Outsourcing Medical Practice Functions - Be Wary

September 17, 2014

Thinking about outsourcing? Here are five situations where it is not a good idea.

A promising option to reduce labor costs for medical practices is the outsourcing of one or more functions to a vendor. The principal attraction is that the function can become someone else's responsibility. And the total cost to the practice often stays the same or declines because of the vendor's expertise and the economies of scale that are not available to the practice.

I personally am a fan of outsourcing done well. Outsourcing, however, is not always a good solution. Here are five specific situations when the practice is better advised to keep a function in house.

1. When the outsourcing solves only part of a problem, or relieves the practice of only the easiest part of the function.

An unrelated example makes my point. A college student wanted to start a seasonal business putting up Christmas decorations, but he wanted no part of taking them down. Since most homeowners have a good time putting up decorations, yet hate to take them down and pack them away, the student's proposed service was of little value. Beware of vendors who want to take the easy stuff off your plate and leave you with the least attractive, most difficult work.

2. When it eliminates the need for part of anemployee and the practice cannot redeploy the staff person to higher-value work.

There is value to saving a practice 10 man-hours of labor per week, if the practice can either eliminate 10 hours of paid staff time or redeploy those hours to valuable work that has been neglected. If the outsourcing saves 10 people one hour per week, and those folks were not already overloaded, the outsourcing has delivered a cost without an offsetting benefit.

3. When the practice wants to maintain total control of the function.

An obvious and often overlooked consequence of outsourcing is that the practice no longer has full control over the function. The practice can still require that the function be done right, but it loses the ability to say exactly what right is.

Anything that deals directly with patient care, or the primary differentiating characteristic of the practice, is best not outsourced. The same is true if the physician is a frustrated tech geek and has very specific ideas about network infrastructure and hardware.

4. When the practice is more skilled at the function than the vendor or can provide it more economically.

Supposed experts do not always deliver better value. The only way to know that in advance is due diligence: understand the details and pricing of the service, and validate a cost-benefit analysis. (There is no reason not to have the vendor perform most or all of the cost-benefit analysis, but the practice must validate the assumptions and data.)

5. When practice leaders believe that outsourcing means no one in the practice needs to pay any more attention to the function.

The practice can outsource an activity, but it can never outsource responsibility. No matter how good the vendor is, someone within the practice must be directly responsible for managing the relationship, monitoring performance, and resolving issues.

What experiences has your practice had with outsourcing? Do they support or refute my premises?