Outsourcing in Healthcare Industry - Essay Example

? Outsourcing in Healthcare Industry Outsourcing in Healthcare Industry Introduction Today many healthcare organizationsrecognize outsourcing as the best strategy to cut down their capital expenditure and to address challenges like labor shortage. As a result, outsourcing has been increasing in the healthcare industry over the recent years particularly in nuclear medicine, ophthalmology, dental services, radiology and imaging, and oncology. The increasing cost of technologically advanced equipments is the major factor enhancing outsourcing approach in the healthcare sector. In addition, rapid changes in technological advancements force the healthcare organizations pace with the latest changes. Outsourcing is a better way to minimize risk factors in terms of technology evaluation and result accuracy. Many healthcare professionals believe that the outsourcing approach in the healthcare sector would deliver quality services to beneficiaries and thereby improve patient safety. This paper will discuss several aspects of the outsourcing practice in healthcare industry and suggest best practices that can make outsourcing effort successful. Prevalence and Trends The practice of outsourcing is extremely prevalent in the healthcare industry and admittedly, this trend is growing dramatically. US healthcare system is the most expensive in the world. As Pear (2004) reports, the US’ healthcare spending accounts for nearly 15% of its GDP whereas most other developed nations spend only 7-10% of their GDP in healthcare. The increased healthcare expenditure forces the country to adopt low cost and efficient options like outsourcing in order to cut down its spending. An aging population in the US not only increases the demand for healthcare but also leads to a paucity of available experts. In addition, the medical transcription (MT) industry has undergone tremendous changes over the past few years. As a result, the scope of MT jobs has increased and MT professional are expected to undertake additional tasks such as editing, checking, and supervision in the near future. Therefore, the US healthcare organizations increasingly and extensively follow the outsourcing approach so as to reduce healthcare expenses and to deliver better services to clients. Today, it is widely seen that healthcare firms outsource their administrative processes that require high degree of expertise and huge resources. By practicing this approach, healthcare organizations can focus more on service quality and patient safety. The services such as billing, coding, staffing, and information technology are greatly outsourced by hospitals and other healthcare institutions. “Modern Healthcare’s annual Outsourcing Survey found that the top 20 outsourcing firms, based on the number of national healthcare clients, reported 13.1% growth between 2010 and 2011” (Expertise on call, n. d.). Staff shortage is growing to be an immense challenge in the modern healthcare environment because of a number of socio-economic factors. As staff recruitment is an expensive and time consuming task, today many of the healthcare organizations outsource this task to external agencies (American Healthcare Outsourcing, n. d.). Since this approach would assist the health organizations to enhance staff retention, more and more firms tend to outsource staff recruiting and training activities to outside agencies. Health care technologies and practices are advancing everyday and firms perceive outsourcing as a better way to take advantages of the potential innovations and to reduce unproductive work time. It is found that the outsourcing practice is more common in large sized health organizations because those firms need to manage troublesome administrative and operational activities. Successes and Failures While evaluating the experience of healthcare organizations that have tried outsourcing, it seems that majority of those firms could attain competitive advantages while some others failed to achieve the desired benefits. Generally, the outsourcing approach in the healthcare industry has been successful despite some adverse effects. The Springhill Medical Center is one of those organizations that have tried outsourcing and achieved potential advantages in terms of productive time utilization, cost, and operational efficiency. The Springhill Medical Center is a 252-bed medical-surgical facility that offers comprehensive services to the greater southwest Alabama region. This healthcare facility has been successfully outsourcing IT operations since 2000 in order to accomplish the goal of becoming the best healthcare provider in the area. As Sucher (n. d.) reports, the outsourcing strategy assisted the organization to eliminate troubles related to an outdated software and several inefficient processes and ultimately to improve the information environment. The author adds that this practice greatly benefited the healthcare facility to stabilize its day to day IT operations, specifically the billing system. In addition, this approach aided the firm to transform its technological landscape in a way that would empower the organization to continue to deliver high quality services. Sucher (n. d.) specifically points out that the outsourcing strategy benefited the Springhill Medical Center to experience a 15% increase in uptime for its billing system. Furthermore, the organization attained 99.9% total system availability by outsourcing its IT operations to Eclipsys Corporation. Another notable impact identified is that this approach assisted the organization to improve its accounts receivable days outstanding by 26% and thereby to increase the level of cash on hand. Ultimately, this change improved the overall fiscal health of the Springhill Medical Center (Sucher, n. d.). Undoubtedly, most of the outsourcing experiences in the healthcare sector indicate that this strategy is beneficial for firms to cut down costs. As discussed already, staff retention is one of the fruitful benefits of healthcare outsourcing. It is obvious that high level staff turnover would impose huge economic burden on healthcare organization because new staff recruitment and training are expensive management tasks. In the case of IT outsourcing, the healthcare organization can get the service of experts and hence minimize the chances of technical errors. Therefore, this practice really helps organizations to trim down unnecessary operating expenses. Suggestions for Areas of Service Process IT operations, staff recruitment and selection, and other administrative functions are some potential areas of hospital services that could be outsourced effectively. However, IT operation is likely to be the easiest service area with the largest economic benefit while considering outsourcing. Reports indicate that the healthcare industry lags behind many other industries in delivering effective IT solutions due to many reasons. Although IT was considered as an administrative function traditionally, today’s health professionals claim that IT has a key role to play in delivering quality patient care. In short, IT has become one of the key elements of quality patient care and patient safety (OSF Global Services). However, many healthcare providers find it difficult to hire and train inside IT staff and sometimes they are reluctant to do so because those organizations rather like to concentrate on providing quality healthcare services. Hence, a significant majority of the providers tend to outsource IT operation to outside agencies. A survey conducted by the Outsourcing Institute reflects that mainly five reasons influence organizations to outsource their certain business functions; they are “reducing and controlling operating costs; improving company focus; gaining access to world-class capabilities; freeing up internal resources for other purposes;” and internal unavailability of resources (OSF Global Services). It is expected that the practice of IT outsourcing would assist healthcare providers to address the above mentioned needs. Evidences suggest that the IT outsourcing would enhance the overall healthcare growth in addition to improving the information environment. An IT outsourcing partnership is better to ensure the availability of required skill sets, particularly in times of technological change. Predictable pricing over a long period of time is another potential benefit of the outsourcing practice in the healthcare industry (OSF Global Services). Since it is easy to separate IT functions from other healthcare operations, IT outsourcing would pose fewer managerial challenges to healthcare providers. Experts argue that the outsourcing approach (or the outsourcing partner) would assist healthcare organizations to align their IT strategies with business goals effectively. They also hold the view that this operational policy would benefit firms to achieve high level expertise more easily and less expensively. In the United States, The Health Insurance Portability and Accountability Act (HIPAA) and the US Balanced Budget Act have significantly cut down the amount of funds to healthcare organizations (OSF Global Services, 2012). Hence, those organizations are forced to find innovative ways to reduce their operating costs and this situation necessitates the need of IT outsourcing in the healthcare industry (OSF Global Services, 2012). Best Practices In order to ensure that the first outsourcing effort is successful, healthcare organizations have to be proactive and subject oriented. Primarily, healthcare managements must maintain a clear view of the service area planned to outsource. The management should ensure that the outsourcing practice would not limit the administrative powers of the organization. The organization has to pay particular attention to outsourcing partner selection because it would decide the outcomes of the outsourcing practice. It is recommendable for healthcare organizations to choose well established and experienced outsourcing partners in order to make the outsourcing effort successful. In addition, the management must appoint a project leader who is familiar with the organization’s day to day activities, particularly those related to the outsourcing area, so as to ensure smooth flow of the outsourcing program. It is advisable for the healthcare facility to clearly list what they expect from the project before the outsourcing effort is launched. This practice would assist the management to evaluate the effectiveness of the outsourcing strategy while it is in operation and thereby identify potential areas of improvement. While practicing the outsourcing approach in the healthcare industry, healthcare organizations must give specific focus to client satisfaction. In other words, the healthcare provider must continuously monitor how the ongoing outsourcing effort impacts client satisfaction. If it is identified that the outsourcing approach does not meet patient satisfaction, the management should make necessary changes to the program. In order to get patient views regarding the change, the management can deploy tools like questionnaires and email surveys. Finally, it is essential to frame an effective performance measurement system to analyze the effectiveness of the outsourcing practice or effect of the outsourcing program on the organization. Such information would really benefit healthcare organizations to make sound decisions in future regarding further service outsourcing. Changes Needed Some specific management and organizational structure changes are also necessary to support the outsourcing program in the healthcare industry. When a healthcare organization outsources some of its tasks to an external agency, this process may reshape the organizational behavior and hence the overall organizational activities. Hence, a well designed change management program is necessary to eliminate issues like employee resistance to change. It should prepare the management and the organizational environment to adopt the change. Since an outsourcing practice would directly affect managerial activities, the management personnel must be thoroughly educated about the change initiative. Even though a particular task is outsourced to an external company, the healthcare management has to actively participate in the operation of that task. Redistribution of job tasks is vital to gain the complete benefits of the outsourcing practice. For instance, if a healthcare organization outsources its IT operations, then the organization cannot employ all the current IT employees. Under such circumstances, the organization may try to assign those workers with different tasks or terminate them. In order to deal with those troublesome managerial activities, the healthcare management must be more thoughtful. In addition, the healthcare facility must restructure its day to day activities (if necessary) in order to align with the organizational change. Conclusion From the above discussion, it is clear that outsourcing is very prevalent in the modern healthcare industry due to frequent technological innovations and changing health care trends. This outsourcing trend is likely to grow over the next decades because today’s healthcare organizations tend to focus more on providing quality health care services. IT operations, staff recruitment and selection, and other administrative functions are the key areas outsourced by healthcare organizations. The outsourcing experience of the Springhill Medical Center shows that the practice has greatly assisted the organization to gain competitive advantages in terms of cost reduction, operational efficiency, and quality of care delivery. A healthcare management must be proactive and vigilant while considering an outsourcing project because this process is likely to cause organizational structure changes. References American Healthcare Outsourcing. Sun Knowledge. Retrieved from http://www.sunknowledge.com/PDF/American-HealthCare-Outsourcing.pdf Expertise on call. (n. d.). ModernHealthcare.com. retrieved from https://home.modernhealthcare.com/ OSF Global Services. (2012). IT Outsourcing Benefits for Healthcare Companies. White Paper. Retrieved from http://www.osf-global.com/assets/uploaded_files/outsourcing-benefits-healthcare.pdf Pear, R. (2004). U.S. Health Care Spending Reaches All-Time High: 15% of GDP. New York Times, January 9. Retrieved from http://reclaimdemocracy.org/us_recordhigh_healthcare_spending/ Sucher, R. (n. d.). Springhill Medical Center finds its outsourcing formula. Journal of Healthcare Information Management —17 (2). Retrieved from http://www.himss.org/content/files/Code143_SpringhillMedicalCenterFindsITOursourcing_JHIM_Spring2003.pdf Read More