How prevalent is outsourcing in the healthcare industry?
To provide quality, timely, and affordable health care, health facilities need to have managed their affairs strategically. The main core of health facilities is the provision of medical services; other functions in the institution can be seen as secondary or supporting services. Medical staffs directly involved in the core business are nurses, medical officers, medical researchers, doctors, pharmacists, lab technicians among others whose services can be attributed directly to patients. Outsourcing is defined as a management process where an institution/organization contracts a third party to offer some service that was previously offered internally: the coverage of the word is wide and incorporates different areas of business; there are no specific areas that can be said are viable for outsourcing, however, some core businesses are better not outsourced (Amar, 2008).
When outsourcing for some services, the services that are targeted for the exercise are the none-core processes, non-core business does not limit their importance in the business, but they are used to mean that they can be managed externally. When managed externally, then a medical facility will be getting the services or goods from a third party and not limit the services offered. Secondly other than in non-core areas, some services that medical facilities offer can be outsourced from experts and other institutions with better facilities for example a medical facility may not be able to maintain a heart surgeon where they get such a case once in a year, they may be called upon to outsource such a service.
The benefits that can be accrued from outsourcing to a medical facility are far-reaching; they can be classified into costs and quality benefits.
When a hospital contracts some third parties to do a certain task, then the company will be saved the cost of managing those employees who could be doing the contracted work. Their pay is then directed to the outsourcing business that may be lower than the cost of maintaining staff internally. The cost and management logistics of employees is reduced in the current and into the future. Some of the contracted services may have been undermining the labor power of a fully employed employee thus when they have been outsourced, the remaining human resources will be managed more effectively. The cost of some outsourced services is on a cost-sharing basis having a direct impact on the cost of the medical facility. With outsourced services, a hospital will benefit from labor arbitrage; this means it will offer the management room to manage fewer human resources that can result in high quality of service (Bragg, 2006).
Focus on Core Business
When a medical facility has outsourced services in its non-core business, then the facility will be able to concentrate on the mainline of business, provision of medical care. The management will have reduced situations needing their decision making thus they will have to concentrate on the quality of medical facility they offer. The main objective of a medical facility is to offer adequate, timely and quality service, medical staff are directly involved in the provision of service thus when are managed effectively, then the provision of quality medical care is a guarantee.
Some services that a single medical facility cannot maintain because of their costs of management or because of the demand, they have in a particular facility; when such services are outsourced when demanded then the company can offer quality services. When outsourcing a medical facility can get the experts in a certain field whom it could not have been able to maintain or develop internally; for example, if the hospital decided to outsource medical research personnel, then the company can get experts in the area or a certain specific area; this will increase the quality of results offered.
When managers concentrate on a slim line of business, the core business, they get room to understand the areas of inefficiency and areas that need to be improved, when such areas have been known, then the company can put on measures to improve them. Improving areas of inefficiency lead to increased gains in terms of hospital profits and quality of medical care (Collis & Rukstad, 2008).
The Outsourcing Trend in Healthcare
The trend in health care outsourcing is on an upward rise as more and more companies that offer outsourcing services at reduced costs are emerging. There has been a change to the traditional belief that hospitals were there for the benefit of the society and not for profit motive; currently, they are managed like any other business with increasing their returns through offering quality and timely services being the main objective. The professionalism in the management of the institution with a profit motive has made managers think of cost reduction methods where one of them has been recognized as outsourcing.
Another change that has occurred in the industry is the enlightenment and improved living standards of people, they are currently demanding better services and calls for more attention from medical personnel. the time spent with patients consume much of the management time thus they have no option other than outsourcing for that service that they have minimal time to manage internally.
The major areas that outsourcing in medical services is dominant is in the private hospitals; these hospitals are aiming at the concentration on the main core business thus taking the option of outsourcing instead of managing staff internally (Douglas & Scott 2005).
Experience in Outsourcing
Currently, some hospitals are outsourcing services from third parties, the main drive that makes them outsource is to reduce their costs of operation. The idea and the goal of the management strategy have bore fruits in many institutions that have embraced the model.
Some medical institutions, which have outsourced the services, St John Hoskins that was established in 1889 as a facility of John Hoskins school of medicine; the main service that the hospital outsources is research to the hospital. Another hospital that has embraced outsourcing is Central Carolina Hospital, both the hospital has benefited from a reduced cost of doing business (Fred, 2008).
Potential Areas of the Hospital Service That Can Be Outsourced
Outsourcing can be in services and labor, in a hospital facility, different areas can be outsourced to improve the quality and timeliness of the services offered. Some areas that can be outsourced effectively are:
Medical facilities need to be clean and maintain a high level of hygiene; this service can be better done by an external party. When they have been allocated the contract, they should understand the extent to which their role extends so as they don’t go ahead and clean patients; which is the work of nurses.
Medical facilities need to be secured all day and night long, a number of companies are offering the service so they can be contracted instead of the hospital maintaining its crew of security officers.
In course of business, there are times that some goods need to be delivered to the hospital while in others some goods are delivered from the hospital. Managing logistics can be cumbersome and expensive; these services can be contracted to those companies that are concentrating on its provision.
Research and development
In current business trends, managers need to have a robust research team, maintaining a highly equipped research team is not an easy task and involve huge capital investments. Medical facilities can afford to outsource such services. They will be able to have highly qualified personnel to conduct the exercise at a relatively low cost and offer higher quality than would be the case if it was managed internally (Goold & Campbell, 2002).
Some services in the core line of business might need to be outsourced, they include services of experts that cannot be maintained in the facility due to their high cost of maintaining and or the demand that they have in the organization. It is also worth noting that some highly qualified professionals have opted to be freelancers and takes contracts instead of being full employees in a certain institution; when such peoples services are required, then they can be outsourced. An example is surgeons in major operations like the heart, lungs and head; other than being scarce, they cannot be maintained, and neither can some of the pieces of equipment they use to be maintained in a single hospital unit (Greaver, 1999).
Outsourcing is a management strategy; like any other strategy, it needs to be well thought and deliberated. Before deciding on outsourcing, there are some questions that management should answer genuinely, they are:
- What areas need to be outsourced, why these areas
- What will be the effect of the outsourcing in teams of costs, quality provision, facilitating business operations?
- Are there qualified experts in the field that need to be outsourced?
- What is the financial implication of outsourcing?
With a full understanding of what the current business situation is, then management should gather information externally and internally to answer the questions above. The manager should gather all relevant data and facts; it is from the facts and data that he develops various the best alternatives or the best practice and knows the company that he will outsource. The statistics will also be the ones that will support the final decision. There are various methods of collecting data; they include researching, brainstorming and experimentation. The manager has to choose the right method to adopt because different problems call for different methods.
Sometimes when making an outsourcing decision, consultation is crucial; it may be from medical data and institutions, government and professional consultations. However, an effective manager should ensure that he/she consults those who matter and those who know. Consultation assists in making a more informed decision and assists in generating more alternatives of choice. Their opinions and viewpoints should be considered in the final outsourcing decision-making, but the manager should always keep in mind that it is his/her responsibility to come up with the right decision (Bragg, 2006).
The company to be outsourced should be vetted for the following:
- Quality and integrity
- Cost and effectiveness
When changing strategies to incorporate outsourcing, managers should handle the situation as a change in the organization, they thus need to adopt effective change management strategies. When implementing outsourcing policies, the health facility will need management and the organization’s structural changes, to effect these changes; the transitional team should prepare the entire organization for the change likely to happen. The management should be actively involved in the change process since support is required from all corners. The main objective in a change management process is to facilitate better process management that leads to cost-effectiveness. For an effective change, employees should be involved right from the start. They should understand how the change is going to affect their life; this can be attained through training and good leadership (Amar, 2008).
Amar, G. (2008). Outsourcing and offshoring of professional services: business optimization in a global economy. London: IGI Global snippet.
Bragg, S.(2006). Outsourcing: a guide to– selecting the correct business unit– negotiating the contract– maintaining control of the process. New York: John Wiley and Sons.
Collis, D.J., & Rukstad, M.(2008). Can you say what your strategy is?” Havard Business Review,86(4), 82-90.
Douglas B.,& Scott W.(2005). The black book of outsourcing: how to manage the changes, challenges, and opportunities. New York: John Wiley and Sons.
Fred, D. (2008). Strategic Management: Concepts and Cases. New Jersey: Pearson Education.
Goold, M., & Campbell, A. (2002). Do you have a well-designed organization? Harvard Business Review. 80(3). 117-124
Greaver, F.(1999). Strategic outsourcing: a structured approach to outsourcing decisions and initiatives. New York: AMACOM Div American Mgmt Assn.