Bases covered: multistate managed care organization uses information technology to meet regulatory requirements and save more than $1 million in labor costs

Health Management Technology, April, 2004 by Richard R. Rogoski

For a managed care company to be successful and competitive, it must cut costs without cutting corners. When that company deals exclusively with Medicaid patients, the need to save money and improve efficiencies becomes imperative.

Long Beach, Calif.-based Molina Healthcare Inc. has been able to do this and more. Since 1997, this health plan has expanded into Utah, Michigan and Washington with an enrollment that has grown from 120,000 members to 574,555 members.

Revenues also are up, says David Erickson, vice president and CIO. "In 1999, our revenues were $184 million. Our revenues in 2003 were $789.5 million," he says.

Erickson attributes much of his company's overall success to information technology and to a single software solution that has automated all claims, reporting and payment processes.

Multiple Modules

Although he was hired in 1999, Erickson says Molina Healthcare hired a consulting firm in 1996 and began searching for an information management solution that would meet the unique needs of a healthcare payer. In 1997, the company chose QMACS, a Windows-based modular software ware product offered by Phoenix-based QCSI, a Microsoft Certified Solution Provider.

Being QCSI's third client and its only client in California could have been risky, given the impending economic downturn, but Molina Healthcare soon discovered that the software's modular design and ease of use gave it an advantage, "It's a very intuitive system," Erickson says, "We can train claims examiners in two to three days."

Reliance on a single system and heavy utilization of multiple modules are contributing factors in Molina Healthcare's success, Among these modules used by the health plan are:

Claims, a rules-based system that relies on well-defined benefit plans and information built into contracts and does not require significant manual adjustment or modification of the claim during processing;

Mass Adjudication, which allows the adjudication of numerous claims simultaneously once the information for such claims has been entered;

Contract Manager, used to create and maintain provider contracts, whether they apply to the entire provider network or are unique to individual providers;

Provider, which maintains provider affiliations between various providers, their groups, hospitals and covering partners;

Member, used to create and maintain member demographic and personal data, as well as to enroll members in benefit plans and assign them to providers;

Finance Manager, which captures and facilitates the extraction of data from QMACS for ad hoc reporting analyses;

Report Administrator, which simplifies the cataloging, viewing and printing of reports, forms, cards and letters;

Payment Manager, which generates payments to providers whether they are fee-for-service or capitalization payments.

Expanding Borders, Reducing Costs

The system's flexibility and customizability also has allowed Molina Healthcare to acquire Medicaid plans in other states regardless of the systems those plans were using. "We use QMACS for our core system and for claims adjudication," Erickson explains. "We have the same system in all four states. That's different than some health plans with larger legacy systems. It is especially difficult with acquisitions in other states where you have different systems in different states."

But because everything in the four states Molina Healthcare now serves is on the QMACS system, issues that may come up order contracts, claims or benefits can be handled from the corporate offices in Long Beach via a wide area network that connects the offices in each state.

Having only one claims center has definitely helped to reduce operating costs, Erickson says. But having a fully automated system that also can reduce turnaround times has proven invaluable, given the highly regulated niche that Molina Healthcare has chosen. "Like all health plans dealing with Medicaid, we face state requirements to meet or exceed Certain Claims turnaround time. As a rule, 90 percent of claims must be paid or denied within 30 days. Right now, we are able to pay or deny 97 percent to 98 percent of all our claims within these 30 days. This is a benefit in terms of how providers see us, because they get paid faster."

Another benefit is the accuracy of these claims. By using the system to measure the quality of claims processing before the claims are paid, Erickson says, "We are paying now with 98 percent accuracy."

Long-Term Strategy

The business model Molina Healthcare has followed since its founding more than 20 years ago would ultimately require a robust information management system.

The company was started in 1980 by Dr. C. David Molina as an emergency room physician who opened his own clinic to serve the underprivileged in Southern California. As the number of these primary care clinics grew to more than 25, Molina began providing managed care solutions under Medicaid. At first, Molina Healthcare served only those in California under the state's MediCAL system. However, as other health plans began shedding their Medicaid accounts to increase their profits, Molina saw this as an opportunity to grow.