Inside HCSC’s MEDecision Buy

With an eye on clinical care management as a differentiator, Health Care Service Corporation (HCSC) has acquired MEDecision.

In a move that will likely have technology implications for the carrier itself and more broadly across the health insurance industry — especially among Blue Cross Blue Shield (BCBS) plans — Chicago-based Health Care Service Corporation (HCSC; $10 billion in total admitted assets) announced that it has closed a merger transaction under which Wayne, Pa.-based MEDecision will become a wholly owned HCSC subsidiary.

MEDecision is a 20-year-old clinical software provider that has a particularly large footprint in member care management systems for payers. The vendor has more than 50 payer customers, 24 of which are Blue Cross Blue Shield plans or BCBS affiliates, according to David St. Clair, CEO of MEDecision.

Prior to the merger, the two companies already had a collaborative relationship. This became stronger in August 2005, when the organizations embarked on an initiative to improve consistency among HCSC's four BCBS plans in Illinois, New Mexico, Oklahoma and Texas and its clinical programs, says William Gerardi, MD, the carrier's executive medical director. By June 2007, all four HCSC plans had been moved to one care management platform. Previously, the enterprise had been running five separate platforms.

"One of the reasons we were so successful [with the care management platform consolidation] is that [HCSC's relationship with MEDecision] was not treated as just a vendor relationship. It was treated as a strategic partnership," Gerardi says. "So, although the acquisition changes the ownership of the organization, a lot of the hard work has already been done. People in both organizations are very familiar with one another and have already developed very strong working relationships."

Other health insurers, such as Medical Mutual of Ohio (MMOH; Cleveland), also operate wholly owned technology vendor subsidiaries. However, unlike MMOH — which spun off a large part of its existing IT shop into Antares Management Solutions — HCSC will not be leveraging MEDecision for internal IT work. "We have a very well-developed and sophisticated IT department," Gerardi says. "They support our implementations of the MEDecision products that we currently use and also our own proprietary claims and customer services platforms."

Gerardi notes that HCSC instead perceives value in the MEDecision acquisition specifically around a shift the company sees in how health insurers obtain competitive advantage. "We see the competitive landscape shifting from just paying claims accurately and quickly and having best-in-class customer service to adding leading-edge medical management solutions to our clients," he explains.

With that in mind, Gerardi says, HCSC is actively pursuing integration between clinical systems and its operational platforms, such as those that support claims and customer service. "By investing in MEDecision, we will leverage [the vendor's] capabilities and integrate them with our core platforms," Gerardi says. "When a member calls in, for example, we will have a 360-degree view of that member."

In recent months, MEDecision's stock price and other indicators concerned some clients who believed the company was not doing well. "There was a perception that MEDecision was a company in trouble ... when, indeed, that wasn't true," the vendor's St. Clair recalls. "The acquisition now by the fourth-largest health insurance company in the country makes us an absolutely safe bet from that perspective," St. Clair says.

As a result of the merger, MEDecision is what St. Clair calls a "Blue-owned asset" and, as such, opportunities could arise for increased collaboration between Blue Cross Blue Shield plans — especially those that are not-for-profit organizations — in the managed care space. "We have the opportunity now to create a platform that many of them, if not all of them, could share, in effect, to do much more advanced case management," St. Clair says.

Ultimately, he envisions a virtual managed care environment in support of BCBS national accounts, as a way to standardize care management practices across various geographies. "We have the opportunity to use this clinical technology to bring the Blue Cross Blue Shield system closer together and to make them more competitive for national accounts," St. Clair says, adding that the company will continue to support and focus on its non-BCBS market as well.