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

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.

In 1997, Molina Healthcare started a new health plan in Utah. In 1999, it acquired a plan in Michigan, and in 2000, it took over another plan in the state of Washington. "Typically, our membership is low-income families--young morns and kids," Erickson says. "Seventy percent of our membership is younger females with children."

Dr. Molina passed away in 1996, but his heirs continued to grow the company, taking it public in July 2003. Erickson says the company will continue to grow in the four states it already serves and is eyeing opportunities in other states as well. "We are definitely in an acquisition mode," he says.

Put to the Challenge

The expansion into Washington proved a challenge for Molina Healthcare, but it also allowed the company to rely upon the strengths of its systems.

In February 2000, Molina Healthcare began a systems integration project to assimilate the 60,000 Medicaid members it had acquired from QualMed Washington Health Plan, a subsidiary of Foundation Health Systems Inc. (FHS). But according to Erickson, the membership rolls resided on two separate mainframe systems: Amisys, with approximately 20,000 members, and MSI, a legacy QualMed system with approximately 40,000 members.

The Amisys claims were paid under an outsourcing contract by in Minnesota, and the MSI claims were paid by QualMed in Oregon. Paper claims for both system were being scanned and imaged by a vendor in Colorado, and EDI claims were received by a clearinghouse and then loaded into each system.

To further compound the problem, Contracts and benefit administration for Amisys was managed by an outsourcing contract in Colorado and for MSI by QualMed in Oregon. Only the physical systems and infrastructure were being managed by FHS from its offices in Northern California.

FHS also had the option to give Molina Healthcare 60 days notice at the end of July 2000 to get off of its system. But Molina Healthcare said it would go live in six months and set August 2000 as its target for beginning to pay claims on the Washington Health Plan from its Long Beach headquarters.

Working closely with QCSI, Molina Healthcare formed a business integration team within the Washington Health Plan, established a corporate claims center and also created a central organization for setting up and maintaining contract, benefit and provider configurations. "We went live in July 2000 and started paying claims in August from Long Beach," Erickson says. But because of the tight scheduling, most of the initial claims still had to he processed manually, which meant there was almost no EDI capability, no scanning or imaging and no auto-adjudication.

Then, in October 2000, Molina Healthcare was informed by the state of Washington that its Medicaid enrollment would double to 120,000 effective January 1, 2001. This became the catalyst for Molina Healthcare to implement its full automation strategy. "We started with EDI through WebMD [Envoy]," Erickson says. "In 2001, we started auto-adjudication." The company also signed a contract with a scanning and imaging vendor and began hiring more staff, he adds.

By August 2003, 45 percent of claims were received via EDI, compared to only 16 percent in August 2000. During that same period, the number of claims received via scanning and imaging went from 0 percent to 50 percent. Claims processed via auto-adjudication jumped from 0 percent in 2002 to 20 percent in 2003. We had 95 permit being loaded electronically into QMACS by August 2003," Erickson says.

More Claims, More Savings

'With the Washington integration, we focused heavily on getting to increased automation," Erickson adds. "We receive 300,000 claims a month, but through automation with scanning, EDI, electronic receipt and auto-adjudication, we have saved having to hire 25 more FTEs (full-time employees) for our business." That alone has saved Molina Healthcare about $1.25 million a year in wages.

While Erickson is proud of the fact that his team was able to take Washington Health Plan live within six months, he admits that one of the biggest challenges was what he terms the "configuration" of the system. "Configuration is the process that includes getting all the providers, contractual benefits and members into a database, so that when a provider sends in a claim, the system can verify him, and when a member uses a service, the system can verify that member's eligibility. That's 'configuring' the system," he says. "This process is tough, because you have to convert whatever system that acquired health plan was using to your own system. This means reloading membership histories, claims histories and provider histories. Normally, it takes about 12 months."

But because QMACS is customizable, the process took half the time for the Washington Health Plan conversion. "We're able to take provider contracts and load and configure them into QMACS, typically with the intent of that contract and the way they are written," Erickson says.

That has helped Molina Healthcare become the No. 1 ranked Medicaid plan in the state. "Providers are happy with us, state regulators are happy with us, and members are, too," Erickson says.

For more information about QMACS from QCSI. www.rsleads.com/404ht-208

Richard R. Rogoski is a free-lance writer and contributing editor to HMT Contact him at [e-mail].