Cosourcing – A Proven Strategy for Healthcare Organizations
An Introduction to Cosourcing
The definition of cosourcing is having internal and external staff working together to complete the activities necessary to run a business. Why? Companies choose cosourcing as a middle ground to get the cost benefits and access to staff associated with outsourcing while maintaining control over data, processes, quality, and who is on the team. In the current cost and employment environment, everyone is considering alternatives. The reality is that the question for healthcare companies isn’t whether to cosource or outsource, the question is how to do it smartly, strategically, and in a way that aligns with the organizational goals, processes, and culture.
Outsourcing and Cosourcing Models
In the business process outsourcing market, there are two models to consider. The first model is traditional outsourcing, also known as service delivery. In a service delivery outsourcing model, companies outsource the complete provision of a service directly to a third-party vendor. The vendor manages the service from end to end and provides a final product to the buyer. This commonly happens with accounting, payroll, janitorial services, and some portions of the revenue cycle. In this model, the purchasing party has minimal visibility into who performs the work and how. Rather, there is only visibility of the end-product. In many cases, this is desirable as the purchaser doesn’t want to expend any time or energy managing those business activities. Janitorial service is a great example. Tax preparation is another example where complete outsourcing frequently makes sense.
There are with complete outsourcing many tasks however, especially at anything other than large scale. While vendors make big claims, who really understands your system, your processes, your staff, and your patients. Thus, to hire, train, and integrate staff in an external environment the process needs to be something with easy handoffs and defined outputs, like tax preparation. The other challenge with outsourcing is managing quality. Without direct view to the people doing the work, it is hard to trouble shoot and resolve problems. Account managers are always friendly, but rarely direct manage the operations team. Finally, most outsourcing services are priced per transaction or widget to the buyer. This always results in a higher price because it shifts the risk of volume variability to the vendor. In some cases, that is desirable, but it is never free.
The other model is cosourcing, also known as remote staffing, staff augmentation, and captives. In a cosourcing model, the vendor becomes a long term business partner that provides full time, dedicated employees to augment the buyers organization in whatever capacities are required. This model works great for organizations that need to find great people and lower their costs but understand the need to maintain visibility and control over both the process and the final product. There are three ways to build a remote team. The first is when the buyer is cost sensitive, has the management capacity to screen and hire, doesn’t care about IT, and the long term need is only 1 person or perhaps less than one person to augment their local staff. At this scale, many organizations choose to go through a company like Upwork or Fiverr. These companies are essentially global job boards for freelance employees, but do not provide HR, benefits, IT, or management services making it hard to build a long term team, manage computers and scale beyond a few employees. The second approach is for organizations looking to build a remote team larger than 500 employees. At this level the organization is likely large enough to justity the costs associated with creating its own offshore subsidiary, leasing space, and building a management and administrative team. This is common for Fortune 1000 companies like JP Morgan and United Healthcare, who have more than 10% of their workforce overseas. The offshore subsidiaries providing business services are frequently called captives.
The third approach to build a remote team is appropriate for most healthcare companies in the United States that need somewhere between 3 and 500 employees. At this scale, partner selection is incredibly important because the vendor essentially becomes part of your management team responsible for critical functions and decisions such as compliance, IT security, healthcare benefits, security, employee relations and so on. Like any good partnership, it starts with alignment of values and goals. The partner must recruit great candidates, help get them trained, implementation the facility and system access requirements, and provide the ongoing management support to be successful. These companies are the liaison to your virtual offshore captive and must be there every step of the way to make sure it is successful. Because of the breadth of services, the per person cost may seem higher than a global job board hire, but that ignores the administrative costs maintained in high cost local environments.
As a healthcare organization what should I outsource?
Many healthcare organizations think there is one way to outsource and that is medical billing and coding in a service delivery model. However, there are many other ways for healthcare companies to get the most out of outsourcing, streamline businesses processes, and improve productivity. Connext, which operates primarily in a staff augmentation model helps healthcare organizations with roles in:
- Billing
- Coding
- Credentialing
- Patient Service and Scheduling
- Accounting
- Nursing
One of specialty clients even has remote employees conducting virtual optometry follow ups. The possibilities are truly endless and the fact of the matter is, if someone can perform a task outside of your office, they can certainly perform it in another country.
The other positive of a staff augmentation model is the ability to build cross functional teams. In a traditional outsourcing model this doesn’t exist. If you want to outsource billing, you go to a medical billing outsourcing vendor and if you want to outsource customer service you, in most cases, have to go through a completely different vendor. In a staff augmentation model, given the previous scenario, you could build a team of billers, coders, customer service representatives, and accountants to serve different functions of your business. This is really ideal for organizations looking to improve productivity across functions and have long term outsourcing capabilities.
Let’s get down to it, the pros and cons
First we will start with the cons, well the perceived cons. I truly can’t think of anything negative to say about companies that outsource correctly, but there are some negative perceptions that deter organizations from taking advantage of outsourcing.
Perception #1: Outsourcing will get rid of our local jobs
What Really Happens: Outsourcing, when done correctly, creates more, higher paying jobs. There are two reasons for this. One, in almost all cases, outsourcing improves productivity in the organization which leads to more growth, more patients, and a need for more, local, customer facing employees. Two, outsourcing takes the burden of back office, administrative tasks away from the local staff. This allows them to focus on revenue producing activities and bring more value to the organization. This often improves both employee compensation and satisfaction across the organization
Perception #2: There are considerable PII security risk
What Really Happens: As mentioned before, someone performing medical billing in a different country is no different than someone performing a task from home in your local area. Additionally, in most outsourcing relationships outsourced employees are purely operating in the cloud. This means that they are operating in your systems, with your security and that zero data is held in servers outside of your office. Additionally, all outsourcing vendors have physical and cyber security measures in place to protect your data. Connext, for example, is SOC-2 certified, PCI-DSS compliant, has 24/7 physical security, conducts 3rd party background checks, does virtual screen monitoring, and installed biometric security at the office. This setup is more secure than most businesses in the United States.
Perception #3: I won’t find the talent I need offshore
What Really Happens: Companies find more talent than they could imagine offshore. Especially in the Philippines, there is an incredibly talented labor pool in healthcare. There are medical billing and coding specialists with years of experience at United Healthcare, Nurses with US Nursing Credentials, and customer service professionals with extensive backgrounds serving some of the toughest US markets. The talent is there. When most companies come to us, it’s not for the obvious cost savings, it is because they can’t find the talent they need to survive in their local market.
Now we get into the benefits of outsourcing and how it can be a catalyst for growth in your organization. First and foremost, outsourcing is a surefire way to solve critical staffing challenges. Almost 100% of the time when we receive a new client, it’s not because they are looking to cut costs (although that is a benefit) it is because they simply cannot find the talent they need in the current labor market and it is hurting their business. In addition, the outsourcing market is filled with employees who have years of experience with large US companies in their respective yield, more experience than you can find in the United States. How hard would it be for you to find a Senior CPA with 5+ years experience at a big four accounting firm, a friendly demeanor, and passion for the job in your local market? Probably hard. In the Philippines we can probably find that person, or someone similar, in under two weeks. Oh and not to mention that person is probably going to cost 50-60% less than they would in the United States. This creates a positive spiral. By moving administrative, back office tasks offshore and paying less for them, you can subsequently pay more for local, customer facing, revenue producing positions. The end result? Happier customers because they are being serviced without interruption by a friendly, local employee and happier employees because they are being paid more and don’t have to put in the extra hours on all that boring administrative stuff. Happier customers means higher retention rate and more incoming revenue and happier employees means less turnover and better local talent acquisition.
The second benefit of outsourcing is that it forces process improvement, management excellence, and accelerates companies towards digital transformation. In order for someone to perform a task in the office, there must be a process. How defined and detailed that process is, is really organization dependent. In order for someone to perform a task remotely, especially in another country, the process must be incredibly well thought out, defined, and codified. To outsource successfully you must have a detailed process map in place for whichever task you want to outsource. We run into this all the type with clients and it is imperative that we work with them to streamline their process before bringing on an offshore employee. The result is a more efficient business process for both the offshore staff and the local staff, which ultimately leads to more efficient and productivity.
Managing employees is hard. Managing remote employees is even harder, and managing remote employees in another country is incredibly challenging. Your managers will be pushed to manage more effectively than they ever had before, thus driving management excellence in your organization. We don’t only see employee and organizational improvement when working with our clients, we also see daily improvement of the client’s managers. The way they interact, the swiftness of their decision making, the ability for them to diagnose issues, and the way they provide feedback to our employees. It’s an awesome thing to see. This, like the business processes, has the ability to spread throughout the organization and create general overall management practices for an organization.
Lastly, the acceleration toward digital transformation. This seems like a scary term, but very simply it means organizations that outsource typically tend to think more progressively about staffing, automation, and technology as a result. A few of our clients have started outsourcing a function and then sought to automate it through robotic process automation once they had the process nailed down and working effectively. Those clients then gave their outsourced team more complex tasks and they started performing, as a whole, at a higher level because they were more productive and more efficient. Because outsourcing forces process inspection, analysis, and improvement it is a natural gateway into other, emerging technologies such as robotic process automation and artificial intelligence than can create a step change in your organization.
Outsourcing is a fantastic way for healthcare organizations to solve critical staffing challenges, scale operational capacity, improve productivity, and create a Positive Spiral. If outsourcing seems like a good fit for your organization, the next step is choosing a vendor that aligns with your organizational goals and culture. In the next part of this series we will explore how to choose the right outsourcing vendor for your organization and the top 5 mistakes companies make when selecting a partner.