June 21

Outsourcing or Insourcing for Your Healthcare Organization?

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In this new era of reform, your healthcare organization will be deciding on what functions, services, and systems to outsource so they can lean their operating expenses to the bone. What is the right answer to this mission critical outsourcing or insourcing decision? Well, it all depends on how you answer these four strategic questions:

  1. Is the function or service mission critical? Would the failure of a function, service, or system put you out of business for a day, week, or month? If you decide that the risk of this failure is too high, you would then need to insource this function, service, or system. For instance, the failure of your sterilization service for even one day would put your operating room and clinics out of business. However, if your concierge car parking service didn’t show up even for a week, your business would go on as usual. Can you see by asking this question how it can make your outsourcing or insourcing decision very easy?
  2. Are the savings worth the effort to change? If your savings are projected to be 2%, 3% or even 5%, maybe the cost of change isn’t worth it. Every change has its hidden cost in time, labor, and resources to effect the change which we estimate to be 9% to 12% depending on the level of difficulty to make the change.
  3. Can you improve your costs to match an outsource provider? I find that in many situations a healthcare organization can match or improve an outsource provider’s cost if they reengineer what they are doing. In many cases, an outsource provider can easily save you money because your operations are wasteful and inefficient. Sometimes, however, all it takes is hiring a new manager to reinvent what you have been doing to match their cost.
  4. Will the service quality be better than your current scorecard? I have actually contracted with outsource companies, over the years, that had a worse service quality scorecard than my prior in-house department or service. Don’t take the contractor’s word that they can do a better job than your healthcare organization can. Verify and scrutinize every claim that they make to ensure that their service quality will actually be better than your own hospital’s track record!

By consistently asking these four strategic questions as you are deciding to outsource or insource a function, service, or system, you can be assured that you are making the right decision for your healthcare organization. It isn’t as hard as you might think!


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Tags

healthcare, healthcare organization, hospital, Hospital Value Analysis, insource, operating expenses, outsource, outsourcing or insourcing, utilization, value analysis


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