Outsourcing is ‘In’

Outsourcing is ‘In’

Outsourcing diagnostics, payroll, medical records management, billing or soft skills are the newer trends in the healthcare industry, finds Sonal Shukla

A couple of months back, Wockhardt Hospital, Mumbai took the strategic decision to outsource its payroll activity to Mafoi, a leader in handling HR solutions for a range of industries. The key decision has saved manpower and time for the Hospital as the central HR team at Bangalore can collate the data and send it for further processing to the vendor company (Mafoi). The result is that the HR team is able to concentrate on other important aspects.

Wockhardt is not alone. Care Hospital, Hyderabad has also outsourced its payroll activity as a pilot initiative and plans to make it permanent after examining its viability. “We also plan to outsource our training and development needs, especially soft skills,” states Dr Krishna Reddy, CEO, Care Hospital, Hyderabad. The Hospital is also contemplating outsourcing managerial skills requirements of its doctors. Mumbai’s Dr LH Hiranandani Hospital has a tie-up with the University of Sydney in Australia to train its nursing staff. “The training improves their grooming skills, leadership qualities, and clinical competence,” says Dr Akash Rajpal, Senior Manager, Medical Services, Dr LH Hiranandani Hospital. From Billing to Transcription

The newer trends of outsourcing do not end with HR payroll and soft skills. Today, hospitals outsource services like billing, revenue cycle management (RCM) for credit billing, back-office work, medical records storage (electronic and hard copy), patient records transcription or medical transcription and diagnostic facilities.

“In future, we plan to outsource our training and development needs, especially soft skills”

– Dr Krishna Reddy

CEO Care Hospital


“Outsourcing of billing activities will lead to greater transparency of the healthcare system”

– Deepak Mendiratta

MD Health and Insurance Integrated

New Delhi

Medical Records: The burgeoning growth of medical records means a crunch for physical space. To deal with the issue, hospitals have started to store records offsite, in the custody of specialised agencies offering foolproof protection from earthquake, fire and flood. According to experts, this activity is more storage activity rather than outsourcing. However, there is no denying that it saves physical space for the hospitals, especially in India where there is no precedence in the law for the legal acceptability of electronic records.

“Outsourcing medical data facilitates collation and digitisation of information from multiple sources—maximising information access to the patient and practitioner, giving secure, long-term storage of medical records, minimising cost of storage and sharing information globally and minimising cost of travel,” says an official at Writer Information Management Services, Mumbai, which provides end-to-end solutions for collation, indexing, specialised packing, customised storage and online retrieval of information and secure destruction of records.

Insurance: In the insurance-payer market, a new cadre of RCM experts takes care of the credit cycle management for hospitals. They work as an important link between the hospitals, patients and the payers by aiding the hospital interest—by helping the patient to get approvals by following it up with the payer. “The hospital has to get the authorisation for the patient issued by the payer who can be anyone from an insurance company to a Government organisation, a bank or a PSU. The work involves taking care of anything and everything in the credit cycle stage—from the moment a patient walks into the hospital to getting his approvals, assisting in claim documentation, filling and following it up with the payer,” explains Deepak Mendiratta, MD, Health and Insurance Integrated, New Delhi. Thus, the RCM experts help to greatly reduce the working capital requirement of the hospital. The trend is growing with many hospitals taking assistance from these experts. According to Mendiratta, in the next two to three years, they will drive at least 30 per cent of the market.

Billing: Outsourcing the billing activities of the hospitals is more common in the West than in India. With the BPO industry booming in India, a high rate of attrition is seen in the staff, especially recruited for billing activities. To control this turnover, hospitals today are exploring the options of outsourcing billing activities. “The trend of outsourcing billing activities by the large corporate hospitals will lead to greater transparency of the healthcare system. We are in discussions for managing billing and front office for a few Indian hospitals,” explains Mendiratta.

Clinically speaking: Amongst the latest outsourcing trends are high-end diagnostic tests. Hospitals also prefer to outsource the entire management of laboratories to leading players in the market. Madras Medical Mission, Chennai (MMM) has outsourced its clinical unit, the Institute of Liver and Digestive Diseases to Chennai Transplant Centre (CTC). CTC operates from the premises of MMM and provides professional services in the areas of general surgery, multi-organ transplantation and gastroenterology. Revenues are shared between CTC and MMM. This has given the Hospital the required skilled professionals, a ready-made brand like CTC and ready-made infrastructure. “We are able to use the surplus space in our premises to extend new support services to our patients. CTC has also invested in core technology like operating instruments required for renal transplants. Thus, we are able to focus on cardiac and reproductive medicine which are critical areas in Chennai,” says John Punnose, CEO, MMM.

Hubli Diagnostic Centre in Karnataka, promoted by doctors having their own hospitals set-ups, has invested in diagnostic and laboratory services. On the clinical side, some pathological tests are outsourced by the Centre, mainly because of low volume and high cost of machinery and overheads.

“In the long run, outsourcing is definitely a win-win situation for healthcare organisations”

– Dr Chinnappa Metgud
Chief Administrative Medical Officer Manipal Goa Hospital


“After outsourcing diagnostic tests, we are able to use the surplus space to extend new support services to our patients”

– John Punnose CEO

Madras Medical Mission, Chennai

Other Avenues

At present, hospitals also outsource the recruitment of nursing staff to agencies. These nurses are commonly known as bureau nurses. Private nursing firms provide these nurses to hospitals at crunch time. According to Amit Singh, Manager, General Administration, Wockhardt Hospital, Mumbai, with the new infection control norms, the Central Sterile Services Department (CSSD) requirement for sterilised OT instruments is becoming stricter. Moreover, the sterilisation process is a very costly affair. “The future trend in this area will be a group of hospitals coming together and making this function available more economically,” he opines.

Manipal Goa Hospital (MGH) has sourced bio-medical equipment maintenance and facilities and ancillary operations respectively to MNE Technologies and Manipal Servicecorp Facility Management (MSFM), a Bangalore-based organisation. “It is difficult for the manufacturers and suppliers of medical equipment to have trained technical manpower deputed at all their installation sites due to the costs involved. Thus in-house engineering support becomes all the more imperative for healthcare facilities and hospitals,” opines Venkatesh Kumar VN, CEO, MNE Technologies & MSFM, Bangalore. The Hospital is also outsourcing biomedical waste management (BMW)—an expensive affair to deal with if done in-house. “Today, almost every hospital can be seen outsourcing BMW management. Very few hospitals like Kasturba Hospital, Manipal do it in-house,” explains Dr Chinnappa Metgud, Chief Administrative Medical Officer, MGH.

Short-term benefits: Shrinking time-lines in project executions, proved efficacy, better cost management, avoidance of additional expenses, sharing and managing risks, adding value expertise & technology, measurable performance, overcoming resistance and negative attitudes.

Long-term benefits: Focus on core strengths, benefiting from others’ core strengths, uniformity of quality, stability of services.

Disadvantages: Dependency, lack of control, unpredictability, occasionally higher costs, lack of alignment with overall strategy and culture.

Not Just Clinical

When it comes to laundry, food and beverage, security, maintenance and housekeeping services in non-clinical areas, outsourcing has been quite common. “Whether it’s through the avenues of food and beverage or facility management, hospitals are outsourcing these vital components of their new business models to the players with core competencies in this field—the hospitality industry,” says Parth Rawal, General Manager (Administration & HR), ALL Services (India) which caters to leading hospitals in Mumbai for housekeeping, patient care services and office support services.

The current labour laws and other overheads make the cost of providing in-house services for laundry, kitchen and housekeeping high, necessitating outsourcing of non-clinical services in a hospital like Mumbai’s Jaslok Hospital. “We have outsourced laundry because the in-house cost of washing linen was Rs 18 per item whereas after outsourcing cost has come down to Rs 5.50 per item, leading to net saving in lakhs every month,” explains Col M Masand, Chief Executive Officer, Jaslok Hospital. Like Jaslok, the Wockhardt Group has outsourced food and beverages. While the customer usually bears the cost for establishing a food and beverage service in-house, by providing both space and equipment, the laundry service can just as well be placed away from the hospital. “There is obviously a lot of savings in capex if the laundry service can be located in an area where real estate is cheaper. Further, the vendor can use the same equipment to service multiple clients,” says Dr Lloyd Nazareth, Associate Vice President, Wockhardt Hospitals, Bangalore.

Care Hospital is currently outsourcing housekeeping and security, and is considering outsourcing training and development functions for various cadres. Outsourcing has also reduced the burden on HR, leaving them free to focus on the skilled workforce.

Volume Wise

Volume plays a vital role for hospitals in deciding whether to outsource activities like diagnostic tests. In lab tests, certain kits once opened must be utilised to process. There are certain tests which are rarely done, for example thyroid profile, a high-end test, whose kit once opened has to be completey utilised.

“For specialised tests like genetic, molecular biology and flocytometry which require large investment and high technical expertise, and where the hospitals don’t have the volume, they send it to diagnostic labs like us. We collect the volumes from many hospitals across India providing service at cheaper rates,” says Ameera Shah, Executive Director, Metropolis Clinical Laboratories, Mumbai.

Size Matters

The size does matter as outsourcing is observed as an effective option for smooth functioning of the administration of bigger hospitals. It also keeps their standard of services high. If the hospital is small it needs to go in for outsourcing the clinical aspect also because putting up CT, MRI and cath lab are not financially viable.

Tertiary care hospitals like Jaslok Hospital do not need to outsource clinical services for every treatment available under one roof. Some pathology tests of the hospital are outsourced as in-house they are not cost-effective. The samples are sent to other hospital labs like Hinduja Hospital and independent labs like Metropolis Clinical Laboratories.

Wockhardt Hospitals does not believe in outsourcing clinical services (like nursing and diagnostic) and customer care. Most clinical services are preferred in-house. Says Dr Lloyd Nazareth, Associate Vice President, Wockhardt Hospitals, Bangalore, “These form our core functions and hence we prefer to manage them ourselves with full-time staff. We normally try to run all the clinical services ourselves, while we outsource others where we believe outside agencies have the necessary capabilities and scale to provide good services. Even for these services, full-time staff on our rolls provide most of the supervision and oversight.” “We do not prefer to outsource labs, diagnostic tests or pharmacy as these constitute high margin profit centres of any hospital,” echoes Dr Krishna Reddy, CEO, Care Hospital, Hyderabad. Another reason hospitals keep away from outsourcing activities like pharmacy is to avoid the menace of spurious drugs.

“I would not like to outsource security for the obvious reasons. Security must be accountable and it can only be accountable when it is not outsourced,” opines Col M Masand, CEO, Jaslok Hospital, Mumbai.

Better Efficiency

“In the long run, it’s a win-win situation as return on investment (ROI) is assured, affordable high-end services are made available to customers and resources are utilised optimally,” opines Dr Metgud.

Outsourcing the services in healthcare industry, as in other industries, serves the purpose of enhancing the business and efficiency of the hospital services. “In order to improve efficiency and quality of patient care, hospitals need to look at outsourcing as a viable option. They can especially outsource their non-core services,” says Dr BK Rao, Chairman, Sir Ganga Ram Hospital, New Delhi, which outsources diagnostic services like CT scan, MRI, Nuclear Medicine, besides the conventional ones like housekeeping, laundry and security services.

Outsourcing relieves the burden of administration, procurement, accounting, logistics and all other responsibilities from the management, resulting in savings of indirect cost related to these functions. Manipal Goa Hospital currently spends Rs 3 lakh every month on outsourcing. Earlier, before choosing the outsourcing path, the Hospital spent Rs 2.5 lakh on managing the activities itself.

“Even though there is an increase on spending, now we are not only able to save on time, but activities are conducted in more professionalised manner, resulting in better bed turnover rate, reduction in Average Length of Stay (ALOS) and increase in patient satisfaction,” opines Dr Metgud.

Not Yet Refined

There are yet scores of unanswered questions and issues that need to be solved for the outsourcing industry to take off and make significant headway in India. The responsibility of any slackness of services by the vendors rests with the hospital, as they are finally answerable to the patients. This problem can be surmounted at the initial stages itself by choosing the correct vendors. According to experts, the hospital should be very clear about which activity to outsource, why it should be outsourced and the end objective. Also important is analysing the benefits in advance and not outsourcing just for the sake of outsourcing. Moreover, all these aspects should be very clearly defined while making a service level agreement with the vendor to avoid unplanned costs later. It is also important that the management continuously trains outsourced personnel.

Consensus suggests hospitals must have a good system of monitoring outsourced services with supervision by full-time staff of the hospital.

The vendors themselves are today facing a fairly high manpower turnover leading to inconsistent quality of service. There is also an added risk of vendors trying to cut corners, impacting quality. Older established hospitals like Jaslok face many limitations in outsourcing because of labour laws and unions. “To overcome it effectively, the Government must change labour laws to help the healthcare industry,” opines Col Masand.

According to Dr Reddy, hospitals should prefer outsourcing when they do not have the expertise or they cannot handle the workforce. “In my view, more than 90 per cent of the newer hospitals are capital-intensive and would want to outsource,” opines Dr Rajpal.