Probing Question: Is Outsourcing of Health Care Services Bad?

In recent years, call centers staffed by non-native English speakers have been the butt of jokes about outsourcing. But do these jibes reflect a real problem, especially when it comes to health care services?

According to Jonathan Clark, assistant professor of health policy and administration at Penn State, it depends.

Clark notes that outsourcing in the health care industry is becoming increasingly common.

“If you’ve had an X-ray taken at a hospital in the past decade, the chance that it was read by a radiologist elsewhere in the world is pretty high,” he says. “That’s because around 90 percent of hospitals in the United States now outsource some portion of their radiology services.”

And that’s not all. Clark points out that hospitals also outsource in other areas, including their anesthesiologist staffing and emergency physician staffing. In those cases, “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.”

“If you’ve had an X-ray taken at a hospital in the past decade, the chance that it was read by a radiologist elsewhere in the world is pretty high.”

Outsourcing can save companies money and improve their capabilities, Clark asserts.

“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.”

However, notes Clark, the benefits of outsourcing are less clear when the products or services are not commodities.

“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.”

Clark has examined the notion of outsourcing radiological services closely in his research and has found that the efficiency with which a radiologist reads an X-ray or an MRI depends on how much experience he or she has with a specific hospital, not just on how many reads he or she has done overall.

“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.”

Although Clark’s research shows that outsourcing radiology services is potentially beneficial, he believes there could be some problems associated with outsourcing other types of health care services.

“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.

The bottom line? Says Clark: “I believe outsourcing is something we should think about, especially when it fuels efficiency and expands access to health care, but we need to be intelligent about it so as not to put patient safety at risk.”
Jonathan Clark is assistant professor of health policy and administration and holds the Gregory H. Wolf Professorship in Health Policy and Administration. He can be reached at jrc24@psu.edu.

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