National Medical Health Card: Faster Facts

By David F. Carr  |  Posted 2004-10-01
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National Medical Health Card 26 Harbor Park Drive, Port Washington, NY 11050

Business Pharmacy benefits management

Key Business Executive Chairman James J. Big

Key Technology Executive CIO Agnes Hall

Project Establish database and analysis infrastructure to provide better service and anticipate growth.

Objective Provide faster answers to customer requests.

Technology Used Oracle on HP-UX, Oracle data warehouse tools

How it gave edge over bigger companies Gave NMHC customers direct access to data they needed to control their drug costs.

Last year, Beth Skalitzky dumped Medco Health Solutions, the $34 billion manager of pharmacy benefits for corporations. She felt she was operating in the dark. "We were not able to get our hands on data to help us manage our plan," she says.

As benefits administrator for Perry Judds, a printing company based in Waterloo, Wis., she was frustrated that Medco wasn't quicker to respond when she asked for reports on drug cost trends or explanations of problems reported by employees.

So Skalitzky switched to National Medical Health Card Systems (NMHC), a much smaller benefits manager that has annual sales of $651 million. A big part of the appeal: the ease with which she can get information from NMHC's Web site.

More than 2,000 employees have her name and home phone number, and they weren't afraid to use it when they had problems with Medco, such as getting to the prescription counter and not being given the proper discounts. "I remember one Fourth of July, I spent the whole day dealing with these sorts of problems," Skalitzky says.

Now, her employees can find answers for themselves on NMHC's site. Or, she can access their accounts and look things up quickly as well.

That NMHC was much smaller, with less than 2% of Medco's sales, didn't bother her. Medco serves more than 60 million "covered lives,'' i.e., individuals and their dependents.

"As a 2,000-life company, we're nothing to them," Skalitzky says.

By contrast, it's much easier to get NMHC's attention. That's why CIO Agnes Hall pushes to install systems that let NMHC respond quickly to customers.

Nobody's going to get fired for picking Medco, Express Scripts or Caremark, but you will not get the personal care from those companies because they're too big," Hall says. "We want to offer very personal quality service that the big guys can't offer, and to keep doing it no matter how big we get."

How big is that?

For the past two years, NMHC has captured a spot in Fortune magazine's list of the 100 fastest-growing companies in America. According to Fortune's September 2004 list, the company ranked sixth, with yearly growth of 44% and a 107% total return to investors over the past three years. NMHC was No. 27 on the list a year ago.

Doubling Market Share

The prescription payments industry handles an estimated 2.6 billion drug purchase transactions a year. The volume of prescriptions handled by the industry has grown 44% since 2000.

The two largest benefits managers, Caremark and Medco, control 18.5% and 15% of the market, according to the Drug Cost Management Report survey published by Atlantic Information Services. But NMHC has more than doubled its share of that growing business, handling 0.7% of the volume this year, up from 0.3% in 2000, according to the survey.

NMHC has been growing through acquisitions—five in a little over three years—but also by building its basic business at a rate of 30% a year.

That has come by paying attention to customers like Skalitzky, whose thirst for information is sated through technology. Hall wants to make sure that anything a customer could possibly want to know about member status, claims eligibility and prescription cost data can be supplied on screen and over the Internet.

NMHC stores 32 trillion bytes of information in Oracle databases on HP SuperDome servers, with room to expand.

To give customers like Skalitzky the quick responses they want, NMHC supplements its central data warehouse with data marts. These are smaller analytic databases optimized for specialized queries, such as an executive summary of mail order and retail spending or a detailed analysis of specific physicians' prescribing patterns.

Integrail, the health data and risk analysis business NMHC bought in 2002, had built its software around a Microsoft SQL Server foundation, but that, too, will be converted to Oracle. "SQL Server exists and has a customer base for a reason, because it's small, light and easy to deploy," says Mark Deck, NMHC's director of technology. "But there is also a reason why you don't put big things on it."

Rather than worry that SQL Server might buckle under the strain of supporting the very large databases he sees in Integrail's future, switching to Oracle is a safer bet, Deck adds.

"We want to offer very personal quality service that the big guys can't offer"

Hall, who is also president of Integrail, focuses on speed as a key virtue in gaining and keeping customers. "The express purpose of speed is how fast can we satisfy the customer's request," she says.

For example, when a customer asks for it, NMHC commonly analyzes several years of data to suggest plan changes that will lower costs while preserving quality. Originally, this required a clinician to spend a week running and reviewing reports, then crafting a presentation to the customer. But by using artificial-intelligence techniques, NMHC wrote software that combs through the relevant databases and creates a near-complete presentation in 5 minutes, according to Hall. A clinician still reviews the recommendations and adds finishing touches, but can do so on the way to a customer meeting, she says.

"I can hardly think of anything that takes longer than 24 hours,'' she says.

Beyond the Pharmacy

Speed isn't all that matters to customers. Skalitzky thinks it's possible that her printing company will "outgrow" NMHC and move to getting pharmacy benefits as part of a health insurance plan. "Sometimes if you tie those together, you can swing a better deal," she says.

NMHC is responding by trying to turn itself into more than just a pharmacy benefits administrator. Partly on the strength of Integrail, NMHC is starting to style itself as a "total health-care solution" company.

Where the pharmacy administrator provides reports that help customers track their drug cost trends, Integrail goes further with predictive modeling and risk analysis of all types of health-care costs. That means a benefits manager such as Skalitzky can use drug refill order data to detect when chronically ill employees are failing to take their medicine, which in turn can head off much bigger bills from hospital stays.

As Hall explains: "We're helping customers lower costs, maintain costs and avoid future costs."