Simple Strategies to Boost your Savings from Outsourcing

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Ideas for putting away more money every single day. An HE Report


You have given up control over the kitchen of your hospital and mastered the art of outsourcing by bringing in an international coffeehouse chain. You have also hired experts to do blood sample testing, dialysis as well as  CT scan. Now it’s time to make sure that the money you are saving from outsourcing is added to savings.

Here are some of the best ways to do it.

Outsource non-core functions

“Many hospitals, especially new hospitals work on a revenue-share model, with their imaging partner, so for the hospital, there’s always positive margin,” says Dr. Vidur Mahajan, Associate Director of Mahajan Imaging, a chain of medical imaging centres. “If an entrepreneur sets up a  400-bed hospital, the long-term financial success of the radiology department is more or less sure. However, for a smaller hospital, investing 25 crores for setting up a radiology department is a significant investment. The management can add 25-30 beds with that money. The financial upside is that the hospital does not need to spend its own money and worry about the department’s profitability in the short term,” he explains.

Dr. Mahajan also points out that if an MRI machine stops functioning in a tertiary-care hospital, then the hospital machinery comes to a stand-still. "Having a partner, who is doing only one specific function is very helpful because they can access benefits of having a network. One has multiple departments in the same city, so even if a machine stops working or doctors go on leave, it’s easy to cover up. We have 45+ doctors on our roll, and if few doctors go on vacation, there is enough bandwidth across the city to cater to that. In case of a hospital without outsourced radiology, if out of 5 radiologists, two go on leave, then the hospital will be adversely affected."

Buy Expertise

One of the most expensive resources for a new hospital is super-specialists. So it’s essential to tie-up with partners who offer the latest technology, costly tests and experts. Dr. Mahajan agrees that outsourcing can not only make life simpler for CXOs and but also painless. "Partnerships with established brands give an edge to a new hospital. There are several stand-alone chains like Centre for Sight who successfully runs ophthalmology centres in hospitals. As soon as you get into a partnership with a company, you also get access to their team of super-specialists. In our team, we have a breast imaging expert, she sits out of one centre, but she oversees the work of all. However, for a hospital, it doesn’t make sense to hire such an expensive super specialist. A radiology chain might hire the costly resource due to the scale of the company."

Choose business models carefully.

To gain a better understanding of outsourcing, understand the various business models of your industry. Revenue sharing is the most popular business model today in the Indian healthcare industry. The hospital collects the money from the patient and shares it with the outsourced entity. There are also other instances where the hospital becomes a joint-venture partner with the company. At times, even manufactures get into a partnership with a hospital. By and large, it's still a very traditional sector. " There are several new business models in the healthcare sector like PPP. Even though, it still in a very nascent stage compared to hospitals in the US. For a CXO, running a hospital in the US  is a lot more profitable than India. From a profitability standpoint, hospitals face many problems in India. There are a lot of international players trying to enter the market, but it is doubtful, whether the Indian market will reach the stage of US healthcare any time soon," explains Mahajan.

Never outsource services which have a direct impact on Patient Experience

Closer a service is to the patient, the higher the likelihood of impact on patient experience. So consider outsourcing services, which doesn’t have a direct effect on the patient. According to Dr Saurabh Lall, Head of Hospital Operations, Max Healthcare - Pitampura any hospital has limitations to bandwidth and with their limited resources want to achieve operational excellence through optimisation of resources. “We want to focus our efforts to provide best medical services to the patient which is what we do best. A hospital might as well outsource these functions to someone whose core business is security/housekeeping and hire an employee to oversee the function. This way the focus on every aspect of patient care improves due to the attention to detail paid at every level.”

He also notes that cost optimisation remains the most critical reason for outsourcing as there are direct savings involved in it. “It also helps to improve productivity and competitiveness, because the vendor always gives you a replacement even in the eleventh hour. It is better to stick with a single vendor for a particular service, across all hospitals, as big hospital chains have fixed SOPs for vendors. Most of the corporate hospitals don’t outsource front-end services, because it involves direct patient management & is coincident with brand ethos. At times, smaller stand-alone hospitals tend to outsource departments like Ophthalmology and Dermatology as they save operational costs & bandwidth. However, for a big brand, it is always about the wow factor, and the cost-benefit analysis forces them not to outsource their primary services. We usually partner only with players with NABH/NABL accreditation and sign MOUs with them to ensure consistency of quality in their facilities. At times, when we are a little sceptical, we also have penalty clauses attached to it. We have enough checks and balances in place that in case there’s an issue, a red flag is raised using our IT infrastructure, and we immediately address that issue. We have a hub and spoke model. In each zone, we have secondary care and a tertiary care hospital which is within a few kilometres of each other. If a patient needs any service that is not available in the secondary care hospital, the hospital shifts the patient to a tertiary care hospital through well-equipped ambulances.

Stay Connected to your Outsourced Departments.

To achieve long-term saving goals, it is crucial that the management stays on top of operations. Partial outsourcing of equipment is another model that works in healthcare because the hospital can enhance services to the end user beyond what has been budgeted, says Lall. “It makes sense to outsource selected backend functions so that the hospital can focus more on its core functions of providing quality healthcare. If you take Imaging, for instance, many hospitals prefer an operational lease model, where a reputed company provides the equipment & maintains it well as per laid down quality standards, but the hospital runs operations and medical services because that is a critical area. Even in the case of hospitals which outsource end-to-end operations to a partner, the management retains heads of each department on their rolls.  Many hospitals outsource their food and beverages department, but they always keep the head of F&B department on their rolls, so that quality of food, calories provided to patients are in line with their clinical standards” he explains.