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Outsourcing in Healthcare is an Emotional Hurdle!

March 2015 The Business of Health Care Comments Off on Outsourcing in Healthcare is an Emotional Hurdle!

Everybody outsources! Individuals may outsource mundane jobs like lawn care, painting, or housecleaning. Businesses are more likely to outsource, without much thought, jobs that they don’t have the expertise to perform. It could include tax preparation, legal work, or medical care. Just like individuals, many companies struggle with the decision to outsource functions that require specialized knowledge because they believe they should be able to handle everything internally. Sophisticated technology development is beginning to change this type of thinking.

While many industries began utilizing outsourcing as a concept in the 1980’s, healthcare did not immediately embrace it. The decision to outsource is generally made in order to lower a company’s operating cost. Today, more than 75% of companies subcontract a process or function to a third party. When businesses began to embrace outsourcing, they did so by identifying and evaluating their core competencies to determine which non-core functions should/could be outsourced. Even when companies could identify cost savings opportunities via outsourcing, many still could not get over the emotional hurdle of letting individuals outside the company perform important and confidential functions. They would dismiss the opportunity to outsource core functions without giving it a fair evaluation. But as outsourcing has evolved, those fears are fading away.

Knowledge Process Outsourcing (KPO) is a term used to describe the outsourcing of core processes that require specialized skills to perform, and are a critical part of a company’s value proposition.  Now, companies are not sending out proprietary knowledge, but in fact they are bringing knowledge into the organization. These processes are generally information related business activities that organizations will consider outsourcing because:

  • It requires specialized knowledge and expertise that the organization does not have
  • It brings additional value added services to the organization
  • There is a potential for cost reduction
  • A shortage of labor exists with the specialized expertise
  • It provides agility and speed for service expansion and growth

Health insurance companies have been the slowest among the slow when it comes to adopting outsourcing. However, shrinking margins, higher claims disbursement, and increasing competition have forced health insurance companies to look at outsourcing to improve efficiencies and focus resources towards the core functions of product development and innovation.  Accenture research shows that more than half of the top US health payers are already outsourcing or are beginning to outsource portions of their health management operations. In my opinion, health insurance companies will have to continue to jump over the emotional hurdle regarding outsourcing if they want to stay competitive in the rapidly evolving healthcare landscape. This is not your fathers’ healthcare!

The explosion of Electronic Health Records (EHR) and Accountable Care Organizations (ACO) in healthcare is putting enormous pressure on companies to become compliant and competitive in a very short time period. Today’s EHR systems make the discrete capture of large amounts of patient data possible. With everyone’s medical and billing records kept electronically, the opportunity presents itself to have an outsourced workforce that can be anywhere, and provide the flexibility that is required to meet today’s business needs.

Over the next two to five years, technology deployment will continue to accelerate and allow for more and more utilization of Knowledge Process Outsourcing, and innovative payers and providers will be looking to expand their stable of outsourcing partners. Do you believe that payers can provide the agility and speed necessary to succeed today, as well as in the future without outsourcing?



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