Should Your Health Plan Build or Buy Payment Integrity Technology?

The real question isn’t whether you can build it. It’s whether building will help you scale faster, reduce administrative burden, and create a stronger foundation for payment integrity.

Whether your health plan has decided it has outgrown its manual paper-based processes or existing technology, at some point you will likely ask, “Should we build our own custom solution or buy something off the shelf?” No matter your choice, there will be trade-offs, primarily between cost and control:

• • Build: more cost, more control
  • Buy: less cost, less control

How will you make that decision for your payment integrity organization? Let’s explore the considerations of each.

“We invested 5 years and $12 million in developing a custom software solution — and it still wasn’t usable.” – CEO, National Health Plan

To Build: Consider the Costs

The impulse to build software in-house to answer your technology needs isn’t uncommon. In fact, it’s a very traditional approach. Especially if your plan employs a large IT team, building can feel like the obvious answer:

• • Internal teams understand your systems.
  • Governance committees are comfortable funding internal projects.
  • Leaders take pride in homegrown solutions.
  • There may not be a perfect-fit commercial software solution for your needs.

But the capability to build is not the same thing as the capacity to build. Too many leaders ask, “Can we build?” What they should be asking is, “Should we build?”

A clearheaded evaluation of all costs involved – both hard costs and soft costs – will usually yield the answer.

Development Isn’t the Most Expensive Cost

When making the build versus buy business case, most health plans start by calculating the obvious hard costs:

• • Developer costs
  • Infrastructure costs
  • Maintenance costs

Which is a great start. If it’s difficult to gather real internal costs, a good rule of thumb is to evaluate the costs of the best-match off-the-shelf solution. Then, take that figure for licensing and implementing that solution and multiply it by 10 or more.

But, while you’re tabulating, don’t discount what’s lost to self-development time – usually two to three years or more. Calculate your opportunity costs accordingly:

• • Savings delayed by two years
  • Productivity improvements delayed by two years
  • Vendor optimization delayed by two years
  • Internal audit growth delayed by two years

According to Mike Kriz, ClarisHealth chief information officer, “The cost of waiting often will far outweigh the costs of building or licensing software.”

“Rebuilding would have costs over $1 million and left us maintaining it. Pareo® was already built and stays current.” – Director of Payment Integrity, Regional Blues Plan 

And that’s if your custom software project actually becomes operational.

The Cost of Distraction

There’s another hefty “soft” cost associated with building that is difficult to predict and calculate: Internal development of software sways a company off-course from their actual core business focus.

Consider the effects of pursuing both the business of being a health plan and that of a software developer. When organizations enter the realm of software development, internal resources also become responsible for scoping the project, testing and documenting the software, and the development and delivery of a training program.

“It was taking too long to get to the data for needed insights, and we were looking at having to rebuild 25 internal applications for just one side of the business. Then, we realized, why build something when we could have everything we needed in Pareo?” – Director of Payment Integrity Operations, Regional Blues Plan

As a result, according to the software industry’s most trusted source on complex IT projects, only 31% of projects are entirely successful, 50% end up exceeding the deadline and budget, and 19% are canceled entirely. For health plans already facing common financial constraints — slim margins, rising cost pressures, etc. — an out-of-control tech project can compound these factors.

“More than one of our clients have invested years and millions of dollars to develop their own custom solution,” says Kriz. “It can be done, but most payers don’t want to be in the software development – or maintenance – business. That’s why they come to us.”

Investing in buying a solution means that the vendor assumes all software development responsibility, which frees up a health plan to focus on other important issues.

The Cost of Scaling

Many internally developed tools are successful. At first. The challenge appears when payment integrity grows:

• • More auditors
  • More vendors
  • More inventory
  • More reporting requirements
  • More executive visibility
  • More accountability

What worked for five users rarely works for fifty. What worked for one vendor rarely works for ten. Your payment integrity operations platform needs to work today – and support where your program needs to be three years from now.

While building software internally is the right decision for some, it certainly pays to consider all your options.

The Six-Month Rule

Technology backlogs have never been longer:

• • Claims modernization projects
  • AI initiatives
  • Data platform investments
  • Member experience priorities
  • Every department believes their project deserves to be next.

A useful rule of thumb:

If IT cannot realistically deliver meaningful business value within six months, evaluate buying before building. 

Because every month spent waiting is a month of unrealized savings, continued manual work and delayed operational improvement.

To Buy: Consider the Control

In a highly regulated and sensitive environment like health plans operate in, it’s intuitive to prioritize control at any cost. But, is it necessary to sacrifice control when working with a strategic technology partner? With the right technology vendor, your voice will be heard, acknowledged and considered with their development roadmap and enhancements process.

Custom vs. Configurable

Many health plans assume buying software means changing their architecture. But often, the opposite is true.

Modern platforms are designed to fit existing ecosystems through configuration, data standardization, and workflow orchestration. The goal isn’t to replace everything. The goal is to connect everything. With that in mind, ask yourself: is it really custom software that you need, or something configurable?

Start by defining the business processes that make your organization truly unique: fields, workflows, permissions, and integrations with homegrown systems. Prioritize solutions that are flexible enough to accommodate your needs.

In the end, you may still determine configurable elements don’t satisfy all your requirements, and you need to commission truly custom development additions to a vendor’s technology. By acquiring a third-party technology platform – and limiting custom development to identified gaps – it’s easier to predict the cost and time investments required.

“IT leadership understood how time consuming, resource intensive, and costly it would be to build something internally. Fortunately, we came across ClarisHealth and they had the solution. A similar self-built solution, to really get something that has the functionality of Pareo, would have astronomical costs associated with it.” – Senior Director of Claims Integrity, Public Health Plan

Bonus Expertise

Many health plans approach technology projects by documenting existing workflows and asking developers to recreate them digitally. This risks a dangerous outcome: You automate inefficiency. The result is faster execution of the same broken processes.

Commercial payment integrity platforms bring something internal teams often cannot: Exposure to how dozens of other health plans solve the same problem.That outside perspective helps organizations challenge assumptions, standardize workflows and adopt proven practices – rather than simply digitizing legacy processes.

We work with our clients every day to solution novel approaches to entrenched challenges. These experiences provide us with ample opportunity to hear directly from industry leaders what works and what doesn’t in terms of technology for payers.

“Our position affords us a unique view into best practices for payment integrity,” says Kriz. “Through their daily use of the platform, thousands of users provide constant feedback on its value. It creates a virtuous cycle of innovation that improves every health plan’s experience.”

It’s a unique position that allows us to, as one client put it, “see the problem as if you’re working alongside us.”

The Best Payment Integrity Programs Don’t Fight IT

A common misconception is that buying technology means bypassing IT. But the most successful payment integrity programs do the opposite.

They create a partnership between PI operations and technology leadership. In this relationship, operations owns and understands the business problem. Technology owns and understands scalability, integration, security and governance.

With these clear lanes defined, together they determine where internal development creates strategic advantage and where buying accelerates value. Build versus buy is a joint decision, not a battle.

Control and Innovation: You can have it all.

The build vs. buy debate assumes payment integrity technology is just another application. It isn’t. Modern payment integrity programs depend on an operating platform that connects vendors, auditors, claims data, workflows, analytics and leadership reporting.

The question is no longer, “Should we build software?” The question is, “How quickly can we create the operational foundation needed to scale and innovate payment integrity?”

For most health plans, that answer increasingly points toward partnering with a platform purpose-built for the challenge.

Whether your strategy includes internal auditors, external vendors or a combination of both, success increasingly depends on having a system that connects the people, processes and data behind your payment integrity program. Pareo® was built to serve as that operational foundation—giving health plans greater visibility, control and scalability across payment integrity operations.

Schedule a conversation today to see first-hand how Pareo is helping health plans scale faster, reduce administrative cost and build a stronger foundation.