McKinsey: Digital transformation in healthcare must preserve paper - for now

Insurers should fit paper forms into an overall digital strategy instead of trying to lead an industry-wide revolution.

5 building blocks your company needs for successful digital transformation At the 2019 MIT CIO Symposium, Jeanne Ross discussed where companies stand when it comes to digital transformation.

Paper is turning out to be a worthy enemy of the digital transformation--at least in the healthcare industry. The multiple players in this sector have too much invested in the paper form process to make the move to a completely digital world. A new report from McKinsey & Company explains how to work with this industry dynamic instead of against it. The report, Best-in-class digital document processing: A payer perspective, recommends a strategy that makes the paper process more efficient and slots it into a larger digital strategy. 

According to McKinsey, paper-based processes endure due to:

To do away with paper forms once and for all, health insurance companies have to transform their internal business processes, and then convince industry partners to modernize their own systems. That includes partners, vendors, doctors, government agencies, and consumers. Many of these organizations avoid this comprehensive transformation because of significant switching costs, among other barriers.

The short-term goal is not to replace paper but to get better at dealing with it. Getting this phase of the digital transformation right is crucial because accurate, structured data is a prerequisite for other digitization efforts. Omnichannel marketing and analytics transformation fail "when information is buried in large piles of paper."

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Source: McKinsey & Company: Best-in-class digital document processing: A payer perspective

Starting the transformation

Digital document processing has three phases: document ingestion, internal processing and document delivery. The short-term goal for insurers is to improve the first phase—the process through which incoming information on paper documents is ingested and then made available in a structured, digital fashion.

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Source: McKinsey & Company: Best-in-class digital document processing: A payer perspective

McKinsey outlines four phases for this kind of transformation:

  1. Pick a vendor and assess the need for process redesign  
  2. Select a dedicated IT team to manage a proof of concept project and then build the tech infrastructure
  3. Create a digital factory to build new IT tools and processes that will reshape the  day-to-day workflow in all departments
  4. Establish a dedicated change management effort to help employees transition to the new system

The authors of the report state that the fourth step is crucial to complete the transformation "because the last 20 percent of paper-based processes are usually the hardest to eliminate." They also have found that "employees who are used to paper-based processes typically need help in adapting to the new digital processes."

A real-world example

In a case study that was part of this report, the authors shared insights from a German health insurance company that improved existing paper processes to better fit within its overall digital strategy. The payer decided to incorporate paper-based communication into its overall omnichannel strategy instead of replacing it because "many of the providers and government agencies it dealt with were behind the curve in digital adoption and regulatory issues were making it difficult for the payer to move consumers to digital channels."

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The first step was to optimize the scanning and OCR processes and then to enter the new files into a document management system. The company then created a shared-services center. This group managed the data transfer from paper documents into the company's IT systems. Once that was done, the business units took control of the data. This change allowed increased efficiency across those teams. 

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Source: McKinsey & Company: Best-in-class digital document processing: A payer perspective

McKinsey recommends a slow evolution to digital because: "Payers and most of the stakeholders they work with lag behind most other industries in their level of maturity and thus face high switching costs if they want to move to fully digital processes."

In planning the transition, the authors recommend these tactics: 

  1. Build IT architecture that can cope with all aspects of document processing.  
  2. Involve the business units as soon as possible and use a minimum-viable-product approach.
  3. Establish consistent key performance indicators to monitor success and steer toward maximum value. 
  4. Be cautious about building custom solutions. Commercial solutions are highly advanced.
  5. Do not underestimate the effort required to redesign internal IT workflows.
  6. Do not overlook basic analytics capabilities—they are often more valuable than artificial intelligence approaches. 

The authors of the report--Mathis Friesdorf, Markus Hedwig, Florian Niedermann, Florian Schaudel--work in McKinsey's offices in Germany.

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