Determining How and What Business Functions to Outsource
Document expectations before entering an agreement
by Gary Sheehan

There is a well-known quote, oft misattributed to Charles Darwin (it was actually Leon C. Megginson, an LSU professor who was extrapolating off Darwin’s seminal work, “On The Origin of Species”), an excerpt of which goes as follows: “…it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.”

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So it is that we find ourselves in early 2018, having endured a five-year period of unprecedented upheaval and disruption, principally driven by downward reimbursement pressures. Industry data suggests that the number of provider locations in some parts of the country is down 40-plus percent. The question we are left asking ourselves is, “What do I do next?”

For providers who are committed to the market, seeking avenues for profitable growth, and are ready to embrace change, I would suggest re-examining labor expenses and considering expanding your development of outsourced partnerships as a must-do for 2018.

Generally speaking, providers are expected to be proficient at sales and service to drive growth and capture additional market share in their regions. As such, your best resources should be deployed in front-facing roles that touch your referral partners and end users. You want your agents to be fully invested in customer satisfaction so their focus is appropriately geared towards creating value for the organization, as well as its patients and partners. But health care is a unique transaction environment, with myriad regulations and business processes that can create inefficiencies, bottlenecks and time delays, while also encumbering excellent team members with basic data entry functions—not a good use of their time, talent or expertise.

Some of the most basic opportunities for outsourcing functions are at the data entry level; taking communications that come into your organization and need to be entered into a system, and moving that work to an outsourcing partner who has expertise in business process outsourcing (BPO). What if all of that information hitting your fax machines and servers was entered into your core system within an hour, 24 hours a day? How could you re-deploy team members to deliver a better service experience? How about transforming your collections or AR activities by removing data entry and tasking staff with working more complex or troubling receivables?

Every analysis of a potential outsourcing project should include how and where staff can be re-deployed after a change is made and what the business impact will be. As you go deeper into your organization, you begin to find opportunities for much broader functions to be outsourced.

A common scenario familiar to those in the industry would be the outsourcing of the billing function, whereby a third party takes ownership of the claims once they are delivered. Their subject matter expertise is in process management and regulatory interpretation. They are going to first look at a claim and ensure all applicable payer regulations have been met for the specified code being billed, and then they will submit the claim for payment. They will typically have much deeper analytics than any individual provider might possess to ensure that the claim is progressing as expected towards payment. The provider may still have front-facing personnel to work with referral partners on documentation and answer patient questions about bills, copayments and deductibles, but they have relieved the majority of their former AR staff from the admin work associated with filing and tracking claims and brought on an expert partner to own that element of their operation.

Oftentimes there is an assumption that outsourcing functions is a purely financial decision—that analysis is oversimplified. Partnering with organizations who have deep domain expertise in process management offers the opportunity to increase your own rate of growth, manage spend during periods of contraction, and generate the technology benefit of a worldwide labor force attending to the needs of your business and customer base, 24 hours a day. You can find significant service level improvements through outsourcing if you are committed to doing the work on the front end. The key is to have a documented understanding of what you do, how you do it, where you do it and how long it takes. If you don’t know that, you will be hard pressed to hand the work off to someone else and have anything resembling a reasonable expectation of performance.

Technology continues to offer innovative companies a means to drive sustained service improvement in an environment where there are more patients than ever to be served. Combining technology, outsourcing and the best sales and service teams you can find will yield significant protections to the bottom line—or what’s left of it—and help ensure you are one of the businesses left standing when the current shakeout inevitably ends.

If done right, outsourcing can be a key driver to maintaining margins and overall stability of HME providers.

Points of Interest

Any function that can be clearly defined and managed through standard operating procedures is a candidate for outsourcing. However, before looking at outsourcing any function you should ensure that you have done the following:

  • Completed a comprehensive review of the function that you are looking to outsource to determine the ROI from outsourcing. The ROI generally comes from a reduction and/or reallocation of resources, but could also come from business growth through increasing capacity.
  • Create a standard operating procedure that clearly defines each step of the function, as well as performance expectations and the ability to manage to these expectations

Once you are ready to engage with an outsourced vendor, you need to ensure you select the right vendor.

  • A vendor that has proven experience in the function you are looking to outsource is generally your best bet, but a vendor with limited experience that is willing to invest in the education and slow ramp up is also an option.
  • Always check references.
  • If you are going to outsource with an offshore vendor, you need to ensure they have the appropriate standards and safeguards in place.
  • While cost is important, don’t fall into the trap of going with the lowest price, just because it is cheaper.