Healthcare Offshore Revenue Cycle Outsourcing

by Phil C. Solomon on October 9, 2012

in BPO,Revenue Cycle Management

Healthcare Whitepaper – Healthcare Offshore Revenue Cycle Outsourcing

By: Phil C. Solomon

10-10-12

Table of Contents

Healthcare Outsourcing – The Drivers of Change

The History of Healthcare Outsourcing

Current Offshore Healthcare Outsourcing Trends

Why Do Healthcare Executives Outsource?

What Are The Risks Associated With Outsourcing?

Conclusion

Healthcare Outsourcing – The Drivers of Change

I

n our current fast paced business environment, the healthcare industry has not kept up with the general business industry and their outsourcing initiatives. That said healthcare executives are now more accepting of outsourcing than they have ever been. Gartner Research Inc. estimates healthcare executives spend about twenty percent of their budget on external sourcing options, compared to the general mainstream industries, which typically invest about a third of their budget on external sourcing1. Gartner also estimates that seventy percent of healthcare organizations who do choose to outsource meet or exceed their cost-savings expectations, and most see an improvement in services as they shift their non-core functions to experts2.

Healthcare revenue cycle outsourcing offers many opportunities for cost and operational improvement. The following list details some of the potential functions:

  • Scheduling and Registration
  • Transcription
  • General IT
  • Operational Business Intelligence
  • Collections
  • Practice Management
  • Coding
  • Billing – Follow-up
  • Claim Adjudication
  • Medical Records Storage
  • Patient Records Transcription
  • Diagnostic Services

Because of the current political landscape, healthcare outsourcing in general has begun to see a significant rise in acceptance. During the next five to ten years, it is estimated healthcare will see an increase in the outsourcing of all business processes. The American Recovery and Reinvestment Act of 2009 (economic stimulus package for the U.S. economy), healthcare reform, and the Health Information Technology for Economic and Clinical Health Act (HITECH), will create  significant opportunities for all onshore and offshore outsourcing companies to aid healthcare organizations in meeting the new set of regulations and requirements mandated by legislative action. These industry changes will increase outsourcing because healthcare providers and payers cannot implement these changes on their own and certainly not at the pace they want. There will be “a progressive shift toward healthcare outsourcing over the next five years,” says Dr. Harry Greenspun, Chief Medical Officer, Dell Perot Systems3.

Healthcare executives must effectively manage their new business process outsourcing engagements by taking a holistic approach to managing the vendor relationship, as well as a collaborative approach to governance, a grasp of strategic outcomes and a prioritization of change management4.

Offshore business process outsourcing spending will be directly associated with the level of acceptance healthcare organizations have towards moving transactional and process oriented work offshore. Historically, physicians, hospitals and insurance payers with larger footprints and decentralized organizations have been the first to initiate offshore partnerships. Historically, smaller organizations typically relied on internal resources. This trend is changing. All sized healthcare organizations are jumping on the offshore outsourcing bandwagon and are moving toward leveraging IT, clinical and revenue cycle business processing outsourcing services due to cost reductions and economies of scale. The drivers for the shift in strategy for smaller healthcare operations are due in part to the margin pressure they are under and the need to cut costs. The key ancillary benefits to an offshore outsourcing strategy are operational efficiencies, cost reductions and providing superior patient satisfaction.

Healthcare executives have numerous sourcing strategies from which to choose. Utilizing a United States based local, regional or national outsourcer has been the typical choice for healthcare executives who outsource. With today’s technology, especially in the services’ sector, it is less important to contract with a local provider than to choose the best-in-class provider regardless where their business operation is located.

The History of Healthcare Outsourcing

T

he term “Outsourcing” did not enter the English-speaking lexicon until the early 1980s. Since the 1980s, the first wave of outsourcing by transnational corporations increased subcontracting across national boundaries. In the early 1980’s several European airlines started using Delhi as a base for back-office operations, British Airways being one among them. The British Airways Delhi outsourcing operation was finally spun off as a separate organization called WNS Global Services in 20025.

In 2002, BPO and IT outsourcing became mainstream in India. IBM, EDS and international national 3rd party BPO players like Convergys and Sitel set up shop in India, swelling the BPO movement to India. In short order, Accenture, IBM, Hewlett Packard and Dell also set up shop in India6.

Analysts believe that India remains a vital destination for outsourcing and expect its annual GDP to grow at 8-10% for the next decade7. In addition, outsourcing efforts to India have been proven to be an effective remedy for US labor force issues, increasing operating costs and shortages of qualified employees8.

Current Offshore Healthcare Outsourcing Trends

T

here are enormous opportunities for Indian companies to help healthcare payers and providers control healthcare costs and improve operational quality. Major opportunities for India based outsourcing vendors lie primarily in revenue cycle management, electronic medical/health records (EMR/EHR), billing & coding and medical transcription and other back office function. The healthcare outsourcing market size, according to ValueNotes, estimates India’s EMR/EHR segment is a $20 billion IT opportunity and revenue cycle management (RCM) is currently a $50 billion market in the US9. India based outsourcing companies are projected to win a large chunk of the $50 billion RCM business.

The mature global technology infrastructure and seamless integrated solutions places Indian companies in a good position to process outsourced healthcare work. An example is the ICD 10 conversion change due by October 2013. It is expected to impact the medical coding industry and is likely to spur a great demand for offshore outsourcing. It is projected that a large percentage of medical coding in the future will be processed in India10.

In the U.S., outsourcing, in general, has become a popular political issue driven by poor economic times and localized job losses. Even with local and national pressure to curtail outsourcing activities by consumer advocates, the ROI from cost reductions and improvements in quality have influenced healthcare executives to pursue offshore outsourcers as an alternative to a localized workforce.

Over time, the acceptance of offshore business process outsourcing has gained greater acceptance from the business community and consumers in general. As general business began utilizing offshore outsourcing, many early adopters in the healthcare industry took the leap and jumped on the overseas or offshore outsourcing bandwagon. At the time, the leading driver for moving work offshore was a better economy of scale than in the US, reduced labor costs, and large labor pools of educated and qualified personnel.

Over the past ten years, providers have increasingly used outsourced IT, technical, back office, billing, and clinical services primarily delivered by India based companies. Those payers and providers who have chosen wisely, and partnered with qualified process oriented firms overseas or offshore, have experienced reduced operating costs and ultimately, higher patient satisfaction experiences.

Americans in general, value the opportunities offered by our free-market economy. In every region of the country, community leaders attempt to support and protect local labor forces, which serve local businesses. The goal of this action is to protect the work force and keep jobs in the community and surrounding area. Unfortunately, with budget cuts and margin pressure becoming greater than it’s ever been, healthcare executives cannot meet the demands of managing various clinical and revenue cycle functions, which demand a more qualified and educated workforce. Gartner Research Inc. estimates, by utilizing qualified outsourcers; hospitals can achieve productivity gains, and operate with cost savings ranging from twenty percent to fifty percent11. The obvious benefits and productivity gains have healthcare executives weighing their outsourcing options.

The healthcare executives who have not utilized offshore outsourcing have succumbed to the local pressure of keeping jobs within their community regardless of the impact on the financial performance of the health system. They have shied away from moving a portion of clinical and business work to outsourcers offshore. That said, an interesting paradox exists as those same executives and community influencers do not think twice about purchasing clothes, food products, electronics, cars, toys, furniture, and households goods produced globally. Regardless of the task, business segment or location of the potential outsourcer chosen to provide services, the ultimate goal of pursuing any outsourcing strategy is to support the goals of the healthcare organization, which are ultimately to serve the community with the highest level of patient care. That cannot be accomplished if the organization is under financial duress.

Many top healthcare thought leaders are now accepting offshore outsourcing as a cost reduction and operational improvement strategy designed to combat the economic squeeze the healthcare industry is experiencing. Outsourcing in general saves time, effort, demands on infrastructure, manpower, and money. By leveraging the best of breed solution providers, healthcare organizations gain a competitive edge guaranteeing endless benefits for the enterprise and the patients they serve.

Why Do Healthcare Executives Outsource?

H

ealthcare organizations that consider outsourcing are seeking to realize benefits or address the following issues:

  • Cost Savings – The lowering of the overall cost of business operations and clinical processes.
  • Focus on Core Business – Resources are focused on developing the core business – in the case of healthcare it is investing in services, which improve wellness and patient quality outcomes.
  • Cost Restructuring – Outsourcing adjusts fixed costs to flexible variable cost structures making variable costs more predictable.
  • Improve Quality – Achieving a positive change in quality through contracting out services with new service level expectations.
  • Knowledge – Access to intellectual property and wider experience and knowledge.
  • Contracting – Services are provided in a legally binding contract. This is not the case with internally delivered services.
  • Operational Expertise – Access to operational best practices too difficult or time consuming to develop in-house.
  • Access to Talent – Access to a larger talent pool and a sustainable source of skills.
  • Capacity Management – An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.
  • Catalyst for Change – An organization can use an outsourcer as a change agent becoming a catalyst for major change.
  • Enhance Capacity for Innovation – Companies increasingly use external knowledge of service providers to supplement limited in-house capacity for product and service innovation.
  • Scalability – The outsourced company will usually be prepared to manage a temporary or permanent increase or decrease in workflow.

 What Are The Risks Associated With Outsourcing?

T

he risks associated with outsourcing can be significant if the wrong partner is chosen or if there is poor planning or a lack of acceptance by the stakeholders. The following are some of the risks healthcare providers or payers should consider when evaluating an outsourcing engagement:

Quality Risk – An organization can be at risk if the outsourcer does not produce services that meet service level agreements (SLA) therefore, creating operational related issues.

Quality of Service – Quality of service is measured through (SLA)’s contractually agreed upon. Poorly defined or absent (SLA)’s can open the door for imperfections in the services provided.

Language Communication – In some outsourcing arrangements, some foreign cultures and language barriers can negatively affect the end-user-experience ultimately leading to patient dissatisfaction.

Security – Some outsourcers put their clients at risk by not offering the highest levels of security such as ISO certification, SAS 70 certifications, and PCI data security standards.

Public Opinion – There may be a negative public opinion against offshore outsourcing because it leads to job displacement. However, supporters focus on mainstream economic benefits to argue that outsourcing improves overall quality of the organization by holding down the administrative costs, thus creating overarching benefits and quality output.

Losses of Control – There are risks for providers who transfer the responsibility of completing a task or a set of tasks to an outside entity. These risks occur because the provider may lose control and not be able to have their finger on the pulse of the work. Stakeholders must ensure that open communication and procedural excellence is adhered to at all times by the outsourcer. Preferred outsourcing providers offer mechanisms designed to keep the organization in tune with every aspect of the outsourcing engagement, thus creating a feeling of confidence and security, knowing their best interests are always upheld.

Conclusion

Many top healthcare thought leaders are now accepting outsourcing as a cost reduction and operational improvement strategy designed to combat the economic squeeze the healthcare industry is experiencing. Outsourcing takes time and effort to develop sourcing requirements, decide on the appropriate outsourcing partner, and implement and monitor the engagement. In the long run, outsourcing saves demands on infrastructure, manpower and money. By leveraging a best in class solution provider, healthcare organizations gain a competitive edge guaranteeing endless benefits for the enterprise and the patients they serve.

About the Author
Phil C SolomonPhil C. Solomon is a revenue cycle, IT and BPO consultant, sales and marketing strategist, healthcare blogger and industry speaker. Phil’s 19 years serving the healthcare industry have been focused on advanced techniques in technology solutions, BPO services outsourcing, A/R collections, customer care and call center applications.

Previously, he was the CEO of a Fast Tech 50, call center performance improvement technology firm, and a principal executive at an INC Magazine American top 500 Fastest Growing Private Company. In addition, he managed the Healthcare vertical market for one of the largest global outsourcing and receivable management companies in the world.

He is an active member of the HFMA, NAHAM, MGMA and AAHAM and is frequently featured as a speaker at industry trade conferences and educational seminars. Phil resides in Atlanta, Georgia and holds a B.A. degree from San Diego State University.

Work Cited

1  Wellsphere “Revenue Cycle Outsourcing.”, 10-26-2011, http://www.wellsphere.com/healthcare-industry-policy-article/healthcare-revenue-cycle-outsourcing/1536937

2 Wellsphere “Revenue Cycle Outsourcing.”, 10-26-2011, http://www.wellsphere.com/healthcare-industry-policy-article/healthcare-revenue-cycle-outsourcing/1536937

3 Outsourcing Center “Areas where outsourcing will grow in the next five years.” http://www.outsourcing-center.com/2010-01-areas-where-outsourcing-will-grow-in-the-next-five-years-article-37455.html

4 Odgers Interim “Business process outsourcing ‘must be managed correctly.” http://www.odgersinterim.com/news-insight/news/article/business-process-outsourcing-must-be-managed-correctly-3590/

5 Wikipedia “Business process outsourcing in India.” http://en.wikipedia.org/wiki/Business_process_outsourcing_in_India

6 Wikipedia “Business process outsourcing in India.” http://en.wikipedia.org/wiki/Business_process_outsourcing_in_India

7 ^ “Marketing to India.” Retrieved 23 March 2011.

8 Amritt, Inc.”Sourcing Advice”  http://www.amritt.com/Sourcing-Advice.html

9  IT Bizcharts “India Outsourcing Industry 2011 – Focus on Healthcare vertical for Growth.” http://itbizcharts.blogspot.com/2011/10/india-outsourcing-industry-2011-focus.html

10  IT Bizcharts “India Outsourcing Industry 2011 – Focus on Healthcare vertical for Growth.” http://itbizcharts.blogspot.com/2011/10/india-outsourcing-industry-2011-focus.html

11 Gartner, Inc. “Outsourcing” http://www.gartner.com/technology/home.jsp

{ 1 comment… read it below or add one }

Keane Mcintosh November 28, 2012 at 11:48 PM

Outsourcing of the internal software development / maintenance burden has become a necessity for many firms and IT managers in order to stay inline with the competition.

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