Is Outsourcing Bad For Health Care Communities?

As health care organizations deal with increased competition and regulation…the bottom line often determines the strategy and vision of an organization. These elements are extremely crucial in health care as it relates to outsourcing financial transcations, complex processes and minor clinical processes.

In a feautre story in Health Data Management (July, 2006), Author Joseph Goedert examines the effectiveness of an Indiana health maintenance organization (HMO) outsourcing efforts. Four years ago, Indianapolis based M Plan outsourced the core of its’ payer information systems, which included processing claims and other related transactions. Unlike other organizations that reach out to international organizations for this particular endeavor, M Plan referred the services to California’s TriZetto Group.

Four years ago, members in the healthcare community [including myself] would not have imagined the mere suggestion of outsourcing [these types of sophisticated processess], due to the negative perception that outsourcing (in general) has received. As with any other industry, positive public perception is vital to the success of an industry and health care should not be excluded from this scenario. Apparently, there are some benefits to be gained and the health care community has begun to realize the net gain of outsourcing some procesess.

For example, M Plan executives wanted to ensure that they were getting the best bang for their buck, so the contract that was signed with TriZetto Group Inc., included some caveats. Service level agreements or (SLAs) are specific expectations of performance metrics requested by the client. In our case of M Plan, there was a particular concern of help desk requests and the timeliness of processed transactions. This particular segment of story is what really caught my attention.

“Historical views of outsourcing have presented barriers to its success. CFO’s fear the loss of control. They are concerned about the confidentiality and security of thier company’s information. (Geller & Company).” It is my view that this observation is very much alive in the health care community. Health Insurance Portability and Accountability Act of 1996 (HIPPA) may have also added to this increased anxiety when considering outsourcing. Not too mention the recent security fiascos at Bank of America, Dept. of Veteran Affairs and Citigroup.

Is outsourcing bad for health care communities? In my opinion, yes and no. In relative terms, if a client [M Plans] have specific metrics, action plans, contigency plans, risk models and an open line of communication with their outsourcing stakeholder [TriZetto]…then I would suggest that outsourcing has significant benefit. Moreover, outsourcing allows for healthcare practioners to come out of their respective silos and become exposed to other industries, lines of business, methodology and business stragey.

In contrast, I also believe that outsourcing has it’s consequences. Particularly in health care. Even though outsouring is not necessarily a new endeavor for health care [temporary staffing needs] Health care is a complex business, when examining a plethora of sub processes in an engagement. In M Plans case, processing of its’ members claims is probably the most crucial element of the SLA. What would happen if stakeholders were not on the same page in terms of operational definitions or what a particular process actually means? What would happen if TriZetto did not understand the importance of relative value units (RVU’s) as it relates to the market? Not too mention the overall customer satisfaction of the client.


Centers for Medicare and Medicaid Services. [Online]. HIPAA – General Information. Retrieved July 19, 2006 from http://www.cms.hhs.gov/hipaageninfo/01_overview.asp?

Corbett, M. (2002). Outsourcing and the Strategic CFO. How Midsize Company CFOs can Use Outsourcing to Become More Strategic. An Executive Paper Written by Geller & Company. Retrieved July 19, 2006 from http://www.gellerco.com/docs/Outsourcing_CFO.pdf

Goedert, J. (July, 2006). Measuring Outsourcing’s Effectiveness. Health Data Management: 14 (7)pp. 50-57.

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