5 benefits of outsourcing in healthcare

When it comes to respected business publications, few have greater pedigree than Forbes. Founded more than 100 years ago, the global media company is renowned for its annual lists of richest Americans, top companies and most powerful people and has a reputation for setting the agenda and providing insightful commentary. Put simply, when Forbes speaks, people tend to listen.

So we come to today and the manner in which the publication recently defined what anyone who works in the healthcare industry already knows – times are tough.

“In 2022, US hospitals and health systems were up against some of the toughest financial headwinds since the pandemic began,” wrote health tech expert Seth Joseph ¹. “Dried up federal public health emergency (PHE) funding, costlier inpatient stays, decreasing outpatient revenue and decreased demand for care, still hovering below pre-pandemic levels, are among the financial challenges hospitals and health systems face this year and will continue to face into the next.”

With growth in expenses vastly outpacing growth in revenues, the heat is well and truly on healthcare operators. For example, the United States’ three largest non-profit health systems all posted poor results in recent times, with Ascension reporting a $118 million loss in the third quarter of 2022, CommonSpirit $227 million and Trinity $550 million².

This is supported by an American Health Association report that found hospital labor expenses increased by 20.8% between 2019 and 2022, largely on the back of a growing reliance on contract labor to fill workforce gaps during the pandemic³.

While the public may like to believe hospitals and healthcare providers solely exist to provide patient care, the reality is they are also businesses. In an environment where margins are low and patient expectations are high, it is a delicate balancing act to succeed at both and every option must be considered to ensure costs are managed in such a complex and evolving business climate.

Little wonder then that an increasing number of hospital and healthcare executives and managers are looking to healthcare outsourcing.

What is outsourcing in healthcare?

Outsourcing in healthcare refers to the practice of delegating certain tasks or services to external organizations or individuals. It involves the transfer of responsibilities such as medical billing, transcription, IT support or customer support to specialized third-party providers.

Why is outsourcing in healthcare attractive?

The numbers speak for themselves. As financial pressure builds on healthcare providers, a study of more than 500 hospitals and inpatient organizations found 90% of health executives are exploring cost savings by teaming with third-party vendors⁴. In turn, the healthcare outsourcing market is tipped to reach $312 billion by 2025⁵ and the reasons for such growth are myriad.

• An ongoing talent shortage is impacting the ability to recruit medical and non-medical personnel.
• Size constraints make it difficult to increase staffing or even add a full-time specialized position.
• Budget constraints, regardless of hospital or health service size, are affecting operations and capital investment decisions.
• Well-informed patients increasingly expect top-quality, personalized care at affordable cost.
• There is fierce competition within the sector, not only from other providers but a widening range of peripheral businesses entering the healthcare arena.

What are five benefits of outsourcing in healthcare?

The healthcare outsourcing industry offers a variety of solutions to meet such challenges.

1. Better cost control: outsourcing is a proven cost-reduction strategy that can help bring greater stability and predictability to daily operations and strategic business planning. Direct savings include reduced labor costs, with the lower cost of living in offshore destinations such as the Philippines saving up to 70% in wages and salaries. Coupled with a reduction in out-of-pocket HR expenses for recruiting, training and maintaining skilled personnel, it is easy to see the positive impact on balance sheets.
   
   Acquiring and maintaining technology is another major recruitment expense, with substantial capital investment needed for acquiring or upgrading equipment and never-ending maintenance costs. Outsourcing shifts this burden to the outsourcing provider, helping healthcare organizations improve both cash flow management and capital investment strategy.
   
   Outsourcing is also known to greatly reduce staff turnover and, in turn, save direct costs of employee replacement and retraining and indirect costs of productivity lapses and mistakes. Partnering with outsourcing providers that are highly skilled in areas such as medical coding, billing and claims management can also shorten revenue cycles and significantly improve cash flow.
2. Wider talent pools: a lot has been written about skills shortages in recent years, with social phenomena such as The Great Resignation and Quiet Quitting putting increased pressure on health administrators to augment staff, both temporarily and permanently. Outsourcing provides them with access to a global talent pool of desirable candidates that would not otherwise be available.
   
   Looking offshore for support and expertise can lead to firms that pride themselves on nurturing highly qualified talent pools filled with experienced, skilled and hard-working candidates who are ready to deliver. For example, the high demand for technology professionals in the US has made it nearly impossible to fill positions but outsourcing offshore offers dual benefits of better supply and lower costs.
3. Competitive edge: the ‘business’ of healthcare has inspired a situation where a growing number of players are entering the sector and creating an increasingly competitive environment for hospitals and health systems. This includes burgeoning retail and ambulatory care centers, while even traditional players are exploring new models of care.
   
   Amid such dynamics, outsourcing can level the playing field for smaller healthcare organizations by providing a wealth of talent and increased capabilities not possible in-house due to budget or space limitations. The inherent flexibility of outsourcing means providers can deliver valuable scalability, with such agility critical for healthcare operators to facilitate planned growth, support fluctuating needs and adapt to unforeseen changes.
4. Improved patient care: while healthcare is a business, the patient should always remain at the heart of the conversation and outsourcing has been shown to improve patient outcomes and deliver higher-quality care. Relieving clinical staff of routine administrative work not only frees them up to focus on patients but can also improve their health and morale, which is vital given health professionals are prone to stress and fatigue.
   
   Healthcare outsourcing also does not mean giving up control. Rather, it means shifting the ‘who and where’. Outsourcing allows in-house staff to divest themselves of repetitive and time-consuming administrative tasks and invest more heavily in clinical care that improves service quality and patient satisfaction. Happier patients are also more likely to remain loyal and promote the service to others, thus increasing revenue in the long-term.
5. Increased accuracy: medical billing and coding are vital tasks within the healthcare sector, with speed and accuracy essential to improving revenue streams. Mistakes cost money, with one study showing billing errors cost the medical sector about $20 billion⁶. It is a specialist field and quality outsourcing firms can provide access to highly skilled individuals or teams of medical coders who can deliver fewer errors in a role where mistakes matter.

What healthcare services can be outsourced?

There are a wide variety of healthcare roles and tasks that can be outsourced including:

• Medical Coder
• Medical Coding Trainer
• Quality Assurance Supervisor
• Quality Assurance Manager
• Medical Transcriptionist
• Medical Claims Processor/Analyst
• Medical Billing Specialist
• Quality Assurance Specialist
• Chart Retrieval Specialist.

The sector also lends itself to outsourcing opportunities across areas as diverse as:

• Patient scheduling and follow-up
• Information technology (cybersecurity, systems design for digital transformation, data management)
• Customer care (including contact centers)
• Compliance management
• Finance and accounting
• Human resources
• Sales
• Marketing.

How do you choose a quality outsourcing provider?

Success is not guaranteed in outsourcing. Achieving great results starts with knowing your goals and there are several factors hospitals and healthcare practices should consider before partnering with a provider.

1. Due diligence: outsourcing saves money but do not make the mistake of rushing to team with the cheapest provider. Avoid common pitfalls by starting with a goals assessment. Are you looking solely for cost reduction or keen to realize other benefits such as smoother cash flow, greater flexibility or the chance to take on more patients without sacrificing quality? Different providers offer different services and the best way to streamline potential options is to identify the tasks you truly need help with.
2. Experience: outsourcing is a specialist industry and experience matters. Look to partner with providers that have a proven track record of working with healthcare organizations, particularly in the specialties and/or processes that will best benefit you. Do your research, request case studies and ask questions.
3. Talent pool: systems and technology matter but people are ultimately fundamental to outsourcing success. Seek evidence that your potential outsourcing partner has nurtured a talent pool that offers access to diverse and highly capable individuals or teams that can deliver what you need. While some organizations considering offshore options worry about language barriers, the Philippines is one example of a nation that boasts a large pool of talent who have excellent English language skills, understand the complexities of US compliance requirements and, in many cases, are trained and experienced in healthcare systems.
4. Compliance and data security: outsourcing providers must reliably meet compliance standards and protect an organization’s business data. A data or security breach could be catastrophic, hence why clearly defined risk management protocols and procedures are essential.
5. Scalability: one of the key benefits of outsourcing is the ability to grow (or reduce) teams based on demand but some health services get caught out by partnering with a provider that cannot meet that need. Be wary of vendors that seem like a good fit now but do not have the capacity to help an organization scale, thus turning what should be an exciting evolution into another headache. It can be expensive to switch outsourcing partners so do what is needed to team with the right partner from day one.

Summary

One size does not fit all in the world of healthcare outsourcing. What works for a tertiary hospital may not suit a rural medical clinic, let alone a one-person practice. For that reason, it is essential to seek out the outsourcing provider that best suits one’s needs.

Also, remember the right partner is just that – a working partner that will share their knowledge and insights to help you evaluate and improve processes and quality. They know their success lies in your success and trust and confidence is paramount. When outsourcing programs fail, it is typically due to poor working relationships between provider and partner. The good news? These tips mean you already have a head-start on how to find a suitable partner and nurture that relationship for your best benefit.

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