10 outsourcing myths that raise your risk: hospitals should be wary of common myths that can cause them to make missteps in developing clinical service outsourcing arrangements

Such misconceptions form the basis of the outsourcing myths that many hospital leaders too willingly accept today. This discussion focuses on 10 of the most commonly accepted myths. By recognizing the fallacies in each of these myths, hospital leaders can take advantage of important opportunities to fortify their outsoureing arrangement against risk.

MYTH # 1: The most important factor in selecting an outsourcing provider is cost-efficiency--get the lowest price for the broadest scope of services possible. Obviously, price and scope of services are important. But intangibles such as reputation, quality of service, and depth of experience are also critical. The two most important risks that a hospital faces when it enters an outsoureing relationship are profitability risk and liability risk, and these can dramatically affect the ultimate cost.

Profitability risk includes the financial losses a hospital could suffer as a result of a bad outsoureing relationship. Such losses could derive from delayed and lost collections, tarnished reputation, lost referrals, damaged morale, and personnel turnover. A hospital can lose significant income when outsourcing turns sour, and recovering the financial losses later can be difficult, if not impossible.

Liability risk includes the potential liabilities a hospital can suffer as a result of the actions of its outsourcing provider. In particular, such risk can be of a regulatory nature. Because most healthcare regulation is aimed at the facility level, many outsourcing companies are unregulated, and an outsourcing company's noncompliant activities could become a regulatory problem for the facility. Further, in many situations hospitals can have vicarious liability for the actions of outsourcing providers.

Suggestion: When deciding how to outsouree a service, remember that intangibles are key. Take time when considering the contract price to also identify the potential profitability and liability risks.

MYTH # 2: The best way to select an outsourcing provider is to have the hospital administrator make the decision. The administrator may well be the appropriate person to lead the process, but the issues raised by an outsourcing relationship cross multiple departments. A hospital's risk manager, for example, may end up dealing with the results of the outsourcing relationship long after the relationship has ended. Also, morale issues can develop quickly if physicians are surprised with a significant new outsourcing relationship or are required, without being consulted, to use an outsourcing provider that delivers inconsistent service or that they perceive has a poor reputation.