So your health plan has decided to outsource, now what?

Coming to a decision to outsource business processes is one thing. Deciding which services to outsource is another.

Will members be angered when a contractor calls them about a service and has access to their protected health information? Will members grow frustrated talking about their plans and services with an overseas representative?

These questions are just the tip of the iceberg when it comes to all the factors that must be considered when outsourcing.

Read: Health plan outsourcing surges in popularity

Shashi Yadiki, executive director and global business head at Dell Services Health Plan Sector, says the decision over what departments to outsource should begin with what type of service is offered there.

“Health plans have essentially three spheres of operations-front, middle and back office," says Yadiki. "The front office takes care of sales, marketing and member experience. That is the area where the health plans want control, because that is how they create their brand. It’s what differentiates them in the market place. That’s not an area that can really be outsourced, except for technology,” says Yadiki. “The operations of the other two, however, can be completely outsourced.”

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 benefit from the economies of scale, highly trained staff, standardized processes and automation tools that a good business processing outsourcing (BPO) vendor brings to the table.

“A good BPO partner can do these middle- and back-office operations better and at a lower cost than most health plans,” says Yadiki. “And a BPO partner will have all the processes in place to ensure compliance with all regulations. At a smaller health plan, they might not have the staff or the processes to stay current on compliance.”

Next: Where to begin

When it comes to infrastructure, there is no reason for a health plan to own a data center, Yadiki says.

“All the applications can be hosted in a cloud center, and [a BPO] can do a better job of managing and maintaining the infrastructure than a health plan can,” he says.

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.

For healthcare providers, such as physician practices and hospitals and health systems, outsourcing is appropriate for much of the revenue cycle operations, and for infrastructure, says Yadiki.

The drawbacks of outsourcing lie mostly in how the partnership is structured.

“For a mid-sized health plan, it is wiser to outsource all the mid- and back-office functions to one vendor than to try to parcel out various tasks to different vendors. You end up with a piecemeal operation that is complex to manage, with little way to coordinate or integrate the various tools and functions,” says Yadiki. “It’s different for a large health plan that has the economies of scale to do much of the work itself. For those organizations, outsourcing certain tasks, where the health plan lacks expertise or tools, makes more sense. But anytime you are outsourcing an entire operation, you are better off with an end-to-end solution from one vendor.”

Next: The key to success

Yadiki says there are a number of measures that are critical to success in outsourcing. Here are six of them:

1. Gather documented metrics and processes. You need to know your current and forecasted volumes, and you need to have your current processes well documented, so that the vendor knows what to expect and how to manage changes.

2. Know your goals. What do you hope to achieve? Cost savings? Better reliability? Better compliance? Make sure your vendor understands your priorities.

3. Get consensus about your goals within your organization. You need to make sure that all key management staff members are in lockstep with the switch to an outsourced operation and agree on the goals before you hand the project to a vendor. Otherwise, the vendor will be caught in the middle and undermined. That will put the whole project at risk.

4. Don’t make the service-level agreement (SLA) the center of your contract.  While SLAs are an important part of the contract, they shouldn’t be the only standard for performance. If a project runs into a significant and unanticipated issue, it is better to change the SLA to give the vendor time to do the quality of work you need. If it is clear to both parties that a task will take longer to complete than expected, changing the SLA will give you a better outcome than rigidly insisting on an unreasonable timeline.

5. Make your vendor a partner, not just an order-taker. If the vendor has experience over a wide range of customers and offers multi-faceted consulting and services, the vendor may have knowledge and information that you don’t. Take advantage of that experience. Bring the vendor into the strategic and tactical planning processes. The vendor should be able to say “no” when needed, because that may save your organization from making costly mistakes. Choose your vendor carefully and listen to the vendor’s input and you will have a much richer pool of knowledge for making decisions.

6. Establish a clear line of communication and designate a liaison within the organization. The vendor should know how, when and who to contact within your organization to solve problems, seek information and generally manage the relationship.

Yadiki also recommends not jumping in to outsourcing without first testing the waters.

“One of the consistent mistakes I’ve seen health plans make in outsourcing is to give high-intensity, high-risk projects to a new vendor," Yadiki says. "It takes a good three months just to get to know the plan’s environment and understand how long a project will take. Often, to get the contract, the vendor will agree to the plan’s timelines. Often, the timelines are just not achievable. Both the vendor and the plan will suffer in that case. It is better to start with a pilot project with a new vendor, to allow the vendor to become familiar with the plan’s environment and to have the knowledge necessary to take on a more critical, time-sensitive project.”

Rachael Zimlich is a writer in Columbia Station, Ohio.