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Abstract

Outsourcing has become one of the healthcare sector's buzzwords. In the supply chain management of healthcare organizations, outsourcing decisions have specific distinctiveness. This article reviews the state-of-theart literature on outsourcing in the healthcare sector and provides a structured frame of outsourcing in different countries with different healthcare systems. This appears to be the first time evidence on outsourcing practices in the healthcare sector have been systematically collected and structured in order to understand the reality beyond the outsourcing processes and trends.
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Supply Chain Forum An International Journal Vol. 12 - N°1 - 2011 www.supplychain-forum.com
Outsourcing in
the Healthcare Sector-A
State-of-the-Art Review
Cristina Machado Guimarães
Researcher in Healthcare Management - ISCTE - IUL -
Lisbon University Institute
cristinamachadoguimaraes@gmail.com
José Crespo de Carvalho
Full Professor in ISCTE - IUL -
Lisbon University Institute
Outsourcing has become one of the healthcare sector's buzzwords. In the
supply chain management of healthcare organizations, outsourcing
decisions have specific distinctiveness. This article reviews the state-of-the-
art literature on outsourcing in the healthcare sector and provides a
structured frame of outsourcing in different countries with different
healthcare systems. This appears to be the first time evidence on
outsourcing practices in the healthcare sector have been systematically
collected and structured in order to understand the reality beyond the
outsourcing processes and trends.
Keywords: Outsourcing, healthcare, health systems, contracting, literature
review
Introduction
In the supply chain management
(SCM1) of healthcare organizations,
outsourcing decisions have specific
distinctiveness, namely, in the
reasons and constraints of the
decision, in the selection criteria of
the activities left to third-party
operators, in the type of possible
agreements, and even in the impact
of the outsourcing decision on the
organization. After the outsourcing
trend in the manufacturing
industry (Roberts, 2001), the
healthcare sector is considered one
of top three sectors (along with the
finance and legal industries) with a
significant outsourcing growth
(Brown & Wilson, 2005).
Our goal in this study was to
understand how embedded the
outsourcing practices in the
healthcare sector are. Thus, the
literature review approach involved
(1) reviewing scientific articles and
grey literature (Farace, 1998) on the
subject,(2) reviewing publications
that focus narrowly on outsourcing
in private and public healthcare
organizations, (3) reviewing
publications regarding clinical and
nonclinical outsourced activities,
and (4) categorizing literature into
thematic areas and items regarding
motives, risks, advantages, and
trends in this researched field.
This article enhances the evolution
of SCM in healthcare, particularly in
identifying (1) outsourcing
decisions rationale, (2) the main
drivers and their differences from
other sectors, (3) specific risks and
benefits of this decision related to
outsourced clinical and non-clinical
activities, and (4) the wide
spectrum of private-public supplier
relationships.
Healthcare organizations have a
commitment to reliability (Weick &
Sutcliffe, 2001), which implies not
treating SCM decisions about
outsourcing as a panacea.
©
Copyright BEM
ISSN print 1625-8312
ISSN online1624-6039
An International Journal
Supply Chain Forum 1. The Vitasek (2005) definition, consensual
among the Council of Supply Chain
Management professionals, can be found at
http://www.cscmp.org/Website/AboutCSCMP/
Definitions/Definitions.asp
Methods
In this study we synthesized
evidence of outsourcing in the
healthcare sector. We developed a
key word search in electronic
databases to find articles
representing the inclusion criteria
of being related only to outsourcing
in the healthcare sector and
the exclusion criteria of being
related to contracting out or
subcontracting in the healthcare
sector. In the literature,
outsourcing has different
connotations from the common use
of the concept. In fact, outsourcing
also refers to activities not
previously performed in-house
(e.g., procurement) and it
differs from subcontracting and
contracting out by the premises of
long-term relationships and the
obligation of not only providing the
means but also results (Kakabadse
& Kakabadse, 2003). We identified
76 eligible articles in the peer-
reviewed literature, 16 in the grey
literature, and 10 books concerning
(1) outsourcing healthcare in
private and public organizations
in different types of health
systems, (2) distinction between
outsourcing clinical and nonclinical
activities, (3) motives, risks,
advantages, and trends in this
researched field.
Outsourcing rationale
in a healthcare setting
Outsourcing, or transferring
internal activities to third parties
(Greaver, 1999), can assume several
forms in a wide spectrum of
relationships (Ballou, 2003;
Franceschini & Galetto, 2003;
Sanders et al., 2007). A theoretical
evolution from transaction cost
analysis (TCA) (Coase, 1988,
Williamson, 1979) and agency
theory (Eisenhardt, 1989) to a
resource-based view (RBV), which
supports outsourcing noncore
activities, keeping core activities
internal (Bettis et al., 1992; Kelley,
1995; Lacity et al., 1995; Mullin,
1996; Peisch, 1995; Prahalad &
Hamel, 1990; Quinn & Hilmer, 1994),
and, more recently, to the
transformational view (Linder,
2004), places outsourcing as an
SCM strategic tool able to redesign
the organization value chain and
sometimes also its mission
(Schneller & Smeltzer, 2006).
Outsourcing decisions frequently
result in organizational change.
Even low-volatility sectors such as
healthcare (Goepfert, 2002) have
riotous periods resulting from
regulations alterations, more
informed and demanding patients.
In this entrepreneurship environm-
ent, healthcare organizations adopt
outsourcing solutions for the same
reasons as in other sectors (Quinn
& Hilmer, 1994): looking for
efficiency, quality, and profitability
gains. However, in healthcare units,
outsourcing is part of volume
flexible strategies to adapt capacity
(namely in bigger organizations
such as academic medical centers)
trying to respond to demand
flotation's, care that is increasingly
complex, and to the linkage
between clinical performance and
number of medical acts (Jack &
Powers, 2006). In fact, according to
some authors (Atun, 2006; Campos,
2004), in some European countries
that are more politically reluctant
to privatizations (e.g., the United
Kingdom, Sweden, Spain, and
Portugal), outsourcing of clinical
services was a response to
waiting lists. Through contracting
agreements with public and private
providers (including public-private
partnerships [PPPs]), healthcare
systems looked for access, quality,
equity, and efficiency advantages
(Abramson, 2001; Liu et al, 2004).
However, according to Bossert
(2004), although there's evidence
in primary care outsourcing
agreements (Walshe & Smith, 2006)
of access improvement (in
provision, coverage, and use)
gains, there is not clear evidence of
equity, quality, and efficiency
effects. Evidence regarding
efficiency gains has revealed some
inconsistency (Atun, 2006; England,
2000, 2004; Liu et al., 2004, 2007).
Although the extension of
outsourcing decisions from
nonclinical to clinical activities
occurred in the healthcare sector
later than in other sectors, the
phenomenon took a global scale
with many reported cases, from
medical transcription to the latest
trend of “medical tourism” with
people travelling abroad for
healthcare services seizing the
best relaxing environment for
recovering (Bies & Zacharia, 2007;
McCallum & Jacoby, 2007).
Main Drivers
From reviewing the literature, the
most pointed drivers for
outsourcing in healthcare units are
(1) cost reduction, (2) risk
mitigation, (3) adapting to quick
changes without jeopardize
internal resources, and (4) value
stream redefining (Alper, 2004;
Bhattacharya et al., 2003; Chen &
Perry, 2003; Hazelwood et al., 2005;
Lorence & Spink, 2004; Roberts,
2001; Wholey et al., 2001; Yang &
Huang, 2002). Wigglesworth and
Zelcer (1998) defend the
outsourcing of healthcare units'
supply chain global management to
specialized providers identifying
three reasons: (1) the possibility of
externalizing noncore activities but
critical to process-oriented
organizations; (2) the transference
of information technology to
support SCM investment, which
allows the leverage of its nuclear
capacities; and (3) the possibility
for critical mass to build up and
achieve economies of scale.
Yang and Huang (2002) identify four
imperatives for outsourcing growth
in the healthcare sector: (1)
organizational, (2) strategic, (3)
regulatory, and (4) technological.
Still, outsourcing decisions in
healthcare units depend on (1) the
kind of activity (modular versus
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Supply Chain Forum An International Journal Vol. 12 - N°2 - 2011 www.supplychain-forum.com
Practitioners and
researchers agree on
the importance of
decisions relating to
the choice of
suppliers or the
management of the
buyer-supplier
relationship.
integral; more or less contractible);
(2) the type of contract (classical
versus relational); (3) contract
duration (depending on contract
type and supplier selection
process); (4) specification of
performance requirements
(process and outcomes indicators);
and finally (5) payment
mechanisms (Liu et al., 2007).
Clinical and Nonclinical Risks
and Benefits
We found a consensual typology in
the literature that identifies as
“clinical” all the activities (direct or
indirect patient care deliveries),
processes, or sub processes
that are carried out by
health professionals, whereas
“nonclinical” actions differ from
healthcare delivery for being
delivered by other areas'
professionals. We also identified a
pattern of distinguishing
outsourced clinical services with
less the proximity to patient (non
directly delivered to the patient)
and the separation of nonclinical
actions from support activities and
business process outsourcing
(Alper, 2004; Cezarotti & Di Silvio,
2006; Guy & Hill, 2007; Hazelwood
et al., 2005; Shinkman, 2000; Shohet
& Lavy, 2004; Stockamp, 2006;
Worrell, 2003).
In general, outsourcing in
healthcare risks were identified as
follows: (1) losing control of
suppliers (discontinuity of service
quality levels (MacCutcheon &
Griffin, 2002), accountability issues,
loss of competences (Hazelwood et
al., 2005), and information
confidentiality problems; and (2)
excessive supplier dependency and
consequent loss of flexibility
(Renner & Palmer, 1999).
Referring to nonclinical services
several authors stressed the
importance of performance
monitoring to avoid quality
problems (infection risks, patient
dissatisfaction) and hidden costs of
support activities such as (1)
cleaning (Andersen & Rash, 2000;
Barrs & Fahey, 2000; Dancer, 1999;
Giarraputo, 1990; Goggins, 2007;
Griffith et al., 2000; Liyanage &
Egbu, 2006; Murphy, 2002) and (2)
meal services (Bossert, 1994;
Crogan & Evans, 2006; Hwang et al.,
2003; Kwon & Yoon, 2003; Lau &
Gregoire, 1998). Other nonclinical
activities outsourced and identified
as the main drivers of cost
reduction are procurement and
purchasing to group purchasing
organizations (GPOs) (Nollet &
Beaulieu, 2005; Rivard-Royer et al.,
2002; Schneller & Smeltzer, 2006).
Although evidence of GPOs shows
cost reduction advantages (10% to
15% in acquisition cost, 40% in
transaction-related costs), some
authors highlighted the risk of
oligopoly development and
function duplications due to
strategic misalignment.
The most reported risks of
outsourcing clinical activities refer
to integration difficulties in
activities such as radiology and
other laboratory functions (Chasin
et al., 2007; Peisch, 1995). On the
benefits side, gains in expertise,
capacity, and resource release are
underlined by Renner and Palmer
(1999) and Greeno (2001).
Visiting Different Healthcare
Systems
One common conclusion derived
from reviewing the several cross-
national health system studies
(Elling, 1980; McPake & Mills, 2000,
among others) is that context
differences are crucial to
understanding the advantages and
risks of outsourcing in each
healthcare system framework.
Based on the source of funding,
three main models can be
identified: the Beveridge model,
with predominantly public funding
based on taxation (in the United
Kingdom, Spain, Portugal, Greece,
Italy, Sweden, Denmark, Canada,
Australia, and New Zealand); the
Bismarck model, with private-
public providers and premium
funding (Germany, France, Austria,
Switzerland, Belgium, Holland, and
Japan); and the private insurance
model, as shown in the United
States with predominantly private
providers coexisting with Medicare
and Medicaid social care (Simões,
2004). From all reviewed literature,
we focused on Germany, United
Kingdom, Australia, New Zealand,
the United States and Greece, not
only because of the higher number
of articles founded regarding
outsourcing practices, but also for
being illustrative of the three
different healthcare systems. The
main findings are summarized in
Table 1.
Outsourcing in the German
Healthcare Sector
A description of the Bismarck
model evolution, adopted by the
German healthcare sector in 1883,
is presented by Kakabadse and
Kakabadse (2005) and stresses the
demographic changes, the social
security financial resources
scarcity (mostly due to
unemployment), and the decrease
of physicians as main constraints
for deep reforms in the hospital
sector. One of the measures
deployed was a new remuneration
system based on diagnosis-related
groups (DRGs), following the
Australian system, starting in 2004
to be completely implemented in
2009 (Augurzy & Scheuer, 2007).
This new system, along with quality
implications of the “integrated
care” (or “integrated delivery
systems” [Burns et al., 2001]),
forced a second wave of
outsourcing trying to achieve
better cost-efficient outcomes than
found in the first wave during the
1990s.
Outsourcing in the United
Kingdom, Australian, and New
Zealand's Healthcare Systems
In the United Kingdom, the National
Health Service (NHS) system,
created from Beveridge's
1942 report (Simões, 2004)
ffered universal access and
comprehensive coverage of
services for all citizens but has
undergone considerable changes
throughout the past decades.
These changes have often been
portrayed as a move toward an
internal market in the UK system.
Under a conservative government
and against the strong opposition
of physicians and nursing
personnel, provisions to reform
NHS (the National Health Services
and Community Care Act) were
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Supply Chain Forum An International Journal Vol. 12 - N°2 - 2011 www.supplychain-forum.com
Constructs Coun t ries
Germany U.K. Au stralia and New
Zealand E.U.A Greece
Outsourcing
Activities
a) N oncli nic al se rvice s
- Info rmation te chno logy
services
- Procurement,
purchasing and deliver y
-Payment collection
- Facility management
(cleaning, laundr y)
- P a ti e nt tr ansp o rt
- Snack-bar
b) Clin ical services:
(m ed ical and te c hn ica l):
- Laboratory (pat holog y,
microbiology)
- Pharmacy
- Radiolo gy
- Nuclear medicine
a) Nonclinical services
-Facility management
(cleaning, meals and
ma i nt e na nce )
-Sterilization
- Nonemergency pa tient
transport
b) Clinical services:
- Physiotherapy,
occupational therap y,
speech and language
therapy
-Home del ivered hi gh-
t ec h h e al t h ca re ( t o t al
parenteral nut rition,
intravenous
chemotherapy,
continuous ambulatory
peritoneal di alysis)
-“M edical tourism
a) Nonc lini ca l servi ces
- Car parking
- Laundry
- Cleaning
- Meals
- Information sy stem
- Security
- Distribution to w ards
- Maintenance a nd
gardening
b) Cl in ic a l se r v ic e s:
- Mental health services
- Radiology
- Pathology
- Pharmacy
- Dentistry
a) Nonclinical services
- M eals
- Cleaning
- La undr y
- Legal advi sing
- Pes t control
- Wa ste management
-Car parking
- Information s yst ems
- Patient transpo rt
- Sterilization
b) Clinica l services:
- Em ergency medicine
-M agnetic resonance
- Ima ging
- Physiotherapy a nd
rehabilitation
- P harmacy
- D ialysis
- Pathology
- A na esthesiology
- Inpatient care
ma na g em e nt
- “Medical t ourism”
a) Nonc lini c al servi ces:
- Sn a c k- ba r
- Meals
- Legal advising
- Equipment maintenance
- Laundry
- Laboratory
NB:
-No published research
was found regarding
cl ini c al s er vi c es ( a par t
fro m La boratory)
out sourcing in
Greek healthcare s ecto
r
Drivers
- Reduce investment in
devices and stocks
- Human resources cost
reduction
- Investme nts exp enses
(easier to support by
bigger hospita ls)
- Cost and health service
qualit y standardization
- Partnership policy
- Cos re duction i n
anc ill ar y a cti vit ies
-Business proce ss
redesign and IT updating
- A c c es s to ex pe r t ise
- Flexibility
- Focus on critical
activities and lean
thinking deployment to
achieve strategic
adv a n t ag e s
- Cost Reduction
- E nd Publ ic- Pri vate
in t erest s conf li ct
- Flexibility to deal with
low and vulnera ble
demand services (e .g.
Dental care)
-Focus on core
competences
- Staff reduct ion (22%
reduction in s ome cases)
-Government
privatization program
- Efficiency
- Ris k m it i
g
at i on
-In clinical activities:
ac c es s to ex p e r t ise
- In nonclinical
ac tivities: cost
reduction
- Process agility
(outsource IT to front-
end activities as pat ient
ad mi ss i on )
-Liability in data
transferring and
warehousing
-Health financing
syst ems c hang es
- Cost reduction
- Patient satisfaction
- Flexibility
- Scarcity of hum an
reso ur ces
- Foc us on core business
Beneficts
- Outsourcing service
quality higher than
internal
(namely i n IT)
- Cost reduct ion
- Service standardization
(to follow National
Standards of Cleanliness
for the NHS Report )
-Equipment
improvement
- Increase in number of
patients
- Staff reduct ion (160 to
35 in a 1, 200 be d unit)
- Cost re duction (from
$A us 200,000 to 3,000)
- A cc es s to b es t pr a ct ic e s
and top c lass technology - Service qual ity
improvem ent
Risk s
- Adapting probl ems
- High hidden co sts of IT
outsourcing
- Patient claims
regarding service quality
- Results monitoring
difficulty and consequent
need for proc ess
monitoring
- Supplier
noncompliance and
quality dec reasing
-Contract cl ause s non
compliance
- Monitoring costs not
previously considered
- Cultural dis crepancies
leading to internalization
(
e.
g
. meals, cleanin
g)
- Dissatisfaction with
outsourcing outcomes
(service quality, cost
reduction and proc esses
ag il it y)
- Very low impact on
cos t s
- Integration and
coordinat ion difficulties
- Vendor difficulty t o
unde rstand internal
pr o ce s s e s .
- Difficulty in negotiating
changes in qua lity levels
Conc lusi ons
and
Futu re
Pe rs p e ct i v e
- Outsourcing leve l
(clinical and nonc linical)
decreases as hospital size
grows.
- Regional differe nces in
outsourcing (IT)
w illingness
- Dominant pattern is:
patient direct care
delivery services are
internalized
- Outsourcing “s econd
wave” in cleaning, meal,
laundry and laboratory
services;
- Outsourcing growth in
sterilization ,building
ma intenance, ac counting
and H R management
services
-
HS Trus ts
outsourcing contracts
evolution : - from c ost
savings in ancillary
ser vice s t o fil ling
expertise gaps through
knowledge intensive
business service (KIBS)
- Growing t rend of
cl i n ic a l se rv ic e s o ff
shoring
-
Mix-outsourcing”
solutions
– Cleaning and meals
outsourcing for
downsizing purpos es
(staff tra nsfer)
- Cost re ductions and
quality gai ns only by
reviewing contracts
-Clinical services remain
internal for havi ng
difficult monitoring
and outc ome measuring
comparing with
nonclinical
-Contract management
fa ils d ue to : la ck of
negotiation skills , bids
bad eva luation, bad
choice of payment form
and abs ence of
measuring culture
- The possibility to revert
outsourcing process and
internalize activities
refers only t o c linical
ser vice s
- C l in ic a l s e rv ic e s
outsourcing in agenda
-Communication
services o ffs hore
outsourcing trend
- 95.3%, of respondents
out source one or more
ac tivities
-Outsourcing didn’t lead
to fu ll - t im e pe rs on n el
reduction (only in 16.3%
of re spondents occurred a
staff replacement of 11%
to 20%)
- 81.4%, of respondents
pr edict a moderate to
substant ial outso urc ing
gr owth in near future
wh il e l es s th a n 2 0%
pr edict a reduction
Table 1
Outsourcing in Healthcare Sector Across Countries
Sources: Aggarwal, 2004; Amaratunga et al., 2002; Augurzky and Scheuer, 2007; Bies and Zacharia, 2007; Chasin et al., 2007; Chess,
2006; Giarraputo, 1990; Grande and Roberts, 2001; Greeno, 2001; Guven, 2003; Heavisides and Price, 2001; Hensley, 1997; Hoppszallern,
2002; Katzman, 1999; Kirchheimer, 2005, 2006; Lorence and Spink, 2004; Mark, 1994; May and Smith, 2003; McCallum and Jacoby,
2007; McPake and Mills, 2000; Moschuris and Kondylis, 2006; Okohoh et al., 2002; Pilling and Walley, 1996; Prager, 1997; Renner and
Palmer, 1999; Shinkman, 2000; Smith and Waymack, 2000; Sunseri, 1998;Young, 2005, 2007a, 2007b.
intended to open the field to the
private sector on a wider scale.
Private hospitals were allowed to
compete with regional and
municipal hospitals for NHS
patients, publicly owned hospitals
could be acquired by private
entities, and, most visibly, services
were to be managed under
prospective global budgets (Perrot,
2004; Simões, 2004). The trusts and
“internal market” creation, in the
beginning of 1990s and later in 1997
the Blair's government reforms, led
to the encouragement of private
sector entrance and spreading of
outsourcing practices that had
begun in the 1980s (McPake and
Mills, 2000).
Likewise, Australia and New
Zealand's healthcare systems,
which are based on the same
Beveridge concept, were driven by
efficiency, flexibility, innovation,
waiting-time reduction, and service
range diversity gains to take
measures such as the “national
competition policy,” which created
outsourcing opportunities (Ashton
et al., 2004; Prager, 1997; Young,
2005, 2007a, 2007b).
Outsourcing in the U.S.A.
Healthcare Sector
Funded through a complex mix of
private and governmental
insurance, the US healthcare
system shows a great reliance on
the mechanisms of the market,
including contracting and
competition that forces providers
to do “more with less money”
(Goolsby, 2001). Outsourcing
practices evidence is, however,
much later identified comparing to
other sectors. Hazelwood et al.
(2005) justify that fact because of
the ownership of most healthcare
organizations being mostly not-for-
profit (80%), government financed,
and managed by committees, and
not by an administration with a
strategic plan and cost-driven
decision-making processes.
However, a growing outsourcing
trend (Smith & Waymack, 2000) has
emerged, helped by quality
constraints of JCAHO (Joint
Commission on Accreditation of
Healthcare Organizations) and
outlined by HIPPA (Health
Insurance Portability and
Accountability Act) (Goolsby, 2001;
Hazelwood et al., 2005). According
to Stockamp (2006), around 75% of
US hospitals have at least one
outsourced function, not just in
support services, as in early years,
but also in the patient path of
inbound to outbound functions
(Chess, 2006; Neil, 2005; Rhea, 2007;
Casale, 2007; Schneller & Smeltzer,
2006). The growth trend is also
posited in studies using surveys of
hospitals, long-term-care units, and
clinics (Hensley, 1997; Katzman,
1999; Kirchheimer, 2005, 2006;
Shinkman, 2000). Another growing
trend is group purchasing
organizations (GPOs), which
service 97% of US hospitals that
outsource procurement (Neil,
2005). The latest trend is medical
outsourcing (Bies & Zacharia, 2007)
provided by partnerships such as
in one of the Parkway Hospitals in
Singapore; the Johns Hopkins
Hospital in Baltimore, Maryland;
one of hospitals in Health Care City
in Dubai; and the Mayo Clinic in
Rochester, New York (McCallum &
Jacoby, 2007).
Outsourcing in the Greek
Healthcare Sector
The Greek healthcare sector, also
inspired by the Beveridge model,
illustrates the importance of the
public health sector as the main
provider in an economically
difficult environment. Despite the
lack of empirical and published
research on outsourcing in the
healthcare sector, the Moschuris
and Kondylis (2006) study gives a
full description of the Greek
healthcare system constraints to
outsourcing practices in public
hospitals, leaving private
healthcare providers outside the
empirical setting. This study
focuses on the decision-making
process, the extension of
outsourcing, effects on public
healthcare, and future trends;
stresses the difficulty of decision
making in public healthcare
organizations; and explores the
reasons of (dis)satisfaction with
outsourcing decisions.
Conclusion
This article reviews the state-of-the
art literature on outsourcing in the
healthcare sector with an
aggregated view. Summing up all
the available information regarding
the activities typology commonly
found, the pointed risks and
pitfalls, and also the advantages
and opportunities that turned
outsourcing in this sector into a
strategic tool, this article provides
a structured frame of outsourcing
in different countries with different
health systems. A systematic
review was conducted with the
purpose of gathering information
and examples from scientific and
grey literature that could show a
full picture of the main drivers,
risks, advantages, and trends found
when outsourcing different
activities in different countries. In
order to describe and compare all
the relevant findings of the
literature review, data from
different healthcare systems in
Germany, the United Kingdom,
Australia, New Zealand, the United
States, and Greece are presented
and illustrate the updated reality of
outsourcing in healthcare.
Despite the literature scarcity
found in this field, all gathered
information was synthesized,
organized, and structured into main
issues (activity typology,
outsourcing drivers, benefits and
risks, lessons learned and future
trends) offering a new research
agenda to follow the phenomenon
evolution in the healthcare sector,
namely, to compare the shifting of
outsourcing paradigm stages of
each country and to evaluate the
implications to healthcare supply
chain managers. The existing
literature is frugal in empirical
research on performance models
and measures in outsourcing cases
(Heavisides & Price, 2001). There is
also a lack of published research on
how healthcare organizations deal
with outsourcing risks before and
after the decision and in different
contexts from organizational
change processes, such as
start-up organizations' outsourcing
decisions. Rigorous scientific
research is also missing in order to
gain a generalization of findings.
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Lessons from other sectors'
practices should be studied instead
of thinking of outsourcing as a
panacea to mitigate risks or simply
reduce costs.
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About the authors
José Crespo de Carvalho has his degree in
engineering from IST - Technical University of
Lisbon - his MBA and MSc in Management -
Information Systems and Logistics Areas - and
his PhD in Management from ISCTE - IUL -
Lisbon University Institute - where, after
doing his aggregation, he is Full Professor
(since 2003). He has signed and coordinated
more than 50 consultancy projects in the
areas of supply chain management and
strategy. He has also published widely in
books (he has already published 22 books
and one especially in healthcare logistics)
and in journal papers, both professional and
academic. He has received, also, several
prizes for his career in supply chain
management and strategy and has been
rewarded several times with the "best
professor of the year" award by the
Management School of his University.
Cristina Machado Guimarães has a degree in
Business Administration and Management
from Catholic University of Porto, an MSc in
Healthcare Management from ISCTE-IUL-
Lisbon University Institute where developed
a PhD research on Lean Healthcare. Having
worked 15 years in industry and services
settings as Supply Chain Manager, has, more
recently, dedicated to consultancy projects in
both industry and services settings as
healthcare. She is also Invited Lecturer in
Post Graduation Programs of Lean Operations
Management and speaker in workshops and
conferences.
146
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... This leads organisations to consider outsourcing and partnering as a mean to contract out services and lower costs. 21 The outsourcing of healthcare provision has been driven by the adoption to rapid external changes, 22 but also by a need for organisational response, strategic alignment, regulatory requirements and technological development needs. 23 Today, healthcare organisations and non-governmental bodies adopt outsourcing and partnerships for similar reasons as the private sector: cost control, quality of patient care and efficiency of operations. ...
... 23 Today, healthcare organisations and non-governmental bodies adopt outsourcing and partnerships for similar reasons as the private sector: cost control, quality of patient care and efficiency of operations. 22 However, the risks of outsourcing at times may outweigh the benefits. In general terms, outsourcing has been linked to 3 loss of control of suppliers, particularly in regard to the expected quality of products and services, 24 loss of core competences and lack of accountability 25 and loss of information and confidentiality issues. ...
... In general terms, outsourcing has been linked to 3 loss of control of suppliers, particularly in regard to the expected quality of products and services, 24 loss of core competences and lack of accountability 25 and loss of information and confidentiality issues. 22 It has been noted by several authors that outsourcing needs a robust performance monitoring approach in order to avoid quality issues and hidden costs. 26 The negative risks of crises outsourcing activity outlined in extensive research resonates with the approach to the development of the NHSTT programme and in particular the development of the NHSX mobile application and its replacement the NHS COVID-19 app. ...
Article
Full-text available
The National Health Service Track and Trace Programme has been one of the most pivotal and controversial tools the UK government has deployed to combat the COVID-19 pandemic. This article reviews the challenges of the development and implementation of the NHS COVID-19 mobile application, and reviews these in the context of the following 3 key areas: outsourcing of public sector, organisational structure and leadership, digital framework and governance. The paper argues that the current pandemic has demonstrated weaknesses in each of the above-mentioned areas, and that is an urgent need to strategically address these in order to prepare for the next public health crisis.
... Outsourcing allows a tertiary health center to become more specialized in concerned services (Aziz et al., 2017;Billi et al., 2007). Studies from different countries such as USA, Taiwan and some of the Eastern Mediterranean regions found that outsourcing allows a tertiary health center to concentrate on the management of core mission and advance its distinct specialty to achieve its strategic goals (Guimaraes and Carvalho, 2011;Billi et al., 2007). Outsourcing of certain independent tasks allows a hospital to maintain financial flexibility if there is uncertainty in demand; and it also reduces the out-of-pocket expenditure, which increases customer satisfaction, thus creating a stream of loyal customers (Young and Macinati, 2012;Billi et al., 2007;Moschuris and Kondylis, 2006;Siddiqi et al., 2006). ...
... Outsourcing of certain independent tasks allows a hospital to maintain financial flexibility if there is uncertainty in demand; and it also reduces the out-of-pocket expenditure, which increases customer satisfaction, thus creating a stream of loyal customers (Young and Macinati, 2012;Billi et al., 2007;Moschuris and Kondylis, 2006;Siddiqi et al., 2006). Some of the hospitals have negatively responded to outsourcing as a strategic tool as it limits the control over outsourced operations, staff and customer satisfaction (Guimaraes and Carvalho, 2011;Kahouei et al., 2016;Billi et al., 2007;Lau and Zhang, 2006). The presence of local protection regulation and lack of overall post-outsourcing measurement will create a conflict between the clients and the outsourcing vendors (Lau and Zhang, 2006;Gaspareniene, Remeikiene and Startiene, 2014). ...
... Economic factors such as saving overhead cost, access to new technology with lower cost, better service quality, audit quality, accountancy accuracy, etc. are mainly responsible for adoption of outsourcing as a strategic tool by different hospitals (Guimaraes and Carvalho, 2011;Sendilkumar, 2020;Macinati, 2008;Moschuris and Kondylis, 2006;Gaspareniene et al., 2014;Libby, 1997;Young, 2007;Hodgkin et al., 1997;Kavosi et al., 2019). ...
Article
Purpose Owing to the rising costs and shrinking budgets; inefficiency can be observed in the financing and delivery of health service both in the private and public sectors, which is not only causing organizations to reconsider their management patterns but also to use new strategies to achieve competitive merits in the current world of business. Outsourcing is one of the best alternates. The purpose of this paper is to study: the nature and magnitude of outsourcing of health-care services in a Smart City of Eastern India; the motives behind outsourcing: and the factors affecting outsourcing decisions. Design/methodology/approach The study was conducted in Bhubaneswar, a Smart City of Eastern India and capital of Odisha State. Data relating to the outsourcing of health-care services were collected from 40 hospitals (each having a minimum of 10 beds) through a structured schedule. Descriptive statistics were calculated through Statistical Package for Social Science to substantiate the objectives. Findings Most of the clinical services were outsourced by small hospitals, while a significant portion of non-clinical services were outsourced by large and medium hospitals. Reduction in cost and better management control were the major driving forces of outsourcing. Loss of control over service providers and quality of measurement were considered as the main disadvantages in the decision-making process of not outsourcing the services by hospitals. Originality/value The study is the first-ever survey based on empirical evidence about the state of facilities management services outsourced in public and private hospitals in Odisha, India. The paper concluded that the effect of outsourcing did not synchronize successfully as shown in international literature.
... Therefore, in a restrictive financial situation and with the human resources redeployment, outsourcing seems to be a way of allowing hospital operations to concentrate on medical care by contracting out services, including equipment maintenance, biological cleaning, and medico-technical operations. 2 Today, institutions aim to extend subcontracting to high-risk areas such as sterile chemotherapy production Guimarâes and Crespo de Carvalho. 3 Indeed, the production of sterile chemotherapy preparations requires many staff and expensive technological equipment. Outsourcing the production would reduce risks linked to low production, allocate time gained on pharmaceutical tasks, absorb costs involved in this activity, upgrade technical skills as well as redistribute staff to other areas of the order site Galy et al. 4 Following these costs arguments, our hospital management suggested outsourcing the pediatric and adult sterile chemotherapy preparation activity to another hospital. ...
Article
Full-text available
The main purpose of this study was to carry out a global risk analysis (GRA) on the subcontracting circuit to determine and evaluate the risks linked to the future subcontracting process and to propose corrective actions for the most critical risks to ensure safety. This study must allow to conclude in an objective way to the feasibility or not of this project. A GRA was performed, conducted by a multidisciplinary working group that met in 20 meetings, corresponding to about 50 h of work. We identified 92 scenarios: 13% of scenarios had an initial criticality C1, 40% C2, and 47% C3. The GRA shows that the riskiest scenarios concern the management, material, and equipment with IT system and logistics with transport. The working group identified 25 corrective actions. After implementing those actions, 85% of scenarios had residual criticality C1, 8.5% C2, and 6.5% had residual criticality C3. The working group chose that it was impossible to subcontract part of the activity. The GRA conducted in this study highlighted the risks related to outsourcing this activity, evaluated and prioritized them, and recommended corrective actions. Therefore, we conclude that subcontracting the totality of sterile preparations would be harmful to patient care quality and reactivity for vital medical emergencies, such as macrophage activation syndrome, preparation of clinical trials, graft rejection therapies, preparation of very short stability chemotherapy, and the pediatric graft conditioning chemotherapy.
... Outsourced medical services included pharmacy, nursing, laboratory, radiology, ambulance, pathology and anaesthesia (Moschuris and Kondylis, 2006;Hsiao et al, 2009;Ayaad, 2018). Supportive services included information technology, laundry, security, legal, maintenance, catering, accounting, and education and training (Diana, 2009;Guimarães and Carvalho, 2011;Ikediashi et al, 2012;Clear et al, 2013;Agwu, 2016;Mujasi, 2016;Mujasi and Nkosi, 2017). The highest number of studies had been performed on the outsourcing of information technology services, which is likely because this area is rapidly advancing (Ayaad, 2018;Al-Ruzzieh et al, 2020;Sharikh et al, 2020). ...
Article
The outsourcing of services in the healthcare sector needs to be thoroughly investigated and comprehensively reviewed to determine the advantages, disadvantages and challenges for healthcare providers. This review explores outsourcing in the context of healthcare services, with the aim of helping managers to understand and facilitate service outsourcing effectively within their healthcare organisations by maintaining the balance between maximising benefits and minimising risks.
... Anyway, social costs also include other indirect costs linked with the new system configuration (e.g., the level of service perceived by the patient, quality and safety of drug administration to patients, the cost for the society of out-of-date drugs, etc.). It seems consensual, by analysing the literature (Colonna and McFaul, 2004;Kremic et al., 2006;Schneller and Smeltzer, 2006;Kumar et al., 2008;Roberts, 2011;Guimarães and Carvalho, 2011;Eroglu et al., 2017), that the new centralised logistic configuration coupled with the outsourcing of hub logistic operations, will benefits from more flexibility, access to world class expertise (the logistic provider managing the new hub) and increased focus on core activities (by reducing non-value adding activities for nurses and other healthcare professionals). These benefits will of course increase the social sustainability of the new system if compared with the traditional configuration. ...
... Anyway, social costs also include other indirect costs linked with the new system configuration (e.g., the level of service perceived by the patient, quality and safety of drug administration to patients, the cost for the society of out-of-date drugs, etc.). It seems consensual, by analysing the literature (Colonna and McFaul, 2004;Kremic et al., 2006;Schneller and Smeltzer, 2006;Kumar et al., 2008;Roberts, 2011;Guimarães and Carvalho, 2011;Eroglu et al., 2017), that the new centralised logistic configuration coupled with the outsourcing of hub logistic operations, will benefits from more flexibility, access to world class expertise (the logistic provider managing the new hub) and increased focus on core activities (by reducing non-value adding activities for nurses and other healthcare professionals). These benefits will of course increase the social sustainability of the new system if compared with the traditional configuration. ...
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Background: Outsourcing as an effective strategy in public management has attracted policy-makers. Awareness of quantity and quality of implementing this strategy can help policy-makers and managers to remove barriers to this policy. This study aimed to investigate outsourced services and the applied models in Bushehr University of Medical Sciences. Materials and Methods: This descriptive cross-sectional study was carried out in Bushehr University of Medical Sciences in 2019 in four separate steps of literature review, shortlisting outsourceable services, data quality assurance and categorization of outsourced services into clinical and non-clinical services. Finally, the collected data were entered into Excel® version 8 to calculate and report descriptive indicators. Results: Result showed that totally 24 types of services have been outsourced. Half of them were clinical and the other haf were non-clinical. Among the outsourcing models, service purchasing model and management outsourcing model were the most and the least applied models, respectively. Conclusion: Although various outsourcing models are available, the type and the number of outsourced services are still limited. Given the diversity of services in health sector especially clinical services, it is possible to use the capacity of outsourcing strategy more effectively. زمينه: برونسپاری به عنوان يک استراتژی مؤثر جهت افزايش کارايي در سازمانهای دولتي مورد توجه سياستگذاران واقع شده است. آگاهي از کميت و کيفيت اجری اين استراتژی مي تواند به مديران و سياستگذاران کمک کند تا نسبت به رفع موانع اين راهبرد اقدام کنند. هدف از اجرای اين مطالعه بررسي انواع خدمات واگذار شده و مدلهای مورد استفاده در واگذاری آن خدمات در دانشگاه علوم پزشكي بوشهر مي باشد. مواد و روشها: اين يک مطالعه توصيفي است که بصورت مقطعي در سال 1398 در دانشگاه علوم پزشكي بوشهر در چهار گام مجزا شامل مرور ادبيات موضوع، احصا ليست خدمات قابل واگذاری، تضمين کيفيت داده ها و تقسيم بندی خدمات در گروه خدمات باليني و غيرباليني انجام شده است. در نهايت داده های جمع آوری شده وارد نرم افزار اکسل ويرايش 8 گرديد و شاخصهای توصيفي مورد نياز محاسبه و گزارش گرديد. يافته ها: نتايج نشان داد که در مجموع 24 نوع خدمت با مدل های متفاوت برونسپاری گرديده است که نيمي از گروههای خدمتي، باليني و نيم ديگر غيرباليني بوده است. بيشترين تعداد واگذاری با استفاده از روش خريد خدمت صورت گرفته است در حاليكه واگذاری مديريتي کمترين روش مورد استفاده بوده است. نتيجه گيری: اگر چه مدلهای متفاوتي برای برونسپاری خدمات وجود دارند اما نوع و تعداد خدمات برونسپاری شده همچنان محدود است و با توجه به تعدد خدمات در حوزه سلامت خصوصاً خدمات باليني، از ظرفيت اين رويكرد به نحو مطلوبتری مي توان استفاده کرد.
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Outsourced clinical and nonclinical services have become widespread since the beginning of the Healthcare Transformation Project in the 2000s in Turkey. The objective of ensuring efficient use of resources requires the control and auditing of outsourced clinical and nonclinical services in healthcare organizations. However, there has been no study performed on the effectiveness of inspections and audits of outsourcing in healthcare organizations. Therefore, the control and auditing of outsourced services in healthcare organizations constitutes the subject of this study. The purpose of the study is to assess whether the ISAE 3402 standard is applicable for the control and auditing of support services purchased in private healthcare organizations and to explain through a model how the ISAE 3402 standard will be implemented. To achieve the objective of the study, a survey was conducted on the managers of 25 private healthcare organizations that are included in a Private Healthcare Group with a Hospital Chain. (The private healthcare group did not give consent to the disclosure of its title.) The data obtained were analyzed by using cross-examination, single and multiple frequency analysis, and descriptive statistics. As a result of the analysis of the data obtained from the study, it was revealed that nearly half of the private hospital managers who participated in the study had heard about the ISAE 3402 standard and the vast majority believed that the assurance engagement conforming to this standard was feasible in the private healthcare industry. Moreover, it was explained via a model how the ISAE 3402 Standard would be applicable.
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