Four Ways Hospitals Are Cutting Admin Costs Part 4

4 ways hospitals are cutting administrative costs part 4: Outsourcing

$1 out of every $3 spent in U.S. healthcare is spent on administrative costs – that’s a trillion dollars spent on administration. And while administration cannot be eliminated, it can be reduced. As a healthcare provider, reducing your administration time and costs can benefit your bottom line and help the entire healthcare industry.

If you’ve been following along, over the past three weeks we’ve covered three common ways that hospitals are attempting to tackle this problem, from hiring more employees, to implementing technology solutions, to hiring consultants. And in our final post of the series, we’re going to cover outsourcing as a strategy.


What is outsourcing In healthcare? 

Outsourcing in healthcare isn’t new, but it is an increasingly popular approach. Outsourcing is when a healthcare system entrusts a third-party organization with a specific task or workflow – even entire job functions or departments can be outsourced. Anything that is not a core competency of a healthcare system could potentially benefit by being outsourced, with the right approach. For example, it is already common practice to outsource hospital food service, laundry, or laboratory services. 

But what about administrative work? How can that be outsourced? Outsourcing administrative work is becoming more common – one area where outsourcing has proven beneficial is medical billing. A professional medical billing company can take over and handle a provider’s entire billing process. But what are the pros and cons of outsourcing administrative work?

Tapping into the pros of outsourcing 

The biggest benefit of outsourcing is that it frees up staff to focus on other initiatives, including patient care. For repetitive, menial work, outsourcing keeps employees from getting bogged down by the processes that interfere with the healthcare provider’s bigger-picture goals. But there are a lot of other benefits too: it can save money, reduce errors, and improve operations. 

Typically, outsourcing a task or process enables a healthcare system to take advantage of another company’s economies of scale. They will have developed a solution that is better and faster than how you are doing it, because it is their core focus. They will have the best technology, the most knowledge, and the focus to continuously improve. By leveraging another company’s expertise and specialization, a healthcare system can actually lower costs and improve the process through outsourcing. 


Cons of outsourcing: The process can be difficult & limiting

Outsourcing isn’t a magic potion that solves all administrative woes. Far too often, providers that outsourced certain functions even feel frustrated by its limitations. That’s because when you outsource, you lose direct oversight of the process. You have to place a lot of trust in the third party that work is being performed accurately and efficiently. A manager cannot walk down to someone’s office to ask a question or ensure that certain tasks are being completed on time. 

Outsourcing also limits your flexibility – organizations are often locked into a contract for a specific amount of time, money, and work. If internal priorities or needs change, your current contract may no longer work for you, but you could be stuck. It can keep your organization from being nimble and quick to adjust to change. 

Plus, outsourcing often comes with hidden costs, money and time. From legal fees to implementation or cancellation fees, makes sure you read any contract carefully and consider these costs when you evaluate potential savings from outsourcing. And even the best outsourcing company requires oversight and management from internal resources, which can end up eating more time than you anticipate. 

Lastly, outsourcing comes with additional healthcare privacy and security issues. The more people and companies that have access to a system, the more potential there is for a security breach. This is an additional risk to consider before outsourcing any administrative work.

Is outsourcing for you?

Outsourcing has plenty of pros and cons, but only you can decide if it will work for your organization by understanding the potential pros and cons. And besides evaluating specific outsourcing companies, it’s also critical to compare outsourcing to other solutions, such as technology solutions. For a more complete list of potential strategies to evaluate when working to cut costs, make sure to check out our eBook, 6 Ways to Cut the Staggering Cost of Healthcare Administration. In it, we share six ways that healthcare systems are addressing these problems, the pros and cons of each, and how to choose the right approach for your organization. Download it today to learn more! 

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