Is Outsourcing an Answer to Financial Pressures Post-Pandemic?

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By Peyman Zand | Jul 29, 2022

4 minute read EHR/EMR| Blog| IT Advisory

An interesting thing happened as the pandemic began to fade. The optimism of going back to the normal routine, which excited most leaders, quickly faded in several ways.  

First, the uncertain economic conditions, unprecedented inflation and lower than anticipated patient volumes in the hospitals made leaders jittery about the recovery and the timing. When leaders announced back-to-the-office timelines for remote workers, they were met with serious resistance.   

To exacerbate this situation, attracting new talent became more challenging as healthcare faced competition for shared services talent from other industries who were not requiring workers to be on site. Furthermore, many other industries and companies were willing to pay higher wages and were continuing to allow remote work, which increased the cost of labor when money was already tight.   

Addressing the challenges of financial resiliency and talent shortage will require extraordinary approaches not only to manage through but to continue to innovate and move healthcare technology beyond the status quo. One approach worth considering through a new lens is partial IT outsourcing.  

Dysfunctional outsourcing partnerships  

Many organizations have been scarred by outsourcing contracts that ended up costing them far more than expected. Perhaps they delayed exiting contracts in a timely manner, they became too dependent upon contractors, and the separation costs became too high. Losing that talent and intellectual capital could put innovation and competitive advantage at risk.  

Now, however, as organizations struggle to attract talent and the burnout ratio of the existing resources are at a critical level, they are rethinking outsourcing. Outsourcing can be a smart strategic play, but here are the top three reasons that outsourcing relationships fail: 

  • Communication. The most basic and common reason outsourcing fails is because there is a lack of understanding around processes (how will the partnership work) and documenting the intended outcomes (what are the expected results). This shortcoming falls on both the vendor and the client. 
  • Change management. Either partial or complete outsourcing of services can be a huge change, and lack of focus on organizational change management and the impact on employees, providers and patients can damage an organization’s culture and reputation. 
  • Expectations. Managing and establishing clear expectations are a must. If the timing of synergies or project rollouts are unclear, then long-term contracts can lock both parties into these unknowns. 

Healthy outsourcing partnerships 

The flip side is outsourcing can be a win-win situation for those involved, because with the right partner and service levels that make sense, healthcare IT operations and strategic projects can be managed with quality and efficiency in mind.  

That’s why we recommend firms start with these three fundamental tenets when assessing outsourcing engagements.   

  1. Establish a partnership model that incentivizes both parties to be successful.  
  2. Select the right size pilot to test out the engagement and document the learning before expanding it to the rest of the organization.   
  3. Develop a flexible partnership model that allows the organization to retain a certain level of talent in the key disciplines that matter to them.  

This flexible partnership model is what we refer to as the Shared Alliance Model. 

Introducing the Shared Alliance Model 

The foundations of the Shared Alliance Model are based on proven methodologies: Lean, Just in Time (JIT) and Total Quality Management (TQM). These concepts have been used to improve operations and project delivery in many other industries – now it’s time to apply these concepts to healthcare technology operations.   

As we have talked with clients over the past few years, we have seen the need to reduce friction, lower costs, improve performance, and manage risks in order to increase successful outcomes. Our insights coupled with our years of experience in healthcare operations led us to develop this Shared Alliance Model with healthcare IT leaders in mind. 

What’s different 

The Shared Alliance Model is different than standard outsourcing models we have grown accustomed to. Here are a few benefits to this management strategy:  

  • Flexible and scalable. Reduce the time to scale resource needs of the organization up or down as needed 
  • Process-centered. Adapt methodologies and processes to the project or programs in a way that continuously measures performance 
  • Integrated system. Manage investments through streamlined governance that focuses on KPIs that will drive the right behavior for both organizations.   
  • Strategic and systematic approach. Improve the alignment of business strategy and project execution by enabling the client to retain the intellectual property while the partner reduces the burden and risks of day-to-day management of resources, projects and operations. 
  • Fact-based decision making. Reduce operational friction allowing innovations to thrive while driving best-in-class cost and service performance, benchmarked to market standards. 

A key takeaway: Shared accountability and performance monitoring are the keys to success for the Shared Alliance Model. Ultimately, the degree to which the model works in the partnership will come down to how well the client and partner are able to establish accountability and measure performance. 

How does the Shared Alliance Model work? 

So how does a client and partner achieve shared accountability and performance monitoring? How can this model work between organizations?  

The relationship begins when each organization agrees to these principles of operations:  

Shared leadership. Clients and CereCore leadership jointly make key decisions. CereCore has accountability over processes and influence over client organization and governance; clients have accountability over investment priorities and influence over functional/technical content development. 

High-performance teams (HPT). HPTs are established to build consistent, repeatable, and efficient process execution. HPTs stay together for extended periods of time as work flows to the teams. Team members build deeper functional and technical skills. HPTs can work in Agile or Waterfall models and include all partners.  

HPT workspace. Team workspace is provided for more efficient use of technical and functional resources, maximum communication, knowledge sharing, and to reduce administrative overhead. HPT workspace can be constructed in a remote setting with diverse teams across geographies. To promote collaboration, teams must come together at certain intervals to promote greater teamwork and role flexibility. 

Integration of competencies. All necessary competencies (alliance team members, client partners, and key vendors) work together on teams and share responsibility for project deliverables. 

Centralization of work processes. The development and support of enterprise work processes are centralized into the Shared Alliance Model, which provides critical mass to enable greater efficiency, utilization, and control of resources. 

What about the cost? 

The Shared Alliance Model approach allows client organization to control costs and outcomes because of the visibility given into rates, projects and resources, and KPIs to measure results. The vendor partner provides the flexible resource model for both the projects and the operation of the organization.   

Alliance models that are executed properly are cost neutral and lead to cost reduction over time when considering the operational improvements that are natural byproducts of the model. The predictable structure and fixed costs associated with the execution of the Shared Alliance Model makes it a strong management strategy, especially during times of financial uncertainty.  

The bottom line 

The Shared Alliance Model addresses both financial uncertainties and resource challenges that healthcare organizations are facing. This flexible sourcing model allows organizations to ramp up and down as needed during uncertain times, allowing them to: 1) manage and, if needed, reduce their structural costs while giving them the ability to 2) bring the right talent quickly and efficiently to key projects and operational needs.  

This model has one other major advantage that is perhaps the most important one for healthcare organizations who are charting new territory — the ability to innovate.  By partnering with CereCore, organizations are able to spend less time on day-to-day operations and bring the right talent and thought leadership to help them in key future initiatives. This is the next level of partnership. 

About the Author:
Peyman Zand

CSO, CereCore

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