To Outsource or Insource: Today s Healthcare Conundrum WHITE PAPER

Transcription

1 To Outsource or Insource: Today s Healthcare Conundrum WHITE PAPER

2 Do more with less. It has become the mantra of healthcare executives around the country. Yet while organizations consider how to do more with less, they must also continue to meet stringent patient safety standards and boost patient satisfaction and outcomes creating a tall order to fill. Multiple factors have increased the focus on healthcare quality. Rising costs have led the government as well as health insurers to look more closely at the care they pay for. Increased consumer consciousness has made patients more aware and more likely to demand higher quality care. And finally, growing social networks can quickly turn isolated instances of dissatisfaction into networks of disgruntlement. This tumultuous environment is requiring healthcare organizations to be more nimble than ever. A significant way for them to accomplish this goal while increasing the focus on quality and streamlining is through the outsourcing of services, particularly services that are not the core competency of healthcare systems.

3 Why outsource certain functions? According to the Outsourcing Institute, the top reasons companies outsource 1 are: 1. Reduce and control operating costs 2. Improve company focus 3. Gain access to world-class capabilities 4. Free internal resources for other purposes 5. Resources are not available internally 6. Accelerate reengineering benefits 7. Function difficult to manage or out of control 8. Make capital funds available 9. Share risks 10. Cash infusion How do you know when outsourcing is right for you? There is a clear difference between a strategic decision to outsource and outsourcing for the sake of outsourcing. For some services (particularly those that are core to your business) outsourcing is not the answer. Before deciding if outsourcing is right for your organization, consider two things: 1. Make sure that outsourcing fits your goals: Evaluate and determine if outsourcing a certain function will support and help meet your organization s business/strategic objectives and priorities better than performing that function internally. 2. Determine that there are organizations to perform that function: Ascertain that there are organizations available to take on that particular function at quality and efficiency levels equal to or greater than what you can achieve. The primary argument against outsourcing is the loss of control over processes and outcomes when you put part of your organization in the hands of an outsider. To be sure, there can be risks with outside providers, which is why choosing a high performing outsourcing partner is so important. Management teams want reassurance that they are partnering with an outsourcing specialist that can be trusted and, more importantly, can adapt to the organization s growing and changing needs. Outsourcing has been around for as long as work specialization has existed. And whatever lingering concerns there may be regarding loss of control over processes, there are frequently more reasons in favor of outsourcing. A few include: Specialization A third party service provider is an expert in the specialized service provided. Quality Because of specialization, the services provided by a third party reflect their core business competency and all of their resources will be focused on delivering the highest quality service. Staffing Through outsourcing a non-core function, organizations can avoid the human resource challenges associated with recruiting, hiring and other personnel issues. Cost savings Many costs typically associated with an in-house solution, such as capital and human resources expenditures and liability, may be avoided by partnering with an outside service provider. Centralization and systemization A trend in service delivery within the current hospital business climate in the U.S. is driving the systemization of services. Hospital systems with many locations are seeking to leverage outsourcing partnerships across many hospitals to help drive predictable outcomes and cost efficiencies. The desired state is more of an integrated organization, with both horizontal and vertical integration across all hospitals to achieve efficiencies. 2 According to the American Hospital Association, 3 there are 5,754 registered hospitals in the U.S. and there are more than 500 healthcare systems. 4 With increased system consolidation, the number of hospitals and other facilities in a given healthcare system is increasing. These systems in turn are trying to centralize more through their supply chain functions. Leading healthcare organizations are proactively seeking outsourced services. Organizations or healthcare systems that are focused exclusively on short-term, tactical solutions miss the point. Success is a long-term proposition. The key to that success is the ability to leverage organizational strengths while continuing to make incremental improvements for overall effectiveness and efficiency. Hospital systems with many locations are seeking to leverage outsourcing partnerships across many hospitals to help drive predictable outcomes and cost efficiencies.

4 Cost-savings are a driver, but a strategic approach is increasingly important. A shift in the nature of outsourcing has moved from one more strictly focused on cost savings (transactional mentality) to one with a more strategic focus (partnership mentality). Because of the ever-increasing pressures that healthcare executives face, many recognize and acknowledge the value of forming a long-term strategic relationship with a trusted outsourcing partner. These future context partnerships are characterized by long-term timeframes, mutual risk, the ability to tolerate change and experimentation and the involvement of the senior management of both organizations. 5 A shift in the nature of outsourcing has moved from one more strictly focused on cost savings to one with a more strategic focus. Outsourcing is strategic and should involve senior management A 2010 survey conducted by the International Association of Outsourcing Professionals (IAOP), 6 across multiple industries, found that organizations expect to continue to increase the size and scope of their outsourcing programs. The survey also found that outsourcing programs are not only expanding, but more importantly, are becoming more strategic. The IAOP survey goes on to conclude: this increase in the strategic importance of outsourcing is reflected in both a shift in the reasons that companies are outsourcing and in the level of senior executive involvement. According to the survey, twothirds of respondents indicated that senior executives were increasingly more involved in outsourcing, compared to only 13 percent who said that senior executives were less involved. A case example: How outsourcing healthcare transportation can support strategic objectives There are likely many functions within your system that may be better served through outsourcing. The authors of this whitepaper specialize in healthcare transportation so that is the example given. Note however, that much of the information is relevant for other functional areas within healthcare as well. Patient and business critical materials, such as patient specimens, pharmaceuticals, supplies and medical records, are transported to and from multiple touch points within healthcare organizations. The transport of these items is operationally crucial because nearly everything that occurs within a given health system depends on it. Yet, unfortunately, healthcare organizations often make department-level transportation decisions. Even with the best of intentions, the result can be overlapping internal and thirdparty courier services and disconnected networks that can cause delays, increase loss and affect the chain and quality of care. Minimal management attention is paid to these internally run or third-party delivery services, limiting quality control and/ or providing insufficient tools for maximum performance, yet healthcare transportation can drive impactful value. Direct value As described in the previous section, department-level decision making can lead to overlap and disconnection. A healthcare transportation specialist can offer several points of direct value that cannot be easily achieved internally: 1. Scheduled cost savings A healthcare transportation specialist can examine a health system s needs impartially and design a scheduled network that meets its needs in the most affordable manner possible. 2. On-demand cost savings An effectively built transportation operation can satisfy the majority of a healthcare organization s needs though scheduled service, reducing the need for expensive on-demand service, thus removing waste. 3. Supply chain efficiency through integration and centralization More than just delivering items from points A to B, a well designed network can serve as a backbone for centralization and integration of many functions, providing ongoing value and savings. Indirect value In addition to the direct value a specialized healthcare transportation initiative can yield, there are also indirect value points that many healthcare organizations may overlook. These can be just as vital, while also contributing to care quality. 1. Liability transfer Both employees and vehicles on the road carry liability. If you partner with an outside healthcare transportation specialist, these areas of exposure are transferred from your organization to theirs.

5 2. Technology cost avoidance Elements of technology, notably scanning and tracking, are progressively becoming the industry norm. An outsourced transportation company s technology platform not only ensures that you are using the most up-to-date technology but, more importantly, it relieves your organization of that investment burden. 3. Variable pricing With an internal transportation department, added stops can mean additional employee(s) and vehicle(s). Conversely, reduced stops can mean costly down time or layoffs. A third-party transportation specialist should be able to provide you with a variable pricing model, which allows for incremental costs for added work, as well as cost relief for reduced work. 4. Return on released capital If capital is not tied up in vehicles and other assets related to transportation, it is instead available to be more productively applied in other areas of an organization. 5. Error reduction Errors can be costly, both financially and to a system s image and reputation. A healthcare transportation operation with updated technology can help reduce errors and provide associated cost savings. 6. Management liberation With internal transportation, managers in each department of a healthcare organization may spend time supervising employees; overseeing capital infrastructure, such as fleet, technology and equipment; designing routes and tracking down lost or delayed items. Partnering with an expert lifts this burden so that these employees can focus on their core responsibilities. Beyond savings: productivity and scalability Healthcare transportation has strategic bearing on a health system and can unify an entire network. By removing the need to oversee transportation logistics and responsibilities, healthcare organizations can return to their area of expertise and focus on providing quality care and improving their patients experiences. To OutSource or Not How to Tell if a Function Can/Should Be Outsourced Many times, healthcare executives do not know if a function can or should be outsourced as a way to make operations more efficient and streamlined and/or reduce costs and improve quality. Below is a brief checklist. If you answer yes to any of the below questions, outsourcing may be a good option for you. Is the function outside of your core competency? Is outsourcing aligned with your business objectives/criteria? Can a specialist provide better quality or more efficient service? Will outsourcing free up my internal resources without jeopardizing quality? Will outsourcing provide me access to world-class capabilities, such as technology, without having to make a capital expenditure? A strong, centrally managed transportation function facilitates the complementary centralization and leveragability of related departments (lab, mail, supplies, etc.), which can enable future strategic opportunities and growth. By converting legacy operations into a centralized and consolidated network, healthcare organizations can increase efficiency and control, reduce waste and overlap and create a transportation system that is far less costly and easier to manage.

6 medspeed.com 1 The Outsourcing Institute, Executive Survey: The Outsourcing Institute s Annual Survey of Outsourcing End Users, Top 10 Reasons Companies Outsource, Global Strategies for Outsourcing Support Services: Impacting Cost, Quality and Access, Aramark Healthcare. 3 American Hospital Association, Fast Facts on US Hospitals, Billian s HealthData, Essential Link of Non-Clinical Services to Quality Care, Aramark Healthcare 6 International Association of Outsourcing Professionals, State of Industry Survey, May MedSpeed LLC. All Rights Reserved.