Outsourcing on the Mind as Hospitals Pursue Value-Based Care

October 11, 2019 - Ninety percent of hospital leaders are considering outsourcing both clinical and non-clinical functions to achieve cost-efficiencies and succeed in value-based care models, revealed a recent Black Book survey.

Leaders from 545 hospitals and inpatient organizations responding to the research firm’s outsourcing user survey agreed that value-based care models are necessitating additional outsourced clinical services to free up resources for other value-adding activities.

“Value-based care reforms have put pressure on hospitals to decrease inpatient volumes, achieve outcomes goals and provide cost-effective care. Clinical services outsourcing is the rage because it offers struggling hospitals with immediate alternatives,” stated Doug Brown, president of Black Book Research LLC.

Hospital and inpatient leaders are mainly concentrating their outsourcing efforts on diagnostic imaging service lines, the survey found. Whereas respondents from past surveys limited their outsourcing opportunities to anesthesia and emergency medicine, leaders in 2019 selected teleradiology and medical imaging equipment as the top most popular areas for clinical outsourcing partnerships.

Past surveys have also shown that hospital leaders are vetting outsourcing partnerships for their financial functions. Eighty percent of hospital executives, boards, and senior managers in last year’s outsourcing user survey said they were considering full outsourcing of revenue cycle management by 2019.

READ MORE: Hospitals Turn to Bolt-On, Outsourced Revenue Cycle Management

Similarly, respondents in 2018 cited value-based care as the primary reason why they are vetting clinical and non-clinical outsourcing.

“In 2019, hospitals have a cost structure that is not sustainable, and some hospitals are making the decision to actually enhance clinical product lines by outsourcing to power up volumes and improve health consumer satisfaction,” explained Brown in this year’s survey.

Hospital and inpatient leaders expect their third-party partners to significantly reduce costs using their expertise in that particular service line or area, the survey uncovered.

Respondents ranked cost savings and avoidance as the top reason for outsourcing clinical services in 2019. The reason beat out "expertise of outsourcing vendor," which was the top reason for outsourcing in 2014 and 2009. In this year’s survey, the expertise of the outsourcing vendor came in second.

Compared to previous years, fewer respondents were considering outsourcing clinical services to enhance revenue (6 percent in 2019 versus 28 percent in 2014 and 24 percent in 2009), meet the requests of physicians (2 percent in 2019 versus 4 percent in 2014 and 10 percent in 2009), and add new clinical services or product lines (1 percent in 2019 versus 4 percent in 2014 and 15 percent in 2009).

READ MORE: Third of Providers Regret Revenue Cycle Outsourcing Purchase

Nine percent of respondents to this year’s survey also selected meeting the demands of the community and consumers as a top reason for clinical outsourcing.

The motivations for outsourcing services may be changing, but the majority of hospital and inpatient leaders still think shifting hospital processes to a third-party partner is “a winning strategy,” the survey stated.

In every outsourced services category, outsourcing users reported that service levels exceeded expectations in more than 80 percent of all hospitals surveyed in 2019 to date, the survey said. Only eight percent of clients reported dissatisfaction in meeting expectations, which resulted in terminated contracts.

“Outsourcing in the healthcare industry doesn’t get the same bad rap other sectors experience such as banking, insurance, tech and call centers where negative stereotypes associated with offshoring and/or full function outsourcing were largely misinformed,” said Brown. “In hospitals, there is a developed understanding of the broad spectrum of clinical services outsourcing options and how to manage vendors.”

Managed services firms are also “creating a niche by specifically focusing on healthcare clients only,” Brown added. “Some leading vendors have recognized the need to bundle services that are only relevant to hospitals and inpatient groups such as IT, cybersecurity, clinical services, analytics and medical facilities management.”

READ MORE: Revenue Cycle Management Outsourcing Market to Grow at 11.9% CAGR

Internal and external attitudes on outsourcing may be shifting. Barely two percent of hospital and inpatient leaders felt outsourcing was an unthinkable option because of the expected reaction of staff, physicians, and the community, which was unchanged from a similar poll conducted by Black Book in 2017.

Outsourcing contracts can now be structured to “not affect existing staff or may stipulate the retention of existing staff into the incoming outsourcing entity,” the survey stated.

These arrangements may be prompting more healthcare providers to request outsourcing, the survey found. A supplemental poll of 129 vendor executives last month uncovered an average three-fold boost in requests for outsourcing proposals since the last quarter of 2017 among select clinical areas.

“It is a matter of finding the right company to partner with,” Brown concluded. “Through research, peer recommendations and due diligence on the firms being considered including the vendor’s history of partnerships with other hospitals.”