Outsourcing in healthcare facilities - Assignment Example

?Outsourcing in Healthcare Facilities Competition and environmental pressures have led to increased use of outsourcing in the healthcare industry. This strategy is a tactical response to the issues of tight budgets, demand for better service by patients and labour shortages. High professional competency is required in healthcare hence healthcare facilities always outsource their clinical services to specialist service providers. A lot of outsourcing is also done for the delivery of non-clinical services. Outsourced non-clinical services include Electronic Healthcare Records Systems (EHRS), linen services, medical transcription services, facilities management, patient feeding, facility safeguarding, transporting among others. For effective operation and achieving of the outsourcing objectives, healthcare facilities have to find reliable business associates who will offer cost-effective and quality services that meet patient expectations. Prevalence and trends of outsourcing in the healthcare industry The prevalence of outsourcing in the healthcare industry is low as compared to other industries though it is picking up at a fast rate due to increasing financial pressures and demand for better services by patients. The trends of outsourcing in healthcare are increasing as evidenced by the decreasing restrictions on the types of services being outsourced by healthcare facilities. Many outsourcing relationships now are like long-term strategic partnerships instead of arrangements that are tactical and single-purpose in nature. This indicates increasing interest in outsourcing by healthcare facilities. Hospitals are the main types of organizations in healthcare which utilize outsourcing to a greater extend. However, there is a difference in the trends and prevalence rates among the for-profit hospital settings and the not-for-profit hospital settings. More of the profit-oriented hospitals are outsourcing as compared to the non-profit hospitals. Currently, profit-oriented hospital settings outsource up to 25% of their services and their non-profit oriented counterparts are expected to reach this level in the near future (Harris, 2001). One of the areas in which outsourcing is utilized in healthcare is medical transcriptions. This is done as a strategy for dealing with the increasing need to document medical records hence it is a more-cost effective way of adding to back offices. Outsourcing in this area is growing at a significant rate of 15% annually. The third most commonly outsourced service in healthcare facilities is linen/laundry services. This is driven by factors like increasing costs of operating a laundry and upgrading efficient laundry equipment. There is also increasing laundry volumes due to the increasing number of patients (Harris, 2001). Ambulance services, gift stores, and security services enjoy a moderate level of outsourcing in the healthcare sector. The most recent service to be outsourced services is IT services. EHRS outsourcing is picking up even as physicians are being encouraged to adopt and use EHRS. The complexity and urgency of implementing and maintaining EHRS is the driving factor behind its outsourcing. The healthcare industry has also begun contracting for software applications. These services are offered by 3rd party application service providers (ASP's) (Kirchheimer, 2005. Other services that experience varied levels of outsourcing include management of facilities, feeding of patients, transportation, health information management (HIM) and clinical services. One of the companies offering medical transcription services is Chromolume Transcription, a company located in Santa Monica, California. Hospital TeamCare provides physician outsourcing whereas Precyse Solutions provides HIM outsourcing. Experience of healthcare organizations that have tried outsourcing Some of the healthcare organisations that have tried outsourcing include Launceston General Hospital and Westbury Community Health Centre. These hospitals outsource their linen services to Northern Tasmanian Linen Service and the experience has been a positive one. The costs of laundry have gone down in these hospitals as compared to the pre-outsourcing period (Kirchheimer, 2005). The Cleveland Clinic has been outsourcing its admixture function through B. Braun's Central Admixture Pharmacy Services (CAPS). According to the hospital’s Director of Pharmacy, outsourcing of the hospital’s admixture function has enabled its pharmacy department to relocate the time technicians and pharmacists used to spend in preparing IV solutions to other services and patient care activities. Massachusetts General Hospital and the Cleveland Clinic outsource their HIM services to Precyse Solutions. Precyse Solutions offers online coding assistance to the two healthcare facilities and the result is on-time billing. This has led to reduction of costs that were formerly generated by delayed billing (Lorence and Spink, 2004). Precyse Solutions also offers oncology abstracting services to Hopkins Hospital and Mayo clinic. The organisation’s oncology associates work on-site at the two healthcare facilities to help their staff organise and manage data. The partnership between Precyse Solutions and the two healthcare facilities has resulted to decreased costs and increased time efficiency. Johns Hopkins outsources its neuroradiology services to Radiostrings. By working with this Teleradiology partner, Johns Hopkins has been able to outsource labour intensive, expensive and complex radiology and other medical related tasks. It is cheaper for Johns Hopkins to outsource this service than to hire a full time neuroradiologist. The result is increasing profitability, reduced work pressure and cost saving. Some of the hospitals that have tried outsourcing have had negative experiences. A good example is the Sir Charles Gairdner Hospital in Western Australia. The results of outsourcing in by the afore-named organisation were poor in terms of quality, externalities and cost. The production and transaction costs increased as compared to when they relied on in-house delivery. When all these services were returned to in-house delivery, their costs reduced (Boardman and Hewitt, 2004). The hospital management and staff of Sir Charles Gairdner Hospital also commended on the inferior quality of services offered by the contracting companies. Another hospital that had a negative experience as a result of outsourcing is Royal Perth Hospital. This mainly resulted from outsourcing of cleaners. This good-intentioned step led to difficulties in controlling infections within the hospital. Potential areas of service that could be outsourced and why they would offer some economic benefits to the hospital It is easier and more economically benefiting to outsource in these areas of service as compared to outsourcing supplies. The potential area of service that our hospital could outsource is manpower. These included expensive specialist services, security, EHR and laundry/linen services. Many workers are needed to deal with hospital laundry and this means a huge payroll for the hospital every month. Their salaries are constant whether the hospital receives less or more patients at any given month. On the other hand, outsourcing does not involve any fixed costs. This means that the hospital will not operate under a reduced profit margin during its low periods/months. It is also costly to buy and maintain laundry machines. Information technology is very important in the move towards better healthcare services. This has made the adoption and utilization of EHRS a critical element of success in the healthcare industry. However, the development, implementation and maintenance of EHR is a complex process. Considering its urgency and benefits, it will be worthy for the hospital to outsource this service. According to Yigit (2007), outsourcing EHR will enables hospital staff to concentrate on core competencies like patient care. At the same time, the resources of the hospital’s IT department will be freed for other critical activities. Outsourcing EHR will accelerate a migration into this service. This is because vendors have operational expertise required for its implementation. Outsourcing will therefore enable the hospital to migrate to it with the lowest downtime and productivity disruption. EHR requires developed infrastructure hence outsourcing EHR will help to deal with the problem of low infrastructure development within the hospital. This is because outsourcing EHR will substantially reduce the costly infrastructure that is required for the implementation of EHR. This means that outsourcing these EHR functions will keep the hospital investments at their minimum level. So far, the hospital records low levels of utilization of its renal dialysis services and neuroradiology. It is therefore economical to outsource these services than to hire a full time neuroradiologist and kidney specialist. Normally, it is more economical to hire full time professionals who offer highly needed services as compared to hiring those whose services are rarely required. This is because the cost of maintaining them is higher than what they bring into the organization. The hospitals should also outsource security services. It much cheaper to outsource security services than to hire security personnel directly. The hospital will be able to secure security services by hiring companies specializing in this area. This is very important in the areas of monitoring because it requires continuous vigilance. It will not be cost-effective for the hospital to put in place its own detection and response services. At the same time, staffing security expertise to keep vigil all day, all night and all year round requires about five full time employees. It is expensive to hire and retain such a team of security personnel as compared to contracting for these services. Actions and changes required for successful outsourcing efforts For a successful initial outsourcing effort, it is very critical that the hospital selects an outsourcing manager. Outsourcing is about partnership hence the person selected should have good leadership and relationship building skills. This manager should facilitate the building of a good relationship between the hospital and the organization or person that will be given the contract. Friends rarely betray each other hence the good relationship will reduce the chances of unmet expectations once the contract kicks-off. The hospital should come up with a list of services that might present economic and quality benefits if outsourced. The hospital should then make a thorough evaluation of the benefits and risks associated with each of the options presented. If the risks are more than the benefits, then the hospital should consider offering the services in-house. If the benefits are more than the risks, then this option shall be chosen for purposes of outsourcing. According to Roberts (2001), outsourcing usually presents some hidden or ‘silent’ costs that reduce profit margins of outsourced business activities. The hospital should therefore look intently into the selected option or options and evaluate their hidden costs. The hospital should only go for the outsourcing strategy if these hidden costs are far less than the additional profit margins expected from the outsourcing process. The hospital has been growing steadily over the past few years. This means that the first outsourcing process will only be considered a success if it enhances this growth. The hospital should therefore select a partner who is positioned to meet the hospital’s growth requirements and not one that can only meet its current capacity. Customer satisfaction is the key to the success of every business. In this respect, our hospital should make customer satisfaction the aim of the outsourcing. This is important given the fact that people are willing to pay for something extra so as to get goods and services especially healthcare. If the outsourcing will result in poor quality service delivery or delivery of low quality goods, customers will look for alternative healthcare providers. This means the hospital should use a customer approach in the outsourcing process and insists on a partner who has the same commitment. In order to achieve the above, the hospital should identify all potential providers of the selected services or suppliers of the identified goods. From this point, the hospital should make a thorough evaluation of each one of them in terms of reputation, quality of services provided, efficiency, reliability, and costs. In order to know their reputations, the hospital needs to evaluate the number of their current customers, number of contracts lost and reasons for the losses. From this, the hospital will be able to settle on a contractor who has higher chances of providing quality services and less likely go against the contract terms. The selection of outsourcing managers will constitute the main change in the management structure. Tushman and Philip (2004), explains that such a step will involve the transfer of work assignments and change of work units. This will mainly touch staff of the involved departments. It will also be very important to select an outsourcing supervisor in every department that will be involved. The role of these supervisors will be to ensure continuous flow of expected services and report to the outsourcing manager. Conclusion By developing cost-effective initiatives aimed at managing materials, energy and labour, outsourcing helps to maximize the performance and life of healthcare facilities. Outsourcing is very effective in enabling a healthcare facility to operate under a tight budget that accommodates shrinking resources and improve the quality of services they offer to their customers. It has also enabled them to retain and maintain a labour force that is adequate in delivering the best quality services. Outsourcing has its benefits and risks and this calls for the selection of outsourcing managers. These managers should have effective leadership capabilities and understand of the outsourcing strategy, outsourcing evaluation process, benefits and risks of outsourcing, and methods of managing the strategy. Outsourcing of manpower will enable our hospital to save a lot of money which will be filtered into other sectors of healthcare within the organization. The quality of services will also improve service delivery because the savings will be used to increase funding in direct patient care. References Boardman, A. and Hewitt, E. (2004). “Problems with contracting out government services: lessons from orderly services at SCGH.” Ind Corp Change. (13) pp 917–929. Harris, K. (2001). “The Trend Toward Outsourcing in the Healthcare Industry.” John Marshall Journal of Computer & Information Law. (4) pp 23-36. Kirchheimer, B. (2005). Outsourcing ins and outs. Mod Healthc. 35:S1–S5. Online: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2685796/. Viewed on 16th July, 2011. Lorence, D. and Spink, A. (2004) “Healthcare information systems outsourcing.” International Journal of Information Management. (2) pp 131-145. Roberts, V. (2001). “Managing strategic outsourcing in the healthcare industry.” Journal of Healthcare Management. (4) pp 239-249. Tushman, M. and Philip, A. (2004). Managing Strategic Innovation and Change: A Collection of Readings (2nd Ed). New York. Oxford University Press. Yigit, V. et al. (2007). “Outsourcing and its implications for hospital organizations in Turkey.” J Health Care Finance. 33 pp 86–92. Read More