Core competencies: With options, outsourcing enables plans to evolve

April 1, 2008

Few words have become as vilified as "outsourcing." For some Americans, it might bring to mind low-paid and poorly trained workers working at an overseas call center. As competition and cost pressures worsen and the talk of recession continues, outsourcing is becoming an increasingly attractive option for healthcare payers. When done correctly, it can be both efficient and cost-effective. Despite popular belief, outsourced work doesn't have to go overseas; in some cases, the work can go across the city, or even across the street.

"The goal is not to aggressively cut people and relocate their jobs to another country...That is one of the things that gave the concept of outsourcing such a negative image," says Minalkumar Patel, MD, MPH, a former health plan president and COO.

Two areas that health plans have long been outsourcing are disease management and the pharmacy benefit. While return on investment is always a hotly debated topic and many still have their doubts about the validity of such studies, there's no question that outsourcing has helped a number of payers around the country operate more efficiently by allowing them to focus on their core competencies while delegating the other tasks to business partners.

While technology continues to develop at a breakneck pace, plans need to re-evaluate who they are today and who they want to be tomorrow, according to Don Hall, a principal with the Denver-based consultancy DeltaSigma, a former plan CEO, and an MHE editorial advisor.

"Obviously, technology is one of the primary drivers of outsourcing in healthcare, but outsourcing can be a viable option for just about any function or department, depending on the company," he says, adding that some plans even outsource their executive management positions, including COO and CFO. "Executives at plans should ask themselves, 'What do we do best? What do we consider our core competencies?' Outsourcing is a potential option for everything that doesn't appear on that list."

Finally, just because a certain business function is outsourced at one point doesn't mean the change has to be permanent. In early 2000, the Philadelphia-based AmeriHealth Mercy family of companies brought its previously outsourced pharmacy benefit coverage back in-house once company leaders realized they themselves were better able to design clinical programs that addressed the specific needs of its Medicaid population. In a complete turn of events, a host of other companies now outsource their PBM services to AmeriHealth Mercy, which now covers 1.2 million Medicaid and Medicare Part D members.

Some don't believe the term "outsourcing" is appropriate any more, opting instead for "smart sourcing." One such company is Care Management International (CMI), which is based in Hoboken, NJ, and led by Dr. Patel who is the CEO. CMI provides individual and population-based care management programs. While the company does have two satellite offices in India, the goal isn't necessarily to ship processes overseas, but simply to identify which ones can be done better and more cost-effectively.

"That's why we call it smart sourcing," he says. "The goal is to empower healthcare payers to retain ownership and control of their care management competencies while eliminating inefficiencies, not to take a team of 30 nurses and turn them into a team of 20. We take those 30 nurses and enable them to do the work of 60."

Sometimes, outsourcing has an even more critical purpose than reducing unnecessary costs: enabling new business. That was the primary factor for Blue Cross Blue Shield of Kansas City's (BCBSKC) decision, according to Roger Foreman, the company's executive vice president and chief marketing officer.

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