“All the fetal monitor is nowadays is a computer. That computer has a hard drive, just like your PC, and it can get a virus because it's tied to a network,” says Brian Montgomery, president and CEO of Coppell, Texas-based Crest Services, one of the many outsourcing firms seeing growth in its computer-technology business. “Patient care has to get more efficient, so delivery has to get better. And the way they're doing that is tying it in to a massive patient-management system.”
Outsourcing companies say that the convergence of IT with traditionally separate areas such as biomedical equipment maintenance is driving the need for better employee training, which in turn drives more hospitals and health systems to consider signing contracts to get the benefit of highly trained employees at a flat expense.
Frank Massi, senior vice president in the patient accounting services division of Dallas-based outsourcing firm Affiliated Computer Services, says IT is also converging with what may be the hottest area of contract work right now: revenue-cycle management. Many health systems recognize the need to start ramping up efforts to adapt electronic health records into their workflows, but they don't have the cash available for initial investments until they hire someone to find money in their revenue cycle. “The combination of those two leaves money open,” Massi says.
Xerox Corp. announced Monday it has agreed to buy ACS in a cash and stock deal that the companies are valuing at $6.4 billion.
Whatever the potential benefits of outsourcing deals, observers outside the industry are pouring cold water on contractors' hopes in 2009. Observers say healthcare executives are reluctant to sign any outsourcing contracts that don't produce immediate return on investment because of the uncertainty in the industry during the recession.
Scott Wilson and Doug Brown, co-authors of The Black Book of Outsourcing, an annual report on the industry, say much of the recent growth in healthcare outsourcing has been in limited contracts for niche business segments, like certain computer systems or discrete segments of the revenue cycle, rather than “end-to-end” services.
And even then, hospitals expect a fast turnaround on the deals. “There's more of a drive toward initiatives that are bringing a fast return on investment, and by ‘fast' I mean less than 180 days,” Brown says.
The 31st annual Modern Healthcare survey of outsourcing provider activity in 2008 showed mixed results overall, with less than a 1% change in the number of hospital clients under contract by the outsourcing firms that took part in the survey. The results, which vary widely between sectors, were based on same-firm responses from 2008 and 2007.
Since the survey is voluntary, it's an unscientific snapshot of trends reported by companies that provide on-site management to hospitals, long-term-care facilities, and alternate sites such as clinics and physician group practices. Fifty-one companies responded to this year's survey, compared with 52 respondents last year. Outsourcing firms Sodexo Health Care and RehabCare Group didn't participate in this year's survey, and once again Aramark couldn't provide numbers for specific outsourcing categories.
Some of the strongest areas of growth by percentage were in accounts receivable outsourcing, where receivables contractors reported more than a 250% increase in clients, and reimbursement firms reported a nearly 150% gain in business. Those results align with the comments of experts within and outside the industry who say that after years of squeezing efficiencies out of hospital operations, the revenue cycle might represent the last relatively painless place for savings.
Tim Quigley, executive vice president for business development for the healthcare group at Perot Systems Corp., Plano, Texas, says one of his clients reported that the revenue cycle was his last chance to find dollars without difficult cuts.
“His comment was, ‘We see this as the last eight-digit opportunity for us as a hospital. We've optimized our supply chain; we've pulled costs out of here or there,' ” Quigley says, quoting his client, who was the CEO of a hospital with about $500 million in net patient revenue. “The amount of money we're talking about with revenue cycle is really that last big-ticket opportunity in our work toward optimization.” Computermaker Dell announced plans this month to acquire Perot for $3.9 million.