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.

Healthcare India- Innovation – Access – Growth

Healthcare  in India - innovation - Access - Growth

Healthcare in India – Innovation – Access – Growth

Healthcare  in India seems to finally be coming of age , came  across a  few  very interesting business models , new ventures  , which should ideally solve  for  existing gaps in the market. Thought would share them with you:

The Glocal Story : In a country such as ours  with  a population of 1.23 Billion, where 22% of the  population is below the  poverty line  (Earning less than Rs. 33.3 (urban) and  Rs.27.2 (rural)), the need for  subsidized / low  cost quality healthcare is  quite clearly evident.  To top that about 70% of our population is rural . Two ex  civil servants did see this gaping hole and  decided to fill it. Glocal healthcare established its first 100 bedded secondary care hospital in Sonamukhi , WestBengal in the year 2010, since then 4  more hospitals have been comisioned in 3 and 4 tier  cities. Whats  even more interesting is that  a plan for commissioning  50 more such hospitals over the next 2  years  is in the pipeline. The total bed capacity would be a whooping 5500 once the plan is executed.

That  is insane but why does it work for them because they use  a Basic model which they have tested over the last five years and perfected to some degree and this includes

1) Well defined catchment area a tier 3 or 4 tier city with a  population of 1 lac urban and 5  lac rural

2) Well defined service mix only  secondary care  well defined specialities ( as per the CEO only 42 diseases account for almost 95% of the disease burden in rural areas)

3) Low project cost – An investment  of only Rs. 8 Crores for the comissioning of the entire hospital  including  civil work, equipment and housing for doctors. (Low land cost, no frills, less area, modular approach and  inhouse construction). And a total of 6- 8  months only for completion.

3) Low fixed cost – A Staff of only 100 for the 100 bedded hospital  which includes 12 onroll doctors thus low fixed costs

4) Utilization of resources which a  bigger corporate hospital would shy away from for example local medicos are welcomed into the hospital and  made part of the care giving team .

5)Partnerships for resource development. Training provided by  a partner agency  to nursing aids and technicians thus filling a  gap in terms of manpower scarcity.

I think this would be the gist of the model  and  of-course the main central  proposition of  quality healthcare at 20 – 40% less than the market rate.

Will the model be a success when scalled up is yet to be seen. Though there is a  definite need for such healthcare, however currently the model works because  it is supported by a state government insurance / Cashless healthcare provision scheme . This accounts for 55% of their business.  But atleast its a  refreshing new approach to healthcare.

The DaVita Nephrolife partnership –  According to recent studies around 17% of the  indian urban population suffers from Chronic Kidney Disease.  Dialysis is a  harsh reality for these patients a  regular affair and no matter how  dark it may sound Nephrolife has  been able to see this demand. With a  potential  market size  of $350 million growing at 20 odd  % annually somebody had to get organised. With what started out as a stand alone dialysis centre in Bangalore  in 2009 after their partnership with DaVita and NEA in 2011 has grown to a network of 14 centres in  a short span of 2  years.  Whats special about this partnership is that the partners not only infused funds  in the tune of $25 million but also brought along with them experience  in previous healthcare  projects and for DaVita healthcare specifically experience in their chosen speciality of Nephrology and Dialysis.

The Key to success be flexible ,  partner, see the bigger picture and  focus on the game.

1) Be Flexible – Various formats of basic business model  – Stand alone  Dialysis centres,  Satellite Dialysis centres , Stand alone integrated Kidney care  centres, Box in Box model for tertiary and secondary care hospitals (either  on rental model or as  a JV)

2) Partner  – The flow of funds  helps when establishing such  a capital intensive setup. Per bed cost is estimated at around the $25 – 40000 mark, however returns are  expected at an EBITA of around 20%. And along with that comes the administrative expertise and  knowhow. Local partners further  reduce capital burdens as well as provide stronger local networks.

3) See the Bigger  Picture: The concept with DaVita  Nephrolife is to provide integrated Kidney care services to build a  care network  , not just  Dialysis  but rather  an entire spectrum of care ranging from prevention ,  diagnosis, Dialysis and end stage kidney disease management (Transplant) , be it through their centre or a  partner centre.

4) Focus on  the game  –  whats interesting is that they realise the chronic nature of most kidney disease and the  importance of establishing long lasting relationships. The single  speciality focus also gives them a certain degree of advantage over multispeciality centres which  can at times  be distracted.

Again its  for time to tell whether  these Healthcare ventures  would succeed  in the future. However its nice to see a new approach to Healthcare in India  an approach based around flexibility,  partnerships and real patient needs.

Disclaimer: The views expressed in this  post are my own and  are  not meant to be derogatory  to any institution or organisation. These are just my thoughts and  these are open for further  discussion and  development. Please do comment and  share and  let’s get some universal cognition into this. Thank you for your patience and  tolerance.

Defining your KPI’s – What is your Hospital Measuring ?

KPIs what are you measuring

Ill start with a  Cliche  – “What is not measured is not done”, but  i truly believe  in the power of measurement  and that’s why measuring all that you have envisioned for your hospital becomes critical.  But then how good are our hospitals at measuring?

Before we can really answer that question we need to identify what it is exactly that we our measuring.  I have come across a few discussions which were based entirely around what hospitals should measure and honestly every individual seems to have his / her own response.  Yes there are some basic KPIs such  as  ALOS , Occupancy, Revenue etc that keep cropping up from time to time however  I haven’t really come across a  really well defined KPI directory that you can choose from .  And sadly enough some  rare  managers and administrators that I have come across  are not  even aware of  the  entire  implication that a  particular KPI has  on the  functioning  of the  hospital.

My attempt here is not to define a directory for you but rather to set a direction to our way of thinking about KPIs

So what do hospitals measure?

Our entire KPI classification is based around

 Clinical Quality  – e.g. Medication errors, outcomes, mortality, hospital acquired infection , repeated surgeries, readmissions etc

Operational Quality – e.g. waiting times,  Going  above  estimates, Consultation quality, Discharge times, Admission times etc

Operational efficiency – e.g. ALOS, Volume growth, Cost per bed, Material cost  %, utilization rates, Your basic time motion studies regarding process efficiency etc

Financial health – eg. EBITA, Debtors outstanding, Case mix, Revenue source mix, Cash to debtor’s ratio, Cash flow etc.

This is definitely not all inclusive in terms of KPIs or categories but basically top of the head stuff. I have  also seen people merge Operational quality and efficiency but id rather keep them separated.

Wow that’s quite a lot of things to measure  if you think about it and  we haven’t even quite scratched the surface yet.  How will I keep an eye on the ball when I’m being bombarded with balls? The answer my friend is simple identify what’s important for you

So what is important for you? Prioritise

The KPI dashboard that you are most concerned about is directly related to the level / nature of involvement that you have with the organization.

If you are a C level executive your KPI dashboard might be entirely different from let’s say someone related solely to Operations which might be different from the individual heading Quality. When i say different it doesn’t mean there is no overlap there will be overlaps but functionalities are different.

So a CEO would have some of these things on his / her  mind  –  EBITA , Material Expenditure, Volumes for critical procedures , Case Mix , ALOS, Debtors , Utilization etc.

And then this further would percolate down to departmental levels.  Eg OPD would have different Performance indicators such as waiting times, doctor punctuality, material consumption, Staff attendance, Overtimes, Complains, average consultation times, volumes,  etc .Marketing would have measures  like – call volunmes, sector wise revenue, cost per  customer  acquisition ,  doctor wise  performance, activity vs conversion etc

I would say define your parameters well at the departmental levels to drive true quality and efficiency.

Ideally a C level manager should look at about 30 – 50 selected indicators on a daily basis and then selectively look at indicators from departmental levels which show huge discrepancy from the expected values or unusual results. Focus can also be shifted while working on specific projects. Please note it’s difficult to keep an eye  on 170 parameters so prioritise and reorganize your dashboard  on regular intervals

At the departmental level each department should be encouraged to develop their own KPI bout 20 – 30 against which they measure themselves. Please remember while defining your KPI it’s important to understand why you are measuring it and whether you need to include it, be specific and be selective.  Also VOC (voice of customer) must  be imbibed into your Dashboard structure. Lastly  identify the correct method to measure the KPI you are defining a lot of times time is wasted on goose  chases with either  the  wrong  data or  erroneous  data  collection.


This is the tough part here is where you record, review and correct and this is not only for a particular phenomenon that you  are  measuring  but also your dashboard structure add omit and refine the  dashboard as  you go along. But before  that  i can not stress on the  importance of getting the  message across to your entire hospital team. The  grass root level must understand the  importance of  an entry they make or the data they capture to ensure the quality of data and the  success of the system.

What would be the benefit?

The answer is simple consistent quality service provided with efficiency and accuracy.

HIS / BI Tools

I am certain there are quite a few HIS systems as well as Business Intelligence tools which integrate with your HIS systems to raise alarm and to bring things to your notice. However treat them as tools but don’t be over dependent on them. Because solutions which come in a tin are not necessarily the solutions we need.

Authors note:

My overall experience with KPI mapping in hospitals in India is that we are inept at measurement.  Most hospitals basically follow a basic set of indicators that are commonly predefined and taught in Hospital Management courses, however creative development of newer indicators seems rare.  A problem that is causing this is that management professionals are not necessarily keen at sharing their knowledge,  and the knowledge share which happens is mostly of data which is already out there in the  public domain.  Also as an industry there is a lot to learn from the Manufacturing sector and we must keep our minds open to newer possibilities through cross industrial / sector learning. In the end Collective Cognition is the need of the hour.

Disclaimer: The views expressed in this  post are my own and  are  not meant to be derogatory  to any institution or organisation. These are just my thoughts and  these are open for further  discussion and  development. Please do comment and  share and  let’s get some universal cognition into this. Thank you for your patience and  tolerance.

Setting up Hospital Quality System-six simple steps

When I was new to the healthcare management, I used to wonder how to initiate and setup quality system in a new hospital? What to do first and what to do next. As I suggested in my previous article, the setting up quality system should be initiate from the stage of civil planning. While looking for information, I came across an article on ‘Ford Assembly line’ and that gave me an idea to develop my own approach, assuming services as product and various execution stages as assembly docks which will refine and bring services in shape. The first and the most important step is to identify the services provided by the hospital and its focus areas.

For the selected services, organization should identify various processes & activities their flow with interdependent activities. Eg. If a high end trauma unit is the in the scope of services then one has to define process of delivering services, which will leads to resource planning (including neuro, ortho, reconstructive surgery as support services which will be requiring man, machine and material) and in turn will impact the civil drawings to accommodate them. This should be done by a cross functional team including quality champions, administrators, architect & doctors. The flow should be patient friendly and should address universal guidelines provided by national or international regulatory bodies. When the activities & detailed workflows are defined, the next step is to define procedures to perform these processes; rules to follow these procedures; how to follow procedures as work instruction. These are collected as documents known as SOPs, Policies and collectively called as manuals. eg. Process of trauma patient care include one procedure as triaging defined stepwise details in SOP; rules to follow during triaging including zoning, colour codes, responsibility matrix etc. will be covered in policy.

Who will execute these processes & policies? Before implementation Staff Awareness is required.  A detailed plan has to be made for training the staff as soon as they join the organization. While training, the points should be clear that how to do it, rules to follow, what if things went wrong & overall expectation. The comprehensive training programme can be divided in Universal Induction, department induction and continuous refresher training. The training content should be customized according to different categories of staff eg. Nursing, doctors etc. for better results. It should not be just dump of information but in small pieces so that the employee can absorb it. This would be time consuming process. Never forget to check the staff understanding towards these processes.

While the staff getting prepared for implementation, a parallel plan to be prepared on how to communicate and make our patients/visitors aware about our system. Patient’s awareness should be aligned to vision & mission of the top management. Eg if hospital is talking about ethical & transparent clinical practices in the mission statement, it should provide information regarding clinician’s protocols; doctor to patient communication, regular counselling during treatment/surgeries, how we take consent and why it’s important; what are the patient rights; how our feedback system works; what are our codes of conduct for patient care etc. Medium of communication is also very important aspect.

It’s very important to follow the process but it is more important to track whether these have been followed correctly with desirable outcome. That’s why key performance indicators and quality indicators come into picture which quantifies the procedures. These can be defined by identifying processes important to the management. For better understanding & for impact analysis, these can be collected in logical fashion under various dashboards with the aim of creating a decision support system. Identification of these QI & KPI can be during the first step but implementation and tracking would be done while hospital is operational.

Tracking & analysis of QI & KPI is a continuous process. Shortcomings or deviation from the assigned benchmark should be evaluated thoroughly. Root Cause Analysis, internal audits are the tools helping us to identify defects in the process or how the things went wrong. These audits must focus on processes not on an individual. Corrective action can be taken by the front team after consent from superiors but the preventive actions must be executed after through discussion amongst multi-disciplinary team. Preventive action will lead to change in the design of the complete system including SOPs & Policies. This will not only impact the hospital operations but also the finances. eg. If hospital identify the cause of decreasing hand hygiene rates as non-availability of disinfectants & training process, preventive measure may include adding-up more locations for keeping disinfectants which will leads to increase in inventory & cost, training staff repeatedly on usage thus impact on working shifts, changing the training process to increase its impact or policy of inclusion of bedside disinfectant bottle charges in bills etc.

This is a cycle and gets repeated during hospital operations for existing services & processes. Even new processes go through same sequence of synthesis.

Hospital Quality System setup

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.