Business Process Outsourcing Goes Mission-Critical
Healthcare providers know that accomplishing their missions in a competitive marketplace means concentrating their talent and experience on what they do best delivering high-quality patient care.
Healthcare providers, like businesses in other industries, increasingly are off-loading noncore support functions and business processes to vendors who can perform them better, faster and cheaper. Outsourced business processes benefit from a highperformance approach that brings to bear improved methodologies; resilient, state-of-the-art information technology (IT) infrastructures; accessible and knowledgeable personnel; and a global shared-services model that reduces costs through offshore resources and economies of scale.
Growth Drivers and Trends
Even risk-averse healthcare executives must come to terms with competitive pressures such as rising consumer expectations, the need to keep a lid on rising healthcare costs and the imperative to deliver healthy profit margins. The rationale for business process outsourcing (BPO) is simple: Outsourced services bring in more revenue and cost less. Outsourcing business processes allows healthcare providers to concentrate on improving clinical care and focus their internal resources on better financial management and more effective decision making. Providers look to outsourcers to supply proven business process methods and expertise that will improve their organization's financial performance. Research conducted by Gartner, Inc., in March 2006 (from a report entitled "Healthcare Provider BPO Market Drivers and Key Players, by Jonathan Edwards, John-David Lovelock and Emma Rose), reports the most important reasons business process outsourcing is growing in the healthcare industry worldwide:
- The need for healthcare providers to concentrate on what they do best;
- The need for healthcare providers to reduce costs;
- The need for assistance in revenue cycle management;
- The need to focus internal staff on more strategic management tasks;
- The opportunity to shift risk for service delivery to external organizations; and
- The opportunity to consolidate back-office infrastructures.
A recent Accenture survey of providers who currently outsource some or many of their business processes shows that the need to drive down operating costs and the strategic desire to concentrate on core clinical issues are the main reasons for the growth of business process outsourcing among healthcare providers, followed closely by the desire to increase expertise in business processes and to gain access to ongoing technology innovations.
Until recently, healthcare organizations were willing to outsource only low-risk, back-office processes and support functions that require little healthcare expertise and few or no interactions with patients. This situation is changing. Acceptance of business process outsourcing among providers is increasing both in numbers of adopters and in the breadth of processes that are candidates for outsourcing. Other trends include:
- More comprehensive outsourcing options:
As their comfort level with outsourcing rises and as the capabilities of vendors expand, healthcare providers driven by cost pressures are placing more and more mission-critical processes in the hands of outsourcers, moving gradually to an end-toend business process solution. This trend is facilitated by consolidation, alliances and partnerships among outsourcing vendors. - Blending of cost-effective offshore resources with
on-site resources:
Outsourcers increasingly are promoting a "blended" global delivery model that utilizes a mixture of offshore, near-shore and on-site resources. Such a model combines the advantages of low-cost, offshore resources with the responsiveness possible with local control of business processes. - Standardization and consistency of processes and
information:
National health systems in other countries and the U.S. Department of Health are driving initiatives to standardize and integrate business processes and repositories of patient information.
Outsourcing for High Performance
High-performance organizations consistently outperform their peers in quality and profitability, proactively satisfying today's needs while positioning themselves for tomorrow's opportunities. For healthcare providers, reducing operating costs and increasing revenue are imperatives as vital as quality care and patient satisfaction. Outsourcing is emerging as a mechanism that can rapidly deliver more revenue for less cost, before the need for better operating margins becomes desperately obvious. An Accenture survey indicates that the functions providers are most likely to consider outsourcing (arranged from most to least likely) include:
- Information technology;
- Employee training and e-learning;
- Supply chain management;
- Customer relationship management;
- Human Resources;
- Revenue cycle management; and
- Finance and general accounting.
Weighing Risks and Benefits
Hospitals routinely outsource support functions such as housekeeping and supply chain management, but they have been reluctant to contract with outside vendors to handle business processes that directly affect the organization's cash flow. In principle, business process outsourcing is roughly comparable to sending out the hospital laundry. The difference is that outsourcing business processes that directly affect the bottom line requires industry-leading skills and methodologies, a capable and resilient IT infrastructure and close collaboration between client and vendor. Relinquishing control of crucial revenue-generating functions, even to a vendor who demonstrates the ability to deliver cost and productivity benefits, is a worrisome proposition. Healthcare administrators are concerned about the risks and potential consequences of putting their key business processes in the hands of off-site and often offshore vendors. Many healthcare administrators are additionally concerned about the effects of outsourcing on employee morale and community relations. Providers need to consider the overall impact that outsourcing will have on the organization. Because so much is at stake, providers should exercise due diligence in understanding the real costs and benefits of outsourcing and in selecting a vendor worthy of their trust.
A Track Record of Benefits
As business process outsourcing gains momentum with healthcare providers, payers already have embraced it and have accumulated a track record of substantial and sustained benefits that include:
- Savings in operating costs of 30 to 50 percent:
Best practices, global delivery and a shared services model combine to increase processing efficiency and reduce operating costs. - Renewed ability to concentrate on core competencies:
Organizations are better able to focus on increasing market share and developing new business opportunities. - Improved service quality that can deliver more than
99 percent financial accuracy:
Motivated and skilled employees, re-engineered processes and superior IT support contribute to operational excellence. - Better employee productivity:
Experience shows that the same employees who worked for the client within a business function prior to outsourcing undergo productivity gains ranging from moderate to dramatic after outsourcing. Most transferred employees discover that their new job situation is more satisfying, with better opportunities for training and advancement. - Improved access to process expertise:
Almost nine out of 10 experienced outsourcers report improvements ranging from "some" to "major" in process expertise and capabilities in the outsourced function. - Better processes and tools to develop and capitalize on
new opportunities:
Outsourcing provides the opportunity to reach beyond a company's boundaries with internal resources, and leverage new thinking and new ways of effective change.
Finding the Right Partner
Any organization considering outsourcing needs to be confident in its outsourcing decision and in the expertise and resourcefulness of the vendor it selects. The vendor of choice should have experience both in financial services and healthcare management, and should be able to demonstrate a track record of helping healthcare clients improve their financial performance. Cost is important, of course, but other criteria should also be considered:
- Transformative approach:
Internal process improvements are an essential first step to successful outsourcing. Automating and migrating inefficient processes produce only incremental gains. Process transformation makes the difference between saving money through outsourcing and achieving market dominance through financial leadership. - Focus on customer service:
Outsourcing vendors that place emphasis on training and retaining a highly skilled staff make excellent business partners. This customer-centered attitude reflects well on the healthcare provider, leading to a more satisfying patient experience. - Thorough understanding of provider issues and business
processes:
Healthcare providers operate their organizations on a much different business model than other businesses. Vendors need to understand the client's processes and priorities, train and/or hire knowledgeable employees and tailor their service offerings to meet client needs. - Resource availability and IT support:
An outsourcing vendor should have sufficient, skilled staff and robust, state-of-the-art information technology to competently handle mission-critical business processes. - Strong collaboration and project management:
Outsourcing delivers maximum benefits when there is close and continual collaboration between the client and vendor, and ongoing project management.
A Stepwise Approach
Outsourcing does not need to be an all-or-nothing proposition. Although experience shows that end-to-end business process outsourcing can set the stage for impressive gains in enterprisewide financial performance, giving up control of revenuegenerating processes has risks. To manage risk, many healthcare organizations begin the outsourcing journey by offloading support functions such as data entry and IT support. The engagement typically evolves to include transaction processing such as billing, collection, denial management, and clinical documentation and coding, which require specific skills but no contact with patients. Many organizations achieve dramatic financial improvements with this limited scope of outsourcing. They find that the outsourcing vendor's methods and personnel can deliver significant improvements in cash flow, accounts receivable and other financial metrics at lower cost.
As the relationship progresses, providers typically expand their outsourcing options, adding functions such as employee training, HR, supply chain management, customer relationship management and other complex business functions that require deep healthcare knowledge and often involve interactions with patients. In collaboration with the client, the vendor may establish a call center to handle preregistration, self-pay follow-up and other customer service requests.
Eventually the provider may contract with the vendor to take responsibility for end-to-end business processes, and commit to broad service levels and prescribed business improvements. At this stage, the vendor often acquires process expertise by hiring the client's employees who previously performed these tasks in-house.
At the most comprehensive level, outsourcing vendors can provide "turnkey" processing, accepting full responsibility for people, processes and technology needed to accomplish all of the client's business functions. In some cases, vendor compensation is tied to achieving agreed-upon improvements in the client's business performance.
Figure 1 shows outsourcing options ranging in scope from simple support services to comprehensive handling of virtually all nonclinical business functions.
Cost Is the Critical Criterion
In today's "no margin, no mission" healthcare environment, optimizing back-office business processes for better financial performance simply costs too much. An outsourcing vendor able to combine business process expertise, global delivery and thorough knowledge of healthcare issues is a provider's best ally in transforming back-office support services into a competitive advantage. Each organization must decide for itself which business processes it is willing to put into capable, but external, hands.
