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TriLon Information Services, hereafter known as TriLon, is a solely owned proprietorship registered in the state of Ohio to Mr. William Long. TriLon is currently seeking funding to update a managed care application for the Health Care Industry. The application handles membership/Eligibility, Claims Processing, Provider Contracting and Capitation, Utilization Review, Authorization/Referrals, Billing, Medicare, and Medicaid. The updated application will also handle Section 125 cafeteria plans. This application is aimed at the self-insured, TPA, PPO, HMO, Health Insurance, and Medicare/Medicaid markets. It will be HIPAA compliant and web enabled with authorization, access, and data transmission security built in from its initial design. It will be licensed to the health care community under the GPL license as open source. Why Health CareAccording to Health care industry leaders at the Third Annual Health Legacy Partnership (HELP) Conference and eHealth Initiative Annual Meeting (Oct, 2002), the nation's health care is in "Critical Condition". Part of the problem is that the health sector lags significantly behind the financial and retail sectors in using existing information technology. This is in spite of major investments made in health care information systems throughout the eighties and nineties. There is a need for an interconnected electronic health information infrastructure supporting payer-provider transactions (e.g., eligibility, referral, claims) and electronic health records. This system would offer the potential for significant increases in provider revenue, reductions in transaction costs, and improvements in service quality to patients and providers. Industry leaders estimate savings up to $80 billion per year. The Federal government through HIPAA has mandated a compliance timetable for the implementation of transaction standards for electronic medical records to enable this intercommunication between systems. But many systems still being used were built in the late 70's and early 80's. They are unable to meet these standards. Currently HIPAA requirements are being met by sending claims through claims clearing houses at a charge of between 35 cents and $1 per transaction. The Employment Policy Foundation’s (EPF) analysis of data comparing states with and without limitations on damage awards in malpractice cases found that capped damage awards could save $54.8 billion to $97.5 billion annually—7.2 percent to 12.7 percent of the $764.8 billion spent on hospital and physician services each year. Research reported in the Quarterly Journal of Economics found defensive medicine adds $50 billion to the cost of health care every year. Because of the crisis in health care costs, there is presently tremendous pressure to move towards government sponsored payment and control of health care. This is exemplified by the recently passed $500 billion Medicare bill, by Hilary Clinton's proposed legislation for a government created health care information infrastructure, and by the Institute of Medicine's recommendation for a government provided universal health insurance. It's clear from the current condition of the health care information infrastructure and from the expensive failure of many of the information initiatives undertaken in the nineties that the proprietary model used to develop and provide applications for the last thirty years hasn't worked for the health care industry. It's fragmented the health care information infrastructure and made it much more expensive than it needed to be. At this point it has failed to provide even the beginning of the standardized infrastructure needed for information systems to make its proper contribution to high quality, affordable health care. So, there remains only two alternatives. Allow the open source software model to do for the health care industry what its done for the Internet and is in the process of doing for operating systems (Linux). Or have the federal government control the health care system including creating and controlling its information infrastructure. In successfully building the managed care part of the health care information infrastructure, TriLon will be positioned to contribute to the successful building of the rest. The same technology would be used for the hospital inpatient tracking and billing systems, the medical group administration systems, the provider point of service systems, etc. LicenseTrilonis-mc will be developed and released as an open source application under the GPL license. Basically, the managed care application is to be given away to the health care industry using the and to anyone who wants to maintain, enhance, use, or service it. In line with the way other open source projects (e.g. 'Linux' for operating systems and 'Apache' for web services) TriLon will maintain control over one brand or distribution. In this way the application should be able to draw freely upon the design, development, and implementation expertise and assistance of the Health Care and Open Source communities. Under the GPL license each customer will be able to make whatever changes are desired to the application without having to add them back to the primary distribution. The only limitation is that the customer can not then take the application plus the changes and then market it as its own proprietary application. Marketing/RevenueTriLon will use the AOL or Gillette model of marketing. Give the product itself away, using the internet for communication and distribution. This way potential customers can, with TriLon's assistance if desired, extensively test the application and its fit, capability, security, and stability before making any major commitment to it. TriLon will generate revenues primarily through maintaining and servicing the application for subscription members in a "co-op" whereby member-users have free access to software changes and enhancements made by TriLon, by customers as they modify the application for their own use and then give it back to the primary distribution, or by other members of the health care and open source communities. This will drive down maintenance and application development costs while maintaining quality and closeness of fit to the actual information needs of each company. The brand identity 'trilonis-mc' will serve to develop and protect application quality and market share. With the right management team, annual revenues are expected to be over $5 million within 3 years of the application’s release, with a potential growth to at least $100 million within 10 years. CompetitionTriLon's main competition in this is the proprietary model for software development and marketing. Under this model the average cost per line of code is about $25.00 and the normal charge for custom programming or modification of an application is $100.00. That's one reason for the migration to overseas development. In order to compete with the open source model, which uses the internet to enable collaboration, draws the top 5% of developers. These developers are an order of magnitude faster than the average developer, and they produce higher quality code. In order to compete with these developers, once their skill and ability is focused in collaborating upon an application, companies which currently use the proprietary model will need to reduce their development costs to about $2.50 per line and their charges to less than $10.00 per line. The development cost is computed by taking the U.S. average developer productivity of 200 source lines of code (sloc) per month and multiplying it by an average developer cost of $5,000 per month. The normal charge for custom programming was calculated by taking a proprietary vendor's average charge of $125 per hour for custom programming and dividing it by 1.25 lines per hour. Additional cost saving with no sacrifice of quality will be derived from the fact that open source (e.g. Linux and Apache) tends towards a natural monopoly. Under the proprietary model, there are many expensive applications for each vertical market, each doing basically the same thing. Vendors maintain monopoly control over the application and can charge monopoly prices for service and maintenance. Each customer is dependent upon the vendor for added functionality or has to pay its own developers for separate applications that tack on that functionality. And each customer has to pay for the complete customization because all development is done in isolation from any other customer. With the open source and subscription model each customer only needs to pay for added functionality when that functionality hasn't been approved by the committee. And even then, the cost of the added functionality is competitive among many possible suppliers. Managed Care SystemThe application was originally developed for PacifiCare, Inc. when PacifiCare was a startup HMO. The sophistication and ease of use of the application helped give PacifiCare a strong competitive advantage. This contributed to its growth to a $12 billion a year multi-state corporation. After PacifiCare was bought by UniHealth in 1984, UniHealth had the application translated into RPG to run on the IBM AS/400. UniHealth began marketing the application in 1986. In 1997 the application was sold to OAO Technology Solutions. OAO earns $150 million a year from the marketing and servicing of this and related applications. More than 200 client companies use the application to administer claims for more than 7 million lives. In 1982 I asked PacifiCare for development and marketing rights to the application. After receiving ownership of the application, I left PacifiCare to form my own company. My first client was J.P. Kennedy and Co., a third party administrator of self-insured employer benefit programs. As good as the application was for the HMO model, it lacked the flexibility needed to handle the full range and combination of potential medical, dental, psych, vision, drug, and other health related benefits. After I rewrote it, Jim Kennedy, the owner of J.P. Kennedy & Co. rated it as among the top 10% of any administration application at any price for its comprehensiveness, ease of use, and flexibility The original application handled membership/Eligibility, Claims Processing, Provider Contracting and Capitation, Utilization Review, Authorization/Referrals, Billing, Medicare, and Medicaid. The updated application will also handle Section 125 cafeteria plans. Trilonis-mc will be web-enabled with strong security, data validation, and utilization review capabilities. It will initially have about 150,000 sloc for a minimum development cost value of $3.75 million. I estimate it will take about 10 months to update this application. The Membership Table LoaderI was involved in the design of an exception handling and reporting system for a membership table loading application for a Third Party Administrator. They had a membership loading program as part of the commercial claims and membership package they were using. Using this loader was corrupting the membership database and the commercial vendor wasn’t fixing the problem. The vice-president of the TPA took our design to a consultant friend of hers. He said that developing the design would be a minimum of $130,000 and 9 months of work. So, the program got scrapped for that TPA. Two years ago, a second TPA needed an EDI-834 translator for the commercial membership and claims management software they were using. It took 2 weeks to write the translator and another 3 weeks to write all the data exception handlers and reports necessary to keep the commercial membership loader from corrupting the database. The application can easily be extended to handle XML file formats or input from any flat file format. The application as it stands is about 3,000 lines of code for about $75,000 value in what would be the normal development costs. I recently called their Information Services manager to see if they were still using it because I hadn’t heard from them in two years. He said they were using it.This application will ultimately be part of the managed care application. References
www.trilonis.com/BusinessPlan/PacifiCareContract.html PacifiCare Contract |
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