Core System Replacement Considerations for Healthcare Payers

New payment methods, accountable care, consumerism and an increasing demand for effective subscriber engagement and management (which disrupts traditional operating models in the small to mid-sized payer market) are placing enormous pressure on providers to innovate and improve operational efficiency. Outdated core legacy systems may hinder a payer’s ability to respond rapidly to this evolving landscape.

In order to accommodate these trends and facilitate better integration and communication with customers and partners, many organizations are considering updating or replacing their core systems. However, switching to a modern core system comes with a number of challenges, due in part to the complex IT environments, custom surround code, and patchwork of legacy systems that characterize most organizations.

The switch isn’t as simple as unplugging dependent systems and databases from legacy core systems and re-plugging them into a new one. Most legacy systems have numerous downstream subsystems, dependencies and integrations, including reporting and regulatory systems.

Before making the decision to replace their core systems, organizations must first evaluate their existing core legacy systems and determine whether it still meets their business needs. Payers need to ask themselves, “Is a core system replacement really necessary at this point in time and if so, what are we going to gain by doing it?”

Healthcare payers must perform a thorough evaluation of their existing IT environment to determine if the core IT stack helps or hinders employees when executing daily tasks across workloads, processes, and departments.

Understanding Your Core System

For business environments experiencing substantial levels of growth or making imminent plans to expand into new products, services or industry, management may often feel the need to overhaul current IT systems to make way for newer, and reputedly more efficient systems that support said expansion or levels of growth.

This need stems from the inability (or perceived inability) of existing systems to properly scale with organizational growth. Although growth comes with tremendous implications for core systems, the decision to replace should depend on the impact of the organic growth on the functionalities of existing operational models.

Payers should evaluate the capabilities of their legacy core system to determine if it’s able to scale with their organization and meet current and future business needs. This means not only understanding the core system intimately and knowing exactly what it’s capable of, but also the application universe it exists in. This means being aware of all integration points both in and outbound, as well as surrounding applications that rely on data from the core system (often with predefined load formats). Staff should have the requisite expertise to understand the current application universe as well as what their existing core system can and cannot do before making the final decision to replace.

If an organization’s employees don’t have the necessary training or expertise to configure and use the core system properly, there may be capabilities yet unexplored. Payers should also check to see if their systems have been upgraded to the latest version. If not, there may be additional functionality in the current release that would effectively meet and facilitate their plans for growth or business expansion.

Lack of Confidence

Due to the rapid pace of technological development, users of legacy core systems are slowly turning their attention to newer, more sophisticated technology, and adapting it to their legacy systems. Newer claims systems have the advantage of being built on more recent technology, but may lack the depth of sophistication in handling scenarios that the legacy software has. As such, understanding the operational details and business needs is another key area to evaluate and have demonstrated when reviewing systems replacement candidates.

To avoid being blinded by “flashy new toy” syndrome, organizations need to engage vendors in direct and detailed conversations around specific business scenarios, to gauge their capability in the space and determine their willingness to provide support in the future.


Core systems provide the organizational foundation upon which critical business operations are built. To achieve optimum performance, organizations must continually assess the capabilities of their core system and business processes to take steps to modernize the underlying technology stack. Payers should not replace their entire system just to gain new functionality in one specific area, when they could implement a targeted solution instead.

Outright replacement of core systems is a drastic, expensive and risky step. It is worth taking the time to thoroughly assess your current environment to fully understand the business needs and gaps before embarking on the journey to a new core system. By doing so, companies can extract the maximum value from their long-term assets while ensuring that they are able to meet the ever-changing demands of the industry.