5 benefits of outsourcing in the healthcare industry

When Fitch Ratings turned its eye to what was on the horizon for the healthcare industry in 2024, it did not mince its words. The credit-rating agency described the outlook as “deteriorating”, revealing that downgrades of hospitals and health systems were outpacing upgrades by a roughly 3-to-1 ratio¹.

In the wake of “a generationally challenged period in 2022 and 2023”², the experts at Fitch Ratings declared: “The healthcare industry remains in a hypercompetitive landscape for personnel against a challenging backdrop that includes a higher cost of living and the exit-early retirement of some skilled labor from the workforce.”³

The story was no different at global consultancy Deloitte, which found only 3% of health system executives and 7% of health plan executives considered their 2024 outlook at “positive”⁴. Amplifying this result was the fact those numbers were down from 15% and 40% year-over-year.

Given such pressures, it is no surprise that an increasing number of hospitals and health providers are teaming with third-party providers, so much so that the healthcare outsourcing market is tipped to reach $312 billion by 2025⁵.

What is outsourcing in the healthcare industry?

Outsourcing in the healthcare industry refers to the practice of delegating certain tasks to external organizations or individuals in a bid to improve hospital or health service performance. Clinical roles such as medical transcription and billing can be supported by specialized third-party providers, along with general administrative responsibilities including IT, customer support and HR.

Outsourcing is increasingly popular among healthcare executives as an ongoing talent shortage is impacting the ability to recruit medical and non-medical personnel, while budget constraints, regardless of hospital or health service size, are affecting operations and capital investment decisions. There is also fierce competition within the sector, not only from other providers but a widening range of peripheral businesses entering the healthcare arena.

^{Source graph here: 5 benefits of outsourcing in healthcare (microsourcing.com)}

What are five benefits of outsourcing in the healthcare industry?

1. Better cost control: outsourcing is a proven cost-reduction strategy that can help bring greater stability and predictability to daily operations and strategic business planning. Direct savings include reduced labor costs, with the lower cost of living in offshore destinations such as the Philippines saving up to 70% in wages and salaries. Coupled with a reduction in out-of-pocket HR expenses for recruiting, training and maintaining skilled personnel, it is easy to see the positive impact on balance sheets.
   
   Acquiring and maintaining technology is another major recruitment expense. Substantial capital investment is needed for acquiring or upgrading equipment and never-ending maintenance costs but outsourcing shifts this burden to the outsourcing provider. It also greatly reduces staff turnover and, in turn, saves the direct costs of employee replacement and retraining and indirect costs of productivity lapses and mistakes.
2. Wider talent pools: outsourcing provides health administrators with access to a global talent pool of desirable candidates that would not otherwise be available. Looking offshore for support and expertise can lead to firms that pride themselves on nurturing highly qualified talent pools filled with experienced, skilled and hard-working candidates who are ready to deliver.
3. Competitive edge: the ‘business’ of healthcare has inspired a situation where a growing number of players are entering the sector and creating an increasingly competitive environment for hospitals and health systems. This includes burgeoning retail and ambulatory care centers, while even traditional players are exploring new models of care.
   
   Outsourcing can level the playing field for smaller healthcare organizations by providing a wealth of talent and increased capabilities not possible in-house due to budget or space limitations. The inherent flexibility of outsourcing means providers can deliver valuable scalability, with such agility critical for healthcare operators to facilitate planned growth, support fluctuating needs and adapt to unforeseen changes.
4. Improved patient care: while healthcare is a business, the patient should always remain at the heart of the conversation and outsourcing has been shown to improve patient outcomes and deliver higher-quality care. Relieving clinical staff of routine administrative work not only frees them up to focus on patients but can also improve their health and morale, which is vital given health professionals are prone to stress and fatigue.
   
   Healthcare outsourcing allows in-house staff to divest themselves of repetitive and time-consuming administrative tasks and invest more heavily in clinical care that improves service quality and patient satisfaction. Happier patients are also more likely to remain loyal and promote the service to others, thus increasing revenue in the long-term.
5. Increased accuracy: medical billing and coding are vital tasks within the healthcare sector, with speed and accuracy essential to improving revenue streams. Mistakes cost money, with one study showing billing errors cost the medical sector about $20 billion[6]. It is a specialist field and quality outsourcing firms can provide access to highly skilled individuals or teams of medical coders who can deliver fewer errors in a role where mistakes matter.

^{Source infographic here: 5 benefits of outsourcing in healthcare (microsourcing.com)}

What healthcare services can be outsourced?

• Medical Coder
• Medical Coding Trainer
• Quality Assurance Supervisor
• Quality Assurance Manager
• Medical Transcriptionist
• Medical Claims Processor/Analyst
• Medical Billing Specialist
• Quality Assurance Specialist
• Chart Retrieval Specialist.

The sector also lends itself to outsourcing opportunities across areas as diverse as:

• Patient scheduling and follow-up
• Information technology (cybersecurity, systems design for digital transformation, data management)
• Customer care (including contact centers)
• Compliance management
• Finance and accounting
• Human resources
• Sales
• Marketing.

How do you choose a quality outsourcing provider for healthcare?

1. Due diligence: do not make the mistake of rushing to team with the cheapest provider. Start with a goals assessment. Different providers offer different services and the best way to streamline potential options is to identify the tasks you truly need help with.
2. Experience: look to partner with providers that have a proven track record of working with healthcare organizations, particularly in the specialties and/or processes that will best benefit you. Do your research, request case studies and ask questions.
3. Talent pool: seek evidence that your outsourcing partner has nurtured a talent pool that offers access to diverse and highly capable individuals or teams. The Philippines boasts a large pool of talent who have excellent English language skills, understand the complexities of US compliance and, in many cases, are trained and experienced in healthcare systems.
4. Compliance and data security: outsourcing providers must meet compliance standards and protect an organization’s business data. A data or security breach could be catastrophic, hence why clearly defined risk management protocols and procedures are essential.
5. Scalability: one of the benefits of outsourcing is the ability to grow (or reduce) teams based on demand. Be wary of vendors that seem like a good fit but do not have the ability to help an organization scale, turning what should be an exciting venture into another headache.

Conclusion

One size does not fit all in the world of healthcare outsourcing. What works for a tertiary hospital may not suit a rural medical clinic, let alone a one-person practice. For that reason, it is essential to seek out the outsourcing provider that best suits one’s needs.

The US healthcare system is witnessing major shifts in government policy and the way the industry operates. Amid such revolutionary times, discover five trends that will influence the healthcare sector in the near future.