Healthcare Outsourcing Should Evolve Alongside Consumerism

Healthcare organizations are developing their workforces for the future. And they are facing complex dynamics along the way – just like those employers across other industries, no less. On the demand side, healthcare organizations are being held to new standards, especially as the need for new skillsets increases. Customers with access to new levels of technology and raw data are demanding new types of services. On the supply side, the shape of the workforce itself is changing, with a greater orientation toward temporary and freelance work, and new opportunities for automation as artificial intelligence grows in sophistication.

There are three overarching questions healthcare organizations need to ask themselves while managing these dynamics:

• What will the future workforce look like in terms of skills, size, and structure?
• How will that new workforce be implemented?
• And how can the transition be managed?

These questions need to be considered as part of an overall strategy, instead of existing in an isolated human resources silo. Similarly, the question of what skills represent core points of strategic control versus those that can be outsourced needs to be considered – not just from a human resources perspective, but from an enterprise strategic point of view.

Outsourcing Care Finances Has Its Loopholes, and Advocates

The ability to access externally is growing easier, as younger generations demonstrate more comfort with freelance work, healthcare start-ups develop strong capabilities at focused points on the value chain, and established non-healthcare organizations see opportunity and begin to offer their services within a healthcare context. Given the complexity of the tasks most healthcare organizations are already responsible for, it is tempting for organizations to adopt an orientation in which most non-core activities are outsourced in one way or another.

However, that is not a foolproof idea, as a recent article in Kaiser Health News illustrates. This article describes a growing trend where hospitals outsource the financing of care to third-party banks that work separately with patients and take a cut of proceeds. This creates problems. Patients are pressured to make significant financial decisions while under emotional stress, and thus feel ill-served by their healthcare providers. In addition, the loan amounts do not always accurately reflect the post-insurance payments for which consumers would truly be responsible, resulting in inflated costs to patients. Ultimately, an attempt to outsource a non-core competency ended up presenting patients with a less valuable service at a higher price.

Opponents of this view may conclude that this is simply an example of poorly implemented outsourcing, and that more rigorous vetting of partner financial institutions and better designed processes might have prevented this issue, even in an outsourced structure. This may be true, however, an important insight from this example is that the system by which healthcare is paid for is critical to a consumer’s experience. But the question nonetheless remains: Is it a mistake for healthcare organizations to outsource that pivotal consumer touchpoint?

It is true outsourcing an aspect of payment to specialized organizations means the chance of securing revenue increases. When bad debt makes up nearly five percent of hospital revenues, this is significant. However, it is also true that consumers are increasingly comfortable making their own healthcare decisions, driven by peer-consumer ratings, which are in turn driven by negative collection experiences. One in four individuals reports viewing physician reviews before choosing one. And although only four percent say they use ratings to choose their hospital today, this number will only increase. 

Health systems need to ask themselves at what point the risk of driving away consumers’ future healthcare spending outweighs the benefit of recovering more revenue per patient. As healthcare consumers make more independent decisions, and healthcare organizations evolve to provide a wider range of health and wellness services, the risk of this lost lifetime value will likely begin to overtake the benefit of recovering bad debt. If a bad payment experience makes a consumer even 10 percent less likely to spend any more dollars within a health system and causes some subset to write negative reviews that are considered by a broader population of potential patients, is that worth pulling in an extra five percent of revenue? Probably not.

Perhaps adding a new core competency, for example, by creating “healthcare financial advisor” positions, is necessary to ensure health systems can differentiate themselves from increasingly consumer-focused competitors.

This demonstrates how a human-resources only approach to building the workforce of the future can fail. Undoubtedly, many of the organizations that partnered with banks to outsource aspects of their care-financing functions consider optimizing consumer experience a key strategic goal. But that did not end up translating into building an in-house employee skillset that could manage the financing touchpoint – as critical as it was to consumer.

In this particular case, the fact that individual consumers are bearing a larger burden of healthcare costs and are taking a more active role in their healthcare decision making suggests outsourcing the important points of consumer contact is dangerous. Similar calculations need to be made every time an organization determines what to outsource versus what to keep in house. The lesson here is not that nothing can be outsourced, but that organizations need to think carefully about what core capabilities and skillsets will differentiate them from their competition, both now and in the future marketplace.