Five things health plans should consider before outsourcing

Determining whether to outsource business processes is a crucial consideration for a health plan. Outsourcing means giving up a vital part of what you do as a business, so it’s a strategy that should be approached carefully. On the other hand, not outsourcing could also threaten the success of your organization.

Here are five considerations when determining whether to outsource:

1. It’s a marriage (or at least a domestic partnership) not a date.

YadikiThe first thing to remember about outsourcing is that you are entering into a partnership with a vendor, not just a casual relationship. It is a big transition to offload even a part of your operations, and it’s not something you’ll want to do repeatedly. So take the time to study the vendors and choose one that has the resources, reputation and experience to serve you for the long haul.

Remember that your outsourcing partner will become a part of your family. Your members and your provider networks will all view the staff who work for the vendor as part of your company. If they don’t do a good job, you’ll get blamed. If they do a stellar job, you’ll get the credit. So you want to know who is joining your family before you sign a contract.

2. It’s a risk, but it can come with big rewards.

Outsourcing, particularly with back-office operations, makes very good sense, especially if you have aging infrastructure. By outsourcing your operations, you can gain access to cutting-edge technology without the capital investment.

Also, a good outsourcing vendor will invest heavily in staff and training, and will have automation tools that you might not have in-house. Not only will you avoid capital costs, you’ll also probably cut the cost of the operations themselves, sometimes significantly. That’s money back to your bottom line, and you don’t have to cut anything to get it.

The other advantage is quality. By outsourcing processes, your staff will be able to focus more on other tasks. There will be fewer instances where your phones are overloaded and claims processing backlog is rising. Your organization can be more responsive to your members and your network. Also, a good BPO vendor will monitor and audit its staff carefully, to ensure accuracy. And it will have a much broader pool of personnel to draw from, often including specialized skills that are hard to find.

Next: It’s important to be selective in what you outsource.

3. It’s important to be selective in what you outsource.

While it makes sense to outsource certain functions-such as customer service, application processing and claims-there are other functions that really should stay in house.

Health plans have essentially three spheres of operations: front, middle and back office. The front office takes care of sales, marketing your brand. It’s what differentiates you in the market place. That’s not an area that most plans want to outsource, except for technology.

Middle-office operations include medical management and network management, while the back-office operations focus on administrative tasks such as processing applications, intake of new members, processing and paying claims and running the call center. These areas might benefit from the economies of scale, highly trained staff, standardized processes and automation tools that a good BPO vendor brings to the table.

A good BPO partner can handle these middle- and back-office operations better and at a lower cost than most health plans. And a BPO partner will have all the processes in place to ensure compliance with all regulations. Smaller health plans might not have the staff or the processes to stay current on compliance.

When it comes to infrastructure, health plan might want to consider outsourcing a data center. All the applications can be hosted in a cloud center, and a BPO vendor can help manage and maintain the infrastructure than a health plan can. Hosting applications in the cloud also means access to next-generation infrastructure, because a good cloud vendor will continuously update its hardware and applications to stay competitive.

4. Fewer vendors can save you time.

It may be tempting to play the field, giving contracts to a variety of vendors, but it can be risky and time consuming. Each vendor will need attention and supervision, and one reason for outsourcing is to reduce the drain on your management time and energy. Using multiple vendors defeats this very important goal.

Particularly for a mid-sized health plan, using one vendor for all BPO contracts can make sense. Like a good marriage, a good BPO partnership will help both the health plan and the vendor prosper. But it also means the plan needs to take some time to find the right partner. Think carefully about your goals and values, and make sure that the vendor shares your values and has the capabilities, depth of experience and resources to reliably meet your goals.

5. It’s important to be fair and not split up over minor issues.

If your plan does choose to outsource, treat the vendor with respect, be fair when problems arise and take ownership of your own issues. And when mistakes are made (and there will inevitably be some in a long-term relationship) be forgiving as long as your partner takes immediate action to prevent future problems.

But don’t sweep problems under the rug, either. Address issues quickly and clearly so that they don’t become habit. Ultimately, a mutually respectful and fair partnership will support your organization’s continued growth and success.

Shashi Yadiki is executive director and global head, health plans, Dell Services.