EDS wins $200 million outsourcing contract

Baylor Health Care System will outsource most of its billing and collection tasks to Electronic Data Systems Corp. (EDS), a move the health care provider expects will shave between 10 percent and 15 percent off its administrative costs, allow it to focus more on its core business and improve patient service.

"We felt we had done about as much as we could do internally" to improve billing and collection, said Bob Pickton, Baylor's senior vice president and chief information officer (CIO), in an interview.

Although efficient, Baylor's billing and collection appears to consumers as a very complicated and confusing process, Pickton said. EDS brings know-how about the business processes and comes armed with technologies to make Baylor's patient billing process "much simpler and straightforward," Pickton said.

"We run an extremely efficient billing service. But we felt there was expertise EDS (and its partners) could bring to us to design new processes and apply technologies in some areas no one had applied in the past," he said.

The 10-year contract, valued at about US$200 million, is of the business process outsourcing (BPO) type, the companies said Monday in a joint announcement. BPO contracts go beyond traditional IT outsourcing deals because the client entrusts the outsourcer with taking over an entire business function or functions -- in this case billing and collection -- instead of just an IT task, such as network management or database management.

The Baylor BPO contract calls for EDS to provide IT services, hardware and software, as well as business processes related to billing and collection, the companies said. Baylor's 200 or so employees in charge of billing services will become EDS employees, Pickton said, adding that no jobs will be lost.

One specific goal of Baylor with the deal is to "dramatically increase" the number of claims that are paid the first time Baylor submits them to third-party payers, Pickton said. Baylor expects to save $51 million in administrative costs over the 10-year life of the contract, he said.

"We're moving forward immediately," said EDS spokesman John Clendening in an interview. "We want to start producing savings for Baylor as soon as possible."

The agreement excludes the claims processing and billing related to Medicaid services, which represent about 6 percent of the company's billings, according to Baylor. The Medicaid billing process will continue to be handled internally for now, Pickton said. Medicaid is a program funded by the U.S. federal government and by the states to assist low-income people with health-related expenses.

Baylor, based in Dallas, is a private-sector, nonprofit health-care company whose network includes hospitals, primary-care-physician centers and rehabilitation clinics. It has about 14,000 employees and had $1.2 billion in total operating revenue in fiscal year 2001.

The companies are also working on a longer-term project to give health care workers wireless handheld devices to record and transmit data in a way that's faster and more accurate, Clendening said.

For example, doctors and nurses would enter patient data into PDAs (personal digital assistants) instead of using clipboards. The data would then be transmitted wirelessly to the hospital's network and to the insurance companies' systems, reducing errors, Clendening said.

Although still on the drawing board and not part of the contract announced Monday, this wireless PDA project is something Baylor is interested in pursuing with EDS, Pickton said.

Monday's contract grew out of a BPO deal Baylor awarded to EDS in 2001 to manage several business functions in its Health Texas Provider Network, a provider of about 300 physicians in practices owned by Baylor. Baylor expects to continue deepening its relationship with EDS to further improve its business processes, Pickton said.

"We're at the beginning of a journey. The more we work together the better it will be for the patients," he said.

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