company that would have been handled by an insurance company. HMOs primarily contract for services based upon price, then re-sell those services to groups. Often, service and choice are less than satisfactory. But, most importantly, cost-effective concerns predominate. Employers are seeking to provide health care for employees at an affordable cost. A backlash has been the increase in self-insured programs administered by TPAs.
In short, a business now demands much more in the way of service and analysis than traditional support institutions have been providing to their clients. The claims processor is a case in point. Merely processing claims does nothing to help a business analyze and control its health benefits plan and to control the costs associated with the plan. And there has not traditionally been a measure for the "quality" of health care service.
Southeast has compiled, through its own proprietary systems and an alliance of external providers, a service mix that includes Network Administration Services, Network Contracting Services, Policy Formation and Quality Assurance, and Marketing Services.
Health benefits are a fact of life for any business. The small and mid-size business is concerned with cost control and administration, just as in any other department of their business operations, except they are ill-equipped in personnel, know-how, and in systems, to administer health care internally.
Thus a full array of TPA self-insured services would include:
Claims experience analysis and cost projections
Plan design consulting
Comprehensive plan analysis
Provider network analysis
Stop-loss brokerage and administration
Prescription drug programs
Vision benefits administration
Dental benefits administration
Short-term disability administration
Worker's compensation services
Custom tailored services.
3.1 Competitive Comparison
Health plans for businesses and their employees comprise a multi-billion dollar industry that is highly competitive. Well known national insurance companies like Prudential, Cigna, Aetna/US Healthcare, and the regional Blue Cross and Blue Shield Companies seek the employer's dollar. A plenitude of HMOs, both regional and national, also compete. Many companies are already self-insured. Some of these companies use TPAs for outside claims processing while others use insurers or attempt to self-administer. Certain claims processors are also gravitating toward benefits management services.
Southeast Health Plans believes that a niche exists that is both too small for concentrated coverage by large national companies and that is not well served with broad enough quality services by other TPAs. Most TPAs are still evolving toward the service mix that small and mid-size companies are demanding. By providing those quality services now, at a fair price, Southeast believes a competitive sales advantage exists that will permit attainment of the market shares sought.
3.2 Sales Literature
Much of the sales materials and literature prepared by Blair Mill will be utilized by Southeast. Advertising executions are included in a supplement to this plan. Direct mail pieces are being developed. A Blair Mill portfolio and video tape provides a professional presentation to prospective clients.
The Strategic Alliance with Blair Mill Administrators of Philadelphia, PA., provides the principal source of health plan administrative services. Southeast will earn revenue both from enrollment sales as well as from cost advantages in the delivery of health care services.
From a product perspective, this relationship is analogous to the role of a regional dealer that sells services and brand name products within a licensed and protected geographic area. The dealer brings competence and value-added expertise to the enterprise while the source brings the credibility of brand name recognition and a substantial existing client base. This serves to reduce the risk normally associated with an early stage, unrecognized health services provider.
On the health care provider side, the sourcing of health care services is already in place from a variety of provider organizations. Southeast management has had working relationships with Georgia Baptist Health Care System, Meridian Medical Group, Emory Health System, Columbia/HCA, Northside Hospitals, Scottish Rite Medical Centers and other independent health care organizations.
The management of Southeast Health Plans remains in ongoing negotiations with physician groups and hospitals to obtain the optimum mix of quality service and price for its clients. The health care providers are receptive both from the standpoint of pricing and freedom to control care. Both consumer and provider benefit from a cost/benefit mix that they find preferable to the insured HMO or Managed Care models. It is not anticipated that service sourcing will be a problem for Southeast Health Plans. Rather, the key to success will be marketing to employers coupled with provider cost negotiation. Quality of care will not be compromised.
3.4 Future Services
Future services will include establishing both a geographic network of clients and health care providers throughout the southeast. As Southeast Health Plans grows and expands it will begin to look less like a TPA and more like a Health Plan. As critical mass of clientele and medical providers is achieved cost benefit is attained and administrative functions and services are consolidated in economies of scale. At that point of critical mass when approximately 50,000 cumulative employees are under managed care the option exists for Southeast to develop its own proprietary heath plan. Many administrative services and functions that will be outsourced by Southeast can be developed as internal company centers.
At that point options exist to finance the shift to a Health Plan company. Mezzanine, or Venture funding will be obtainable for a company with £5 million in revenue and £1.6 million in earnings (and no debt). After ramp-up to a £10 to £20 million dollar company an IPO is a potential. Also, the company would be an attractive target for acquisition.