Hospital Outsourcing-broad criteria for decision making

A hospital administrator always faces questions on services outsourcing in a hospital. It is difficult to take the decision as there is no common rule or criteria to identify what to outsource and what not. Currently most common prevailing practices are followed and these are driven by financial concerns. Other important factors come into picture once the service gets outsourced. At that time, it has its own challenges to revisit the decision. for eg. for a hospital decides to outsource pharmacy services on the basis of desired outcome of keeping no stock hence no capex & manpower.  But as a super-speciality hospital it’s running a medical oncology department where most chemotherapy drugs are required. In such case it’s important to maintain a control on stock, look at financial viability for hospital as well as patient and overall patient satisfaction. this can be better achieved if pharmacy is in-house.

There can be multiple criteria to consider while identifying such areas for outsourcing. There is nothing better then mother nature to provide the approach. Let’s consider a very simple colony of honey-bees. Honey bees have well defined system based upon the task to accomplish that ensures survival of the colony i.e. purpose. Members work in groups to fulfil needs of the colony. If we consider Queen as focused and result oriented leader then other members i.e. worker bees and drones are the groups to whom specialized work gets allocated by the leader in a very systemic way. Thousands of Worker Bees assume responsibility for feeding; cleaning, nursing, defending & Drones assume responsibility of mating with queen for colony growth. The distribution of tasks is on the basis of its characteristics. These characterises can be decoded and can be consider as criteria for outsourcing decision making.

Hospital Outsourcing concept

Goal- It’s very important to identify the Goals of the hospital which gives the clarity about the short & long term achievements.  Eg. For the hospital low cost treatment as one of the goal, leaders should isolate all the areas that lead to reduction in the cost thus impacts on the service delivery pricing. These areas can be non-clinical services, consumables or pharmaceutical products. If hospital has a goal to provide high end diagnostic service then all the areas like MRI, CT, and medical equipment procurement should be considered.

Critical Services– it’s important to identify criticality of the area considered for outsourcing. These critical services may be super-speciality associated services as defined by a hospital. Ideally such services are the differentiating factor for a hospital & should be in-house. For a level 1 trauma centre, ambulance service is critical and should be in hospital control. The delivery of such services will directly impact the patient care and satisfaction.

Value of services– in case of bees, drone is important for specific time period but doesn’t add value to other tasks done by worker bees. In a healthcare organization, support services like housekeeping or parking are important services but not a major value addition services to hospital mission. Some services are for specific time periods but are important and can impact operations any time. Equipment maintenance is one such example. Hospital has to keep a team in house or can outsource the maintenance. Up-keeping is the important activity and assurance to minimize sudden downtime.

Future plans– Drone bees are only useful as future assurance.  In the same way Organizations should identify the future plans. It’s important to understand whether they wanted to focus only on the hospital(s) core services or wanted to develop some services as separate business units. To develop separate business units organization should develop the expertise and develop them with in-house. These areas can be clinical areas like dialysis or imaging service and non-clinical as F&B department, Patient Care Services.

Operational Risk– bee colony is limiting their risk of ‘not having their offspring’ by sheltering a group of drones. Operational risk including cost, process, quality impact is the important component to consider while outsourcing. It’s better to have options to fall upon. Eg. IT infrastructure maintenance can be handled by an in-house team but because of the nature of issues and dependency, it’s a good idea to keep a highly skilled team as backup and outsource few selective activities like IT hardware maintenance.

Setup Complexity– in a colony of bees setting up the honeycomb, prepare food, taking care etc. tasks are taken care by the worker bees this is same as complexity linked with initial setup.  In hospital it’s important to identify these complexities like initial cost, operational challenges in setting up the services etc. for example it’s very important to check the setup cost for rehabilitation dept. with operational challenges as its different from focus areas (Ortho or Neuro) for a specialized hospital. It will require larger space with different set of equipment. But on other hand by combining rehabilitative services with the specialities can provide end to end care for the patients.

Skill Set– required skill set and its availability is also a major criterion to be considered while outsourcing. In a super speciality hospital setting up Dental department requires different kind of doctors and skill sets. Hospital branding & campaigning required exclusive skill set which belong to different sector.

Resources– in bees’ colony, the activities require high resource but having low or medium value proposition are taken care by the worker bees. In a same way in hospitals activities require Hugh manpower or consumables but the value addition to our goal is not much but supportive, it can be considered for outsourcing.  e.g. Housekeeping services, security services etc.

Hospital Outsourcing matrix

Quality, Cost & service efficiency are the part of the desirable outcomes and common in above said points but not the only criteria for decision making. These points should be covered while negotiations & preparing SLAs.

Disclaimer: The views expressed in this post are purely the thought of the author and are not meant to be derogatory to any institution or organisation. The author is open to further discussions. Thank you for your patience and tolerance.

Advertisements

One thought on “Hospital Outsourcing-broad criteria for decision making

  1. apart from the critical nature of the activities, many times hospital administrators think that cost of outsourced services will be always less than the in house service cost. This is not always true. Hence one should take in to account the value of management time that is freed up by outsourcing, so that the revenue generation from the freed up managerial time is more than the increase in cost of outsourced service compared to in house service cost.

    In india the norm of outsourcing certain medical services has also become popular. There are certain conditions. Co-Branding is possible. Too many outsourced partners/brands is not attempted. The medical service requires higher levels of skills, experiences. Investment support is also considered. When these are met, the hospital management outsources certain medical activities with fewer partners and manage those in which the hospital is good at and commands brand value.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s