19 May 11 Can outsourcing providers meet the challenges posed by the US healthcare reforms

The healthcare industry is broadly divided into providers, payers and individuals, to whom the services are provided. The services that are rendered by third party vendors are classified into payer and provider services. The payer segment provides services such as data processing and transaction processing for insurance claims that are settled by insurers, i.e. the payers. Provider services are support services rendered to healthcare providers, i.e. hospitals, nursing homes and other healthcare providers. Medical transcription, coding and billing, and accounting and follow up of dues also called revenue cycle management are the common services facilitated by outsourced vendors.

Growing need to outsource
For the next decade or so, the US healthcare industry will be interesting to watch. With the objective of providing universal healthcare access to its citizens and streamline its healthcare system, the US government is spearheading several policy changes. It also intends to cut back on spiralling costs of an expensive healthcare system (at over $5,000 per capita, it is the most expensive in the world). Its healthcare system is also burdened by lack of resources, and an ageing population which further increases healthcare costs. Included in the healthcare legislation are laws that –

  • will effectively add ~30 million more people to the healthcare system,
  • mandate upgrading currently used versions for healthcare transaction processing,
  •   direct the use and implementation of electronic medical records.

As these laws are implemented, there will be a growing need among healthcare providers to increase outsourcing. This need arises from a shortage of current resources for support services like data transaction, processing, coding and billing. Providers are therefore unable to upgrade to newer versions of software or compliance standards without some form of external assistance. It is interesting to note that a majority of American hospitals already outsource a significant portion of their ‘non core activities’. These include support services like revenue cycle management (RCM) including, data capture, billing, coding, and collection of payments. Healthcare vendors have already been moving up the value chain and providing higher end services like data analytics and accounts reconciliations. Some vendors have capitalised on regulatory changes and are even assisting providers with testing and software to implement electronic medical record systems. The following figure depicts the value chain of services as has evolved over the years in the RCM service chain:


Making the most of the current situation
We believe that the next few years are going to be critical in terms of RCM services which are especially likely to experience a ‘boom’. Vendors need to prepare themselves by increasing recruitment, training existing staff to new standards or versions, i.e. showcasing themselves as providers with the capability to help healthcare outsourcing buyers with their needs in light of the current changing environment.

Buyers, in turn need to evaluate the right vendor for their needs, and choose from a diverse and fragmented pool of vendors, the best fit. Some key points they need to evaluate include-
•    Ensure that the vendor is HIPPA compliant, ISO certified.
•    Evaluate security measures to ensure data confidentiality
•    Evaluate vendor experience and understanding of the medical industry
•    Evaluate the relevant technology or innovation the vendor brings (or has the potential)

This article was based on a healthcare outsourcing report which can be found here.

ValueNotes Research
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