CDS Group Health does one routine thing very well — so well, in fact, that it’s expanding into new markets outside its northern Nevada home and beyond its traditional base as an administrator of health-benefits plans.
“We pay claims,” says Rayne Niehaus, vice president of the Sparks-based company. “There are a lot of claims out there.”
The company, an affiliate of Saint Mary’s Health Plans, said last month that it’s expanding its service area to Arizona, Idaho and Utah — states that it can serve fairly easily from its home office.
The careful geographic expansion, Niehaus says, comes on the heels of another diversification move in which CDS began processing indigent-care claims for the Washoe County government.
And it’s edging into bundled-care payments, a federal initiative in which Medicare payments aren’t made doctor-by-doctor. Instead, a bundled payment is made for a single health-care event — a patient’s heart attack, for instance — and medical providers split up the payment.
CDS is working with about a half dozen hospitals in Nevada and California on the bundled-payment initiative.
The growth of CDS into new markets comes after two decades in which it built a solid business as the third-party administrator handling back-office functions for some of the big self-funded health plans in the region.
It processes claims for the Washoe County government’s self-funded health plan along with plans operated by the Washoe County School District and the city governments in Reno and Sparks.
Although public-sector clients account for about 70 percent of the company’s volume, Rayne notes that it also provides third-party administration for private companies’ self-funded plans, and some of those clients have as few as 60 employees.
All told, the CDS handled about $90 million in claims last year, working with health plans that cover about 30,000 people.
It may not be the most exciting work in the world, but CDS has carved a niche for itself with relentless attention to efficiency and accuracy.
“We only want to handle that claim once,” says Niehaus. If a physician’s office or an insured mom questions a claims payment, the administrator’s razor-thin margins are eroded.
That places a premium on skill and experience in the company’s staff of 43, who need to understand the intricacies of each of the health plans that the company administers on behalf of employers.
“We work for them,” Niehaus says. “Everything we do is for them, to make their plans successful.”
The business model is simple: CDS simply collects a monthly fee based on the number of insured people — employees and dependents — covered by a self-insured group.
“We don’t get paid for denying claims,” Niehaus says.
But the company’s dependence on employee head-count has been a headache during an era in which big public-sector employers in northern Nevada have been reducing the size of their staffs through the recession.
At the same time, the number of competitors in the third-party administration arena has declined, sharpening the battle for new clients.
“Now, we’re competing against the best of the best,” says Niehaus. “The ones that are still standing are really good.”
That creates challenges, too, for CDS executives as they map the company’s expansion into new markets. They’ll face competitors with their own deep experience and relationships with self-funded health plans.
“It’s going to be tough for us,” Niehaus acknowledges.
On the other hand, some potential clients in the three states targeted for expansion by CDS welcome a fresh face.
Says Robert King, president of R.W. King & Associates Inc., an employee-benefits brokerage in Phoenix, “As someone who has been working in the self-funded arena for many years, I am always glad to see new, competent administrators enter our market. Competition is always good for our clients.”
