This article was written by Lisa Miller.
For hospital leaders required to deliver margin improvements, generate more revenue and provide value based care, outsourcing can be an attractive solution.
Before making that decision, I advise reviewing my 7 steps to optimize outsourcing in your hospital in order to ensure high performance from your providers.
Outsourcing is a growing market in US healthcare and can appear, at least at face value, to be the most convenient option for under pressure healthcare leaders. A 2018 study found that three-quarters of leaders were reported to be feeling ‘some degree of burnout.’ (The subject of non-clinical burnout is explored in more detail in an article by our COO, Rich Dormer.)
To optimize your outsourcing agreements, I recommend the following:
#1 Analyze and answer four key questions
The requirements of each individual hospital or health system evolve over time, making a needs assessment essential, whether you are exploring outsourcing for the first time or renewing an existing agreement. Consider these four questions.
- Which services can be effectively performed in-house and which would benefit from outsourcing?
- How will the contract for outsourced services be structured?
- How are those contracts going to be negotiated?
- To ensure ongoing strategic success for outsourced services, how will you manage your relationship with your vendors?
#2 Ensure your data and costs are clear and easy to understand
To maximize the value of any outsourced partnership you must understand factors such as unsustainable contract terms, inaccurate pricing and poor relationship management. In our experience, these can impact on your revenue and value leakage.
Between 40-70 percent of outsourcing value can be lost as a direct result of these issues. Invoices must be accurate and easy to understand. When it comes to purchased services spend, we frequently identify cost cutting opportunities in line item details arising from issues such as incorrect pricing.
Invoice ROI™ from VIE Healthcare delivers unparalleled cost savings in your purchased services spend.
#3 Gather regular feedback on your outsourced provider
A system that incorporates well designed feedback will promote a successful relationship with your outsourced provider. This can be achieved with:
- Quarterly performance reviews to identify unresolved issues and opportunities for improvement.
- Evaluating the quality of the services provided.
- Annual meetings with key end users to assess how your provider is performing.
#4 Treat your outsourced providers as an extension of your organization
In doing so, ensure they are committed to cost, process and revenue improvement. At VIE Healthcare, we have found that setting expectations at the outset is vital to avoid potential ‘utilization’ issues. Your outsourced provider should be responsible for utilization.
#5 Consider performance-based contract arrangements
Performance-based contracts are on the rise. Performance metrics are used to incentivize hospitals and vendors to ensure each party is meeting its responsibilities. It can also be described as a ‘shared risk’ or ‘shared benefit’ relationship where penalties are incurred for failing to meet a required standard, and incentives are received when the standard is exceeded.
This type of contract arrangement encourages closer relationships and therefore engenders trust between hospitals and providers. The recent focus on inefficiencies in areas such as administrative processes means it may also offer a more suitable solution for hospitals.
#6 Request marketplace visibility
Healthcare organizations are entitled to review services, prices, incentives and innovative thinking available at any time during the period of your agreement with your outsourced provider. After reviewing this information, I recommend that you benchmark those findings to obtain the best possible pricing and services for your organization.
Depending on the results of your review, you may need to renegotiate your existing agreement with your provider. This can be a challenge for hospital employees who lack strong negotiating skills. In this case you have two options:
- Hire a trained negotiator to represent your hospital in meetings with your vendor.
- Provide dedicated vendor negotiation training for your staff. VIE Healthcare offers essential skills training in this vital area.
#7 Carry out a test phase
A test phase helps your organization to select a suitable outsourced provider. To ensure objectivity I recommend that you:
- Agree to the duration of the test phase at the outset.
- Ensure tests can be carried out and evaluated accurately.
- Ensure a consistent environment during the test phase.
- Confirm that any investment is recoverable for both parties.
- Ensure that results cannot be influenced by either side.
- Include re-contracting intervals if the initial tests are not reliable.
For a more detailed insight into getting the best from your outsourced provider, download our research report How To Guarantee Extraordinary Performance From Your Outsourced Service Providers.