Cutting medical transcription costs: one health system is saving up to 38 percent on its medical transcription costs by using home-based, production-based full-time employees - Feature Story

Healthcare Financial Management, July, 2003 by John A. Forsman, Jr.

Looking for ways to cut costs has become second nature to healthcare providers. One area often overlooked as a substantial cost-saving opportunity is medical transcription. At one time, most medical transcription was performed by in-house employees. Then a trend toward outsourcing began. One health system now is reducing its costs by bringing medical transcription back home.

Saint Barnabas Health Care System (SBHCS), the largest integrated healthcare provider in New Jersey, continually is challenged to reduce expenses and efficiently use revenue to ensure high-quality patient care for its more than million patient visits each year. In 2000, SBHCS began a comprehensive evaluation of the cost-effectiveness of its transcription services. Three of the system's largest acute care medical centers were enrolled in the National Medical

Transcription Benchmarking Study, codeveloped by a consulting firm and a leading not-for-profit group purchasing organization. At the time, the three facilities--the 602-bed Newark Beth Israel Medical Center, the 620-bed Saint Barnabas Medical Center in Livingston, and the 528-bed Monmouth Medical Center in Long Branch--were outsourcing their health information management (HIM) medical transcription.

The benchmarking study evaluated transcription quality, turnaround time, productivity, and, most importantly, all-inclusive costs over the previous 12 months. The study provided a comprehensive statistical breakdown of all transcription costs and production and procedural information, and determined the key comparative bottom-line statistic, total cost per transcribed character. The study's final report compared each facility with the study average and the three best facilities in the study that have similar demographics.

The study results for SBHCS showed the three facilities were paying 28 to 36 percent more than necessary when compared with a best-practice model. Yet the facilities were receiving legitimate physician complaints about quality and turnaround time. Fortunately, the study identified best practices to cut an estimated $2.8 million over five years. Equally important, the best practices promised to improve quality, reduce turnaround time, and return control of information to each facility. SBHCS immediately began converting the facilities' medical transcription operations from an outsourced function to one that employs home-based, production-based medical transcriptionists.

Beginning six months after implementation at each of the three facilities, cost savings have been thoroughly audited and reconciled. The cost analyses show more dramatic cost savings than originally projected. After using the model for nearly two years, the facilities are achieving savings of 33 to 38 percent. The savings are expected to surpass $3.2 million over the next five years.

Heads or Tails

Previously, the two primary options for medical transcription were to operate an internal department of medical transcriptionists and supervisors or outsource the function. Each option offers distinct advantages and inherent deficiencies.

Internal departments, when run efficiently, provide limited cost advantages over outsourcing and allow an organization to control information and turnaround time. Also, because departmental transcriptionists become familiar with an organization's processes, procedures, and medical staff, they achieve a higher degree of accuracy, consistency, and quality. However, high costs of physical space and constant upgrades for transcription equipment, as well as hiring, training, and retaining qualified transcriptionists and supervisors, have pushed the industry toward outsourcing.

Organizations have turned to traditional outsourcing to ease their internal management responsibilities, lock in predictable annual costs, and reduce their physical space requirements and equipment expenses. However, rising outsourcing costs, sometimes -unsatisfactory quality, and lack of control over information and turnaround times are drawbacks of traditional outsourcing.

The linchpin of any solution embraced by SBHGS had to be significant annual cost reductions, although other considerations also would weigh heavily. First, using the results of the benchmarking study as a statistical foundation, SBHCS conducted comparative analyses of various medical transcription models and examined the average total cost per character for:

> Total department outsourcing

> Full-time employees based on site (in-house)

> Part-time employees on site and/or at home

> Independent contractors

> Home-based, production-based full-time employees

SBHCS found that home-based, production-based transcription costs nearly 37 percent less per character than total department outsourcing and 31 percent less than full-time department-based transcription. Additionally, the pro ductivity of home-based transcriptionists is 39.4 percent higher than that of office-based transcriptionists, further expanding the bottom-line savings by producing the same amount of work with fewer employees.