Are Outsourcing Services Right and Cost Efficient for Hospitals?

By  //  August 10, 2020

Although outsourcing services have been a part of doing business for a long time now, the medical industry shied away from it. It’s difficult to say whether it was due to the nature of the industry – personal and trust-based, or just simple resistance to change.

Although outsourcing services have been a part of doing business for a long time now, the medical industry shied away from it. It’s difficult to say whether it was due to the nature of the industry – personal and trust-based, or just simple resistance to change.

However, in recent times, hospitals have begun to warm up to the idea.

The pressure to deliver high-quality healthcare despite increasing healthcare costs is part of what has driven hospitals to consider outsourcing businesses. Used in this context, outsourcing means to give someone or a company the jobs or responsibilities that would normally have been handled by the parent hospital.

There are a couple of things that hospitals must think through before deciding on whether they want to outsource or not. Here they are:

• The reasons why they need to outsource

• The combination of tasks that need to be outsourced without adversely influencing the hospital’s financial books

• Imminent challenges that will happen after the outsourcing has taken place

• The best way to go about finding an outsourcing company

Types of Services That Can Be Outsourced in a Hospital 

Theoretically, all services in a hospital can be outsourced. The exact combination of outsourced services in hospitals differs from place to place. In practice, there are two broad classes of services that hospitals outsource:

• Clinical services: This typically includes both medical and technical departments in the hospital. It includes laboratories and other investigative services. Dialysis, radiology, and other treatment procedures are classified under clinical services that may be outsourced. It also includes therapeutic interventions like physiotherapy, rehabilitation and speech therapy, and support services like pharmacies.

• Non-clinical services: These are services that don’t directly affect the healthcare of the patients. Information technology, billing and payment systems, data management, and cloud computing are some of the things that are handled under non-clinical services. Hospital infrastructure management like procurement, maintenance, cleaning, and waste management are also typically considered for outsourcing. Click here to read more about medical waste disposal outsourcing.

Benefits of Outsourcing Services at Hospitals

Outsourcing services wouldn’t be so popular with hospitals if there was no significant benefit attached to it.

We’ll be looking at some of the top reasons why hospitals keep looking to outsource their services:

•  Reduced administrative overhead: Cutting cost is one of the most alluring benefits of outsourcing. A hospital ceases to pay administrative expenses on services after they have secured them. The administrative course becomes the responsibility of the company that was outsourced to. Administrative overheads are a very significant portion of the cost that any hospital has to pay, so being able to shed that financial burden is always welcome.

•  Enhanced profitability: Healthcare businesses usually have minimal margins. Being able to save money on outsourcing money-draining operations can substantially increase profits for them. 

•  Better focus on specialization: The core service of a hospital is to be able to attend to patients. When medical practitioners are burdened with administrative tasks, it can take away from their focus and also increase stress levels. With outsourcing, these medical practitioners get to direct all their attention to the needs of their patients and provide excellent care.

•  Improves patient experience: Since the medical staff can give their full attention to their patients, it’s normal that the patients enjoy more considerable and more personal care. This will improve the patient’s experience and boost the hospital’s goodwill and public image.

•  Lowers cost for hiring staff and training them: While the cost on individual hires will remain the same, the hospital’s budget for hires will drop significantly after signing an outsourcing partner. Just as with administrative expenses, the contracted company is responsible for everything related to that service, including hiring, training, and retaining employees. 

• Gives you access to a talented workforce: Even though your hospital won’t be hiring, you’ll still have access to locum providers with a very gifted workforce if you outsource to the right companies. If the hired company is professional, they will have a skilled workforce that can take on complex tasks around the hospital. Being able to surround yourself with excellent working hands provides an all-around boost to morale in the work environment.

Challenges Associated With Outsourcing Hospital Services

As with any venture, there are detractions to hospitals outsourcing their services. The healthcare industry was slow to adopt the outsourcing model due to some of these problems, which can be devastating.

Here are the most critical challenges hospitals can face when outsourcing:

• Quality assurance: The first challenge that hospitals will face with outsourcing is that the quality of the service may not meet their required standard. Because it’s a new venture, there will be differences in expectations between both parties. This difference in opinion will be smoothed out over time as you continue to work together. Notwithstanding, you’ll need to define the scope of the work and the critical performance index you’ll be using to grade the work.    

• Control issues: Another challenge you’ll face is the lack of control over so many problems. Since the two companies are independent of one another, you won’t be able to exert control over the personnel and resources, even when they’re in your vicinity. 

Perhaps what’s most worrisome is the potential of being left in limbo after an expired contract. Such a situation can lead to a noticeable disturbance in the hospital workflow.

Unexpected or unwanted interruptions in the workflow can be a nightmare situation in an industry that’s people-intensive.

• Data breaches from third parties: This risk factor is highest with companies hired to handle tech on behalf of the hospital. In 2018, over 15 million patients had their records stolen. Although the risk of being hacked is still there when the tech is handled internally, the risk is significantly higher when third parties are involved. It’s crucial for hospitals and third-party outsourcing partners to beef up the security on their patient’s data in compliance with HIPPA regulations. 

Things to Consider When Outsourcing for a Hospital

You’ve decided to go through with it and outsource certain services within the hospital. While there are no laid down rules for how to go about your outsourcing, it helps to have a process you can rely on.

You’ll likely have to talk to multiple vendors, having a system to compare them against is vital to help you decide on which one benefits your interests more:

• Talk to various vendors. Even if you already have someone in mind that you want to do business with, it still pays to talk to a number of potential partners. Some organizations will have better than others or even better terms of the agreement. It’s better to have multiple vendors you can compare against one another before making a decision.

• Conduct rigorous interviews. While talking to the different vendors, your aim should be to figure out the best fit for your needs. To do this, you’ll have to engage in a rigorous interview process. Lay out your expectations, listen to their terms, and try to reach a consensus that makes sense for both parties.

• Ensure that the terms of the agreement are clear, detailing the responsibilities of both parties. The bottom line of the agreement should be mutual collaboration.

• Assign a liaison officer from the hospital to deal exclusively with all outsourcing firms you’ll be working with. The person will be in charge of communication and ensuring compliance on both ends.

• Decide if you’ll be taking a long-term outsourcing contract or a short one. 

• Secure the livelihood of your old staff. Outsourcing companies are often required to hire back around 70% of your hospital’s staff that previously worked in that section. It will be up to the person in charge of negotiations to determine just how many people are kept in employment.

• Determine the necessary performance index that will be used in assessing the outsourcing firms. It’s important to keep track of whether working with a firm is actually saving the hospital money or not. You’ll also want to track how their work improves the business from a non-financial standpoint.

• Identify if the outsourcing firm can help with issues raised in the Patient Protection and Affordable Care Act like patient safety and satisfaction. If they can, then they can help improve your brand image.

• Set up accountability channels through which you can perform comprehensive audits of the activities of your outsourcing partners. 


Whether outsourcing is for your hospital or not depends on your immediate needs. If you’re in a tight place moneywise and need something to lighten up your wage bill and overhead cost, then it might just be the thing for you.

That said, the challenges associated with outsourcing can be pretty disastrous for the hospital if things don’t go well. You should only proceed to outsource a job if you’ve done all you can to mitigate the potential pitfalls.