An Introduction to Co-sourcing in Healthcare
The definition of co-sourcing is having internal and external staff working together to complete the activities necessary to run a business. Why? Companies choose co-sourcing as a middle ground to gain the cost benefits and expertise associated with an outsourced staff while maintaining control over data security, business process, and quality, while not losing the benefits of tribal knowledge. In the current cost and labor availability environment, many companies are considering alternatives. The reality for healthcare companies, for example, isn’t whether to co-source or outsource, it is how to do it smartly, strategically, and in a way that aligns with the organizational goals, processes, and culture.
Outsourcing and Co-sourcing Models
In the business process outsourcing (BPO) 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. Tax preparation is great example where complete outsourcing frequently makes sense.
Outsourcing vendors make big claims, however, who really understands your system, your processes, your staff, and your patients or customers? To hire, train, and integrate staff in an external environment the process should be something with easy handoffs and defined outputs, much like tax preparation. Another challenge presented by 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, time increment 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 co-sourcing, also known as remote staffing or staff augmentation. In a co-sourcing model, the vendor becomes a long-term business partner that provides full time, dedicated employees to augment the buyer’s organization in whatever capacities are required. This model works well for organizations that need great people, lower costs while simultaneously needing 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 and manage 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 justify 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 building a remote team is appropriate for many healthcare companies in the United States, needing 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 culture, values and goals. The partner must recruit great candidates as you would define them, facilitate or co-facilitate their training, accommodate your facility and system access requirements, and provide the ongoing management and HR 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 would not be when full administrative costs are considered. In fact, these partners usually base their operations in high availability/low-cost labor markets for the primary purpose of lowering your relative expense of employment.
The figure below is an excellent depiction of different outsourcing models and where companies fit based on their organizational requirements.
Functions for Healthcare Organizations to Co-Source
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 co-sourcing model helps healthcare organizations by supporting:
– Eligibility Verification
– Patient Service and Scheduling
– Remote Nursing
– IT Support
Healthcare outsourcing opportunities are far more extensive than many realize and if someone can perform a task outside of your office, it can be performed virtually and globally.
A Co-sourcing approach also allows organizations to build cross functional teams, which is not an option in the traditional outsourcing model. If you want to outsource billing, you go to a medical billing outsourcing vendor and if you want to outsource customer service you, in many cases, must go through a completely different vendor. In a co-sourcing model, you could build a team of billers, coders, customer service representatives, and accountants to serve different functions of your business. This is ideal for organizations looking for a team of experts to improve productivity and streamline processes across different business functions.
Negative Perceptions Surrounding Outsourcing
Outsourcing generally ads a lot of positive value to an organization but there are 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 another country is no different than someone performing a task from home in your local area. You have simply shifted the worker’s home to a lower cost location. 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 experienced 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 many 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. The Philippines, for example, has an incredibly talented labor pool in the healthcare industry and supplies many doctors and nurses to the US. It follows that there are medical billing and coding specialists with years of experience at companies like United Healthcare, Nurses with US Nursing Credentials, and customer service professionals with extensive backgrounds serving US markets.
Positives of Co-Sourcing
Co-sourcing can be a catalyst for growth, process improvement, and overall productivity increases. First, co-sourcing is a surefire way to solve critical staffing challenges. Almost 100% of the time when we receive a new client, it is not because they are looking to cut costs it is because they simply cannot find the talent that they need in the current labor market, and it is creating a business distraction. In addition, the outsourcing market is filled with employees who have years of experience with large US companies in their respective field, in many cases, 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 of experience at a big four accounting firm, a friendly demeanor, and passion for the job in your local market? Most likely challenging. In the Philippines it is far easier to find that person, or someone similar, in under three weeks, at less than half the cost of a local employee. 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. Typically, this results in a better outcome for both the customer and your employees.
The second benefit of co-sourcing is that it forces process improvement, management excellence, and accelerates companies towards digital transformation. For someone to perform a task in the office, there must be a process. How defined and detailed that process is, is organizationally dependent. For someone to perform a task remotely, especially in another country, the process must be incredibly well thought out, defined, and transferable. To outsource successfully you must have a detailed process map in place for each task you want to outsource. We experience this quite often with clients and have gained expertise in managing them through it. It is imperative that we work to streamline a transferred process before moving it offshore. The result is more efficient collaborative business practices affecting both, the offshore staff and the local staff. This ultimately leads to more a more fluid business outcome.
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 to before, thus requiring higher levels of management excellence in your organization. At Connext, we do not only focus employee and organizational improvement from the standpoint of our clients, but we also see continuous improvement of the managers we assign. This includes their level of client engagement, the swiftness of their decision making, the ability for them to diagnose issues, and the way they provide feedback to assigned personnel. This, like the business processes, can spread throughout both partnering organizations and create a competitive strategic advantage for our client.
Lastly, there is an acceleration toward digital transformation. This seems like a scary term, but, very simply, it means that outsourcing organizations tend to think more progressively about staffing, automation, and technology. It is our business. A few of our clients have even asked up to develop robotic process automation solutions rather than long-term staff dependency. Those clients were then able to assign their outsourced team more complex tasks, optimizing their investment. , Modern outsourcing forces process inspection, analysis, and improvement, becoming a natural gateway into emerging technologies such as robotic process automation and artificial intelligence.
In conclusion, 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.