Generally, you can view services like any other commodity and apply strict goods economics. So if the same type of service is available elsewhere, even in another country, at a cheaper price it makes sense, economically, to outsource. Is health care a different matter, however? Apparently, if you took an X-ray in the past decade, there’s a 90% chance it was read by somebody elsewhere in the world, let alone in your hospitals’ vicinity.
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In the past two decades or so, outsourcing of US services has risen dramatically, in part lending to the weakening of the economy in the long term. Who hasn’t called customer support to be greeted by a non-native speaker who sympathizes with your problem even though he’s six thousand miles away. There are so many Indian outsourcing jokes that’s hard to keep up, but is there anything to joke about outsourcing health care services? How dangerous really can this be, and do the benefits outweigh the downsides?
The short answer is: it depends, according to Jonathan Clark, assistant professor of health policy and administration at Penn State. Clark points out that besides radiology services, most hospital in the U.S. today outsource a variety of other medical services as well including anesthesiologist staffing and emergency physician staffing.
“Hospitals outsource the management of physicians from a physician management company. In other words, they buy physicians’ time from a management company. In this way, they get dedicated physicians who, for the most part, only work for their hospital. This is not necessarily the same thing as outsourcing radiological services, where hospitals send images out and it could be read by one of 1,000 radiologists,” Clark says.
Benefits of health care outsourcing
One can understand why hospitals would want to do this in the first place, and after all there are some overall benefits to the practice.
“Anytime health care organizations can get better at what they do, whether that involves outsourcing or not, that’s a good thing for our economy,” he says. “When it comes to U.S. health care — an industry with serious access problems — if we can become more efficient and thereby reduce those access problems, that is a good thing.”
Clark warns however that health care services can’t be outsources in the same way you would manufacturing, for instance.
“One of the assumptions people make is that outsourced services are like commodities in which one unit of service is the same as another unit of service,” he says. “With regard to radiological services, this would mean that providing a radiological read for a patient in Stockton, California, isn’t any different from providing a read for a patient in Miami, Florida.”
Can you outsource patient relationships?
After closely examining radiology performance, Clark found that the accuracy with which a radiologist reads an X-ray or MRI is directly dependent on how much experience the person has with the hospital the patient came in and not with the overall number of reads the radiologist made.
“Our results suggest that there is some customer specificity,” he explains. “If that is the case, someone might say why should we outsource? Shouldn’t we just employ them? But we found that customer specificity may also be transferrable to the outsourcing firm as a whole. So over time the outsourcing company may be able to turn that specificity into an organizational capability rather than a capability that’s embedded in one radiologist’s experience with a hospital.”
Overall, Clark believes there are some benefits to outsourcing radiology services in particular, but believes other health care services are more troublesome to outsource and should be closely followed.
“If you’re mixing and matching anesthesiologists and emergency physicians in a way that’s not permitting them to develop relationships with people at a specific hospital or to become familiar with the culture of the hospital and the team dynamics of the organization, that creates a little more concern, especially with professionals like anesthesiologists or emergency physicians who frequently deal with life and death situations,” Clark notes.