Outsourcing has become a four trillion dollar a year business. Statistically speaking, one of the strongest areas of growth by percentage in hospitals was in accounts receivable outsourcing, where receivable contractors reported more than a 250% increase in clients, and reimbursement firms reported a nearly 150% gain in business. Outsourcing defined is the contracting of traditionally internally provided goods and services to outside third-party contractors (Hazelwood et al., 2005). Sometimes referred to as “off-shoring” when the work is done overseas and “near shoring” if done in Canada or Mexico, the practice exists in various sectors of the economy, including manufacturing, technology, accounting, business services, and health care (Hazelwood et al., 2005). The growing demand to outsource goods and services in healthcare is due to the pressure to cut costs and keep up to date with state-of-the-art technology (Raths, 2007). In recent years, hospitals have steadily warmed to the idea of outsourcing functions they had previously kept in-house. This is due to of a host of factors that include the passage of the Patient Protection and Affordable Care Act, the economy and the increasing emphasis on quality and performance improvement, which have pushed that trend into overdrive.
Prevalence and Trends in Outsourcing
The prevalence and trends of outsourcing has grown in recent years and will continue to climb. There are a number of processes and services that are being currently outsourced range from business research, customer services, insurance billing, claim collection and billing and services such as radiologist services. Researchers predict that more than three-quarters of all hospitals outsource at least one clinical or nonclinical function. The prevalence of outsourcing has increased for services such as billing and accounts receivable on a yearly basis. TriMedx, a healthcare equipment services company based in Indianapolis, saw its client roster spike more than 35% in 2009, to 739 from 545 in 2008 by utilizing outsourcing in customer services, management support and medical and insurance billing collections. Hospitals that choose to outsource management of their clinical and diagnostic equipment also usually have access to a higher degree of efficiency and expertise than they likely would have if they relied on in-house staff.
Outsourcing has also occurred in the medical service industry. This was spurred in 2012 by a shortage of U.S. radiologists and an exploding demand for more sophisticated scans to diagnose scores of ailments. This is part of a growing telemedicine trend: technology enables the speedy transfer of medical data via the Internet to virtually anywhere there’s a computer, so radiologists can read the scans during the night and relieve the pressure of a staff shortage.
Outsourcing is a growing trend in healthcare and more and more organizations are considering outsourcing as a means to reduce cost and improve overall productivity. There is a growing demand in each section of the healthcare industry that has considered outsourcing. Types of organizations that have considered outsourcing include hospitals, outpatient clinics, physician clinics, therapy centers, laboratory services, medical transcription offices and independent billing offices.
Other services that can be outsourced include clinical trials by pharmaceutical companies. The extent of outsourcing specialties extends into medical billing, billing and coding claims adjudication, teleradiology, healthcare software, medical animation and medical transcription. The extent of outsourcing healthcare services is expanding to meet the needs of the American healthcare system.
Experience of Healthcare Organizations
The experiences of healthcare organizations that have tried outsourcing are varied. If facilities do not properly vet the companies that they are outsourcing from, they may endure negative experiences and even privacy concerns. Hospitals in the past have experienced information leaks of patient data on unsecured, publicly available websites. This obviously indicates the need for hospitals to closely monitor the services that have been outsourced. In addition, the hospital needs to ensure that the contract protects the hospital from having outsourcing services outsource to a secondary or tertiary company (one of the main concerns of outsourcing).
A positive experience of outsourcing is displayed by one hospital that realized there were delinquent records that needed to be addressed. A Virginia hospital was late to complete patient charts, and that delinquency could have posed a threat to Joint Commission compliance. Outsourcing helped the hospital strengthen its automation effort, and improved the coding accuracy, record analysis accuracy-deficiency, assembly and analysis, filling and retrieval and cancer registration by ninety-five percent. The importance to researching the data that allows management to determine what areas can be outsourced is critical to a successful outsourcing plan.
Outsourcing in healthcare can significantly reduce the costs for hospitals and medical facilities, which in turn allows the hospital to reinvest in patient services, research, and purchased goods to enhance patient care.
Best Practices for Outsourcing
As the need for outsourcing grows, the size and intricacy of outsourcing contracts also develops. This results in new models for outsourcing transactions. The challenge in achieving a successful outsourcing relationship requires that companies and vendors address the full scope and complexity of the required decisions.
Contracting issues can include medical system selection/licensing, adhering to HIPPA and privacy issues, system testing and acceptance, access requirements, configuration/interface responsibilities, system upgrades and support; turnkey or shared business models, project management, operational/process responsibilities, project scope and change orders, dedicated staffing requirements and management reporting. Other issues include data back-up and storage, data privacy/security, cross-border data protections, hard document retention, emergency mode operations and disaster recovery, service level agreements, performance monitoring and penalties, auditing and on-site inspections.
Essential elements of the contract include bundled or transaction-based pricing models, though there may be information on volume fluctuations and pricing assumptions, special fees/charges, warranties, liabilities, regulatory compliance penalties, dispute escalation and resolution, and most importantly contract length and exit clauses.
Management and organizational changes that might be necessary to support outsourcing relationships are best practice. Facilities may need to assign new management roles or restructure teams to foster relationships and maintain oversight of the developing partnership.
Healthcare trends in outsourcing are continuing to grow. Different healthcare organizations are increasingly using outsourcing strategies. Many of the larger organizations, such as pharmaceutical companies, have been outsourcing services for years.
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