Outsourcing Trends: Health Services Professionals

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MGT 6220 – Health Care Human Resource Management

Outsourcing Trends – Health Services Professionals

Fall 2012 Research Paper

Anthony Edens

Thomas Grumley

Outsourcing Trends – Health Services Professionals

In today’s healthcare environment, hospitals are facing increasing pressure to reduce costs, increase efficiency and improve the quality of patient care. Although some of the details of the impending changes may not be perfectly defined, the industry is certain that changes are inevitable. Going forward, there will be an increased focus on quality; penalties for re-admissions, medical errors and hospital acquired infections (Buser, 2010). Several factors, such as aging populations, new treatments, low patient financial responsibility and misalignment of incentives have forced the Government to reconsider current Medicare reimbursement arrangements (Kaplan, Porter, 2011). For example, fee for service, which reimburses providers and hospitals based on the procedure performed, are not based on the desired outcome which should be good patient health. Therefore, the incentive for the provider could be to perform more of the higher reimbursement procedures and not to focus on decreasing the costs of business. Unfortunately, this has lead to a cycle of increasing costs for the government and payers, who are now looking for ways to decrease reimbursement and align incentives with quality while reducing re-admissions. Decreasing reimbursement will force hospitals that are not currently focused on cost control to rethink the existing strategies.

In light of this, hospitals will need to concentrate on expense control, staffing productivity and service line efficiency. Crucially, hospitals will need to focus on effective alignment with physician practices and hospitalists. One consideration that continues to arise is whether to outsource certain functions from an employment model to one involving outsourcing, and one which will be discussed at length in the following pages. The current climate is signaling a clear increase in the trend to outsource a multitude of functions, for both large and small hospitals. In Modern Healthcare’s 33rd Annual Outsourcing Survey, 42 firms reported a 14% increase in the number of healthcare clients from 2009 to 2010. The following year’s survey, reported that among the top 20 outsourcing firms there was a reported 13.1% growth from 2010 to 2011. The top 5 services which are currently outsourced are laundry, housekeeping, clinical/diagnostic equipment maintenance, hospital based emergency departments and food services (Kutscher, 2012). Additionally, the outsourcing of back office functions continues to increase. For example, firms providing accounts receivable functions reported a 21% increase in 2010 and firms providing medical record services reported a 6% increase in 2010 and an 8% increase in 2011 (Kutscher, 2012; Daly, 2011). Also related to the back office functions is effective revenue cycle management. When considering the tightening of the current and future reimbursement environment, the ability for a hospital to successfully collect monies owed and to reduce bad debt will be crucial. For example, in May of 2011, Conifer, a subsidiary of for-profit hospital chain Tenet Healthcare Corp., Dallas announced that it closed on a deal to provide revenue management services to 56 hospitals (Kutscher, 2012).

Another area of explosive growth is in the IT sector. Part of the reason is that there is a federal mandate which requires hospitals and physician practices to show “meaningful use” of electronic records. Not only are there financial incentives for implementing electronic health records early, there are financial penalties for those that have not implemented a system over the next few years.

Robust growth can also be seen among the firms that provide diagnostic equipment maintenance. In Modern Healthcare’s...
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