Hospitals and healthcare providers face a unique challenge in their mission to optimize costs – they must do so without compromising care. While all businesses should take the impact on quality into account when looking to save money, there is extra pressure for healthcare executives given the serious ramifications for their ‘customers’. Unlike a retailer, a decline in standards or increase in wait times can result in patients suffering physical harm or even death and, consequently, reputational damage for health providers.
Cost cutting is a reality for the sector though as many hospitals and healthcare systems across the US find themselves under immense financial pressure. As noted by a leading global consultancy: “Our healthcare system exists in a state of crisis as we near a tipping point for many systems attempting to balance operational survival and financial sustainability.”1
The need to balance responsible budgeting with quality care has given birth to a new concept known as ‘cost-conscious care’. While financial considerations remain a top priority for hospital executives, one recent study found nearly all hospitals surveyed (99%) have adopted value-based care models in a shift of mindset that signifies a growing focus on delivering cost-conscious care as opposed to general cost-cutting2.
In this new world, offshoring has become an increasingly attractive strategy for healthcare providers. Balancing cost savings and quality care is no easy task but partnering with external providers that specialize in healthcare services can make it a reality.
Content guide
What is healthcare cost optimization?
Healthcare cost optimization is an ongoing and focused commitment aimed at maximizing patient care while reducing costs. Where cost cutting is a short-term action that aims to decrease expenses, cost optimization requires a more measured approach to ensure any financial gains are not offset by a decline in patient outcomes. Healthcare cost optimization can include multiple goals including the minimization of service costs, maximizing patient satisfaction, reducing wait times and ensuring optimal cost efficiencies.
Why is it important to balance cost-cutting with quality care?
All businesses walk a fine line between managing costs and providing quality. However, that line can be especially treacherous for healthcare providers. A lack of fiscal responsibility can result in exorbitant costs being borne by patients and run the risk of a rise in health inequalities. Conversely, traditional cost-reduction strategies such as reducing staff numbers can affect the quality and access to services, not to mention negatively impact the morale of team members.
That is why the key to effective cost optimization is doing so in a manner that also invests in quality. Offshoring is a tried and tested function that achieves this aim by helping healthcare organizations improve select services and efficiencies while simultaneously reducing costs. How so? Read on.
How popular is outsourcing in healthcare?
Before outlining how offshoring solutions can optimize costs, here is an array of evidence that shows the growing demand for outsourcing in healthcare. Numerous studies have been conducted in the field and it is clear many hospitals and health providers believe there is a lot to like about the resourcing strategy.
- A study of more than 500 hospitals and inpatient organizations found 90% of health executives are exploring cost savings by teaming with third-party vendors3
- The U.S. healthcare outsourcing market is expected to reach $66 billion by 20254
- More than 90% of U.S. hospitals have outsourced at least one of their processes5
- 54% of health CFOs believe outsourcing will increase efficiency and improve their organization’s financial health6
- Of physician groups with 10 or more practitioners, 68% outsource a combination of collections and claims management7
- Almost 75% of hospitals over 300 beds outsource IT services and even more hospitals and health systems with less than 300 beds do the same8
How does offshoring benefit healthcare cost optimization?
There are multiple reasons to pursue an outsourcing strategy when looking to optimize healthcare costs including:
- Reduced labor expenses: one of the key reasons that businesses seek support from offshore partners is to avoid high labor costs for non-core functions. Healthcare organizations are most associated with clinical care but there is a virtual army of administrative staff that play a supporting role from medical coders and transcriptionists to accounting and HR teams. Partnering with quality offshore providers can result in labor savings of up to 70% and reduce the burden of recruitment, onboarding and training.
- Access to technology: while modern technologies have helped automate many labor-intensive business processes, they can be a cost burden, especially for smaller hospitals and health operations. Along with providing access to wider talent pools, quality offshore providers typically invest in cutting-edge solutions and tools that deliver improved efficiency and productivity. From artificial intelligence and robotic process automation to cloud computing, it is a great way for healthcare providers to access administrative technology without expense.
- Fewer infrastructure costs: an expanding workforce does not only require more money for wages but an additional investment in infrastructure such as computers, furniture and other equipment. One of the joys of partnering with an outsourcing firm is the chance to avoid the need to buy such items and instead redirecting those funds to frontline care. It is also the responsibility of the provider to maintain them, another saving the cost of repairs and replacements.
- Reduced real estate expenses: the rise of remote and hybrid work has shone a spotlight for many businesses on the high cost of physically housing team members. With more people working from home or other remote locations, organizations have realized the benefits that come with needing less office space for staff. This is amplified when partnering with an external agency as healthcare providers can reduce their own property costs, whether buying or leasing, while the lower cost of real estate in many offshoring destinations allows the partner to deliver their services at more affordable rates.
What are strategies for using offshoring to optimize healthcare costs?
Using offshoring to optimize healthcare costs is not as simple as merely signing a contract. Just like every major business decision, it requires strategic foresight. Here are several tips for success.
- Think long-term: the greatest benefits of an offshoring partnership come with a quality long-term relationship. Switching providers every couple of years is not only a financial drain but a logistical and emotional burden. Look to establish a partnership with an offshore provider that you believe you can work with long-term.
- Prioritize quality: there is no shortage of outsourcing providers and like most business sectors, there can be a disparity between the best and the worst. Take the time to find a quality partner that is worth investing in. Can they address your specific needs? Do they have appropriate certifications and testimonials? Will they strike the right balance between price and quality?
- Seek tech-savvy partners: while people will always be at the heart of quality outsourcing, one cannot underestimate the role technology plays in the modern landscape. A tech-driven offshore partner will help healthcare operators streamline manual processes such as medical billing and transcription and enhance patient care and outcomes.
- Look to established destinations: the global boom in offshoring has seen many nations invest in developing outsourcing markets but some are more established than others. The likes of the Philippines have earned a reputation for quality service on the back of excellent English literacy rates, a highly educated workforce, government investment in the sector and a hard-working ethos.
- Quality communication: offshoring is no different from any other business relationship in that communication is critical. Ensure that your provider has proactive and established processes for bridging the divide between offshore and in-house teams and managers. Such commitment also needs to go both ways. The more time you invest in getting to know your offshore team, the better the relationship will be.
Conclusion
You don’t need to look far to find headlines about economic concerns and potential financial challenges for the business community. This is even more so for the healthcare sector, which is why there has never been a better time to explore how offshoring can not only help your organization optimize costs but do so in a manner that does not sacrifice care.
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