Outsourcing in Healthcare
Outsourcing in the health care industry continues to grow in an effort to cut the raising cost, to increase efficiency and quality of care by hospitals nationwide. As annual healthcare spending in United States hit $3.8 trillion (Munro, 2014), and aging population in America is increasing with the retirement of baby boomers and higher demands for patient care, the cost of healthcare will continue to grow. In response to increasing cost, many hospitals will employ outsourcing to save money and combat rising costs. This paper will examine outsourcing trends in healthcare.
Prevalence and Trends
Outsourcing is not a new trend in healthcare. In the past, medical centers successfully outsourced support services, such as construction, IT, translation, laundry services, housekeeping and food services. Today, in an attempt to reduce rising cost of healthcare services, hospitals increasingly turning to outside contractors for patient care and clinical services, such as medical staffing, radiology services, laboratory services and clinical specialties. The clinical specialties most frequently outsourced are anesthesia, emergency department, dialysis services, diagnostic imaging and hospitalist services (Waller, 2012). For information technology, 97% of respondents report outsourcing one or more of these services, such as EMRs, patient satisfaction surveys, help desk, CPU and peripheral maintenance and local IT support (Waller, 2012).
According to Modern Healthcare survey, conducted in 2012, contracts for anesthesiology and emergency department services increased 21.4% and 10.1%, respectively, among the outsourcing firms that responded to the survey. The survey reported 13.1% growth in outsourcing among national healthcare clients between 2010 and 2011 (Kutscher, 2012). It included responses from the top 20 outsourcing firms that served 16,463 clients in 2011.
Outsourcing in healthcare is expected to increase for the IT and clinical services in the next decade. The United States healthcare IT outsourcing market is expected to grow by 42.8 percent in the next five years, according to a report by MarketsandMarkets (Punke, 2013). As reported by Healthcare IT News, the global healthcare IT outsourcing market is forecast to grow at annual growth rate of 7.6 percent to reach $50.4 billion by 2018 from $35 billion in 2013, according to the RnR Market Research report (Monegain, 2013). Demands for outsourcing IT in healthcare is fueled by rising healthcare costs and higher demands for quality of care (Monegain, 2013).
The growth is predicted for the top five most outsourced clinical services as well, such as anesthesia, emergency department staffing, dialysis services, diagnostic imaging and hospitalists staffing (Punke, 2013).
Literature Review of Successful Outsourcing An example of successful partnership with outsourced IT company is Jefferson Regional Medical Center in Pittsburgh, PA that was presented by Outsourcing Center in 2007 in their report. After being $16 million in debt in early 2000 and continuously loosing patient revenues, the hospital top management realized that IT was not a hospital’s core competency. Outsourcing a hospital’s IT systems and processes will not only reduce operational costs but also enable the hospital to bring in new technology cost-effectively on an ongoing basis (Goolsby, 2007). Successful partnership with Lexmark, St. Edward Mercy Medical Center and St. Joseph Mercy Health Center located in Arkansas, was able to eliminate pre-printed forms that wasted valuable space, budget and time of the staff. Lexmark, an outsourced firm, was able to digitize all hospital forms, eliminating the need for stocking pre-printed forms and having patient information on paper. With print-on-demand documents, St. Joseph and St. Edwards Medical Centers were able to reduce expenses dramatically (Lexmark, 2013). At St. Joseph, putting its 3,000 forms online allowed the hospital to shut down its internal print shop, leading to immediate cost savings of nearly $1 million dollars (Lexmark, 2013). At St. Edward, the elimination of just one form in the admissions processes has already led to quantifiable annual savings of almost $900,000, according to Owen. She expects additional savings as other processes are automated and up to 100 active paper forms are eliminated (Lexmark, 2013). Radiology services remain to be one of the most outsourced clinical services and is estimated that around 90 percent of hospitals in United States now outsource some part of their radiology services due to faster turnaround time (LaJeunesse, 2013). As cited in Modern Healthcare (2012), C. Rhoades, assistant administrator of general services at El Centro (Calif.) Regional Medical Center, notes that by using an outside radiology firm, scans that used to take up to 24 hours to read can now be done in an average of 25 minutes (Kutscher, 2012). Many hospitals in United States are able to reduce costs by using services of outside vendors while maintaining high care quality and patient satisfaction. As presented by Specialty Care (2013), Lutheran Medical Center (LMC), located in Brooklyn, NY, continuously experienced issues with OR instruments and equipment such as incomplete instrument trays and malfunctioning video and monitoring equipment that often resulted in late procedure start and underuse of OR suite. By outsourcing minimally invasive surgical services, LMC was able to receive new equipment and instrumentation, that is now being maintained by outsourced company, disposable supplies and Clinical Technicians to support procedure. Today surgeries start on time in 87 to 95 percent of cases (Specialty Care, 2013). An average turnaround time has been reduced from 63 to 30 minutes, minimally invasive surgical volume more than doubled and procedure volume growth has been managed with no additional personnel in OR (Specialty Care, 2013). Besides the higher procedure volume, LMC was able to cut expenses related to equipment replacement and repair (Specialty Care, 2013). By outsourcing minimally invasive surgical services LMC was able to increase procedure volume and save money while maintaining high quality of care. Lutheran Medical Center was a recipient of Distinguished Hospital Award for Clinical Excellence by HealthGrades and was recognized as one of the nation’s top performance-improvement leaders by Solucient (Specialty Care, 2013).
Suggestions
Information technology continues to be one of the most outsourced services in the healthcare and as more healthcare facilities turn to IT to improve communications, transparency and patient flow and to reduce the cost, the amount of outsourcing is expected to increase (DerGurahian, 2007). By utilizing IT outsourcing hospitals can use the savings derived from their operational cost reduction to invest in IT initiatives that will improve patient care and satisfaction, reduce medical errors, and improve physician satisfaction. Another outsourced service that can potentially improve patient care and patient satisfaction is radiology vendors that could complement existing radiology department for faster services. It is estimated that 90 percent of hospitals in United States now outsource some portion of their radiology services (LaJeunesse, 2013). One of the most important benefits of using outside radiology services is faster turnaround time.
Best Practices The key to success in outsourcing a hospital’s IT is to assess and convey the needs of the physicians, clinicians, and end users of the applications to not only ensure the IT strategy matches the hospital’s objectives but also meets the users’ needs and solves their issues (Goolsby, 2007). As suggested by Becker’s Hospital Review, in order to use outside vendors successfully, a thorough investigation of whether that relationship maximizes clinical outcomes and greatly helps the hospital is needed (Oh, 2010). Using services of an outsourced vendor does not mean releasing all responsibilities. Hospital must be involved in all vendor’s processes from start to finish, clarifying all expectations, setting measurable goals and keeping vendor accountable to those goals and expectations (Oh, 2010). Careful assessment of the hospital’s weak areas that require cost and quality improvement will help in determining which services can be potentially outsourced. Successful outsourcing requires extensive research and interviewing of potential partners in order to choose the right one. Open communication with outsourcing firm is required in order for this collaboration to become a mutual goal. Budget assessment and long-term value of the contract with outsourcing provider will provide an outlook on the real cost savings for the hospital. Besides cost saving, it is necessary to determine how the partnership will improve patient safety, patient care quality and patient satisfaction.
Necessary Changes
Whether outsourcing support services or clinical services in the hospital there will be a need for restructuring. Using an outside vendor could lead to departmental downsizing or even elimination. As described earlier in this paper in the example of St. Joseph and St. Edwards Medical Centers, their successful outsourcing partnership resulted in a complete switch to digitized hospital forms and closure of the hospital print shop. Fear of losing job will have a high impact on existing employees that could lead to increased turnover (Dunn, 2010).
Another possible problem with outsourcing is maintaining patient confidentiality. This issue needs to be addressed by hospital management, as outside vendors need to be monitored for quality and legal compliance.
Employing outside vendors involves some training to make sure that the company employees are compliant with hospital goals and processes.
Conclusion
Outsourcing is a growing trend. In the past hospitals used outside firms to meet their construction needs, housekeeping, linen services and other support services. Today, in the times of rising healthcare costs, hospitals are seeking services of outside companies to replace or complement patient care and clinical services as well. IT services remain one of the most outsourced services today and demand for this type of service is predicted to grow. Radiology is another widespread outsourced service used by hospitals in order to cut costs, receive faster services and increase patient satisfaction. In order to achieve success with outsourcing, hospital management must perform a careful assessment of the organizational needs and weaknesses in order to identify potential areas for outsourcing. Management needs to assess thoroughly every potential vendor before signing contract. Quality control and legal compliance of the outsourced firm is the direct priority of the hospital. References
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