BPO Make vs. Buy: How Small Medical Practices Can Benefit from Outsourcing

If you think the old adage, “If you want a job well done, do it yourself,” applies to medical practices, think again. The healthcare landscape has become increasingly competitive and fast paced. With ever changing insurance rules and government regulators breathing down their necks, physicians are in a quandary. How can they provide quality patient care while performing the time intensive, sometimes tedious job of operating a successful practice? Enter BPO, commonly known as Business Process Outsourcing of services.

Outsourcing is certainly not new. In fact, it is a tried and true concept that has been embraced by corporations fighting to gain a foothold in our cost-conscious and competitive climate. Indeed, the big companies have learned that the cost efficiency and increased revenue realized from outsourcing services can take an organization to the next level and catapult them ahead of their competition.

From Revenue Cycle Management (RCM), Financial Control & Bookkeeping, Clinical Compliance & Meaningful Use (MU), Practice Marketing and even remote-based Virtual Scribes, small and mid- sized medical practices have begun to realize that they too can reap benefits from outsourcing functions within their essential practice workflow. When physicians and their staff rely on outsourcing an array of complex and crucial services to outside experts, they are relieved of the burden of performing administrative tasks and are able to focus more fully on providing patient care. While reaping increased efficiencies and reducing mistakes, physicians can see more patients, provide quality care and boost patient satisfaction—all of which are assets to the bottom line.

Today, we launch a four-part blog series dedicated to examining the growing trend of business process outsourcing in the medical industry. This blog series, based on the white paper, “BPO Make vs. Buy,” authored by WRS Health Founder Lawrence Gordon, M.D., provides a detailed look into today’s options for medical practice outsourcing, exploring the benefits of outsourcing revenue cycle management services, financial control and bookkeeping services, clinical and meaningful use compliance services, marketing services and scribe and transcription services.

Part 1

B•P•O [Business Process Outsourcing]  

No, it’s not a texting abbreviation coined to communicate with each other at the speed of light. It stands for Business Process Outsourcing and it is the movement of shifting an organization’s fixed cost related services to external sources. BPO is a relatively new term that has its origin in the more well-known term – outsourcing.

Driven by unprecedented advancements in technology, the BPO model has served corporate giants well. BPO has provided proven and effective solutions for businesses across all industries and sectors, ranging the gamut from IT companies, such as IBM, to consumer goods titans, including Coca Cola.

In comparison, the healthcare sector has been slow to enter the BPO game. The reason in a nutshell: The challenges of converting fixed costs to variable costs are greater for small to medium size medical practices. It is more difficult to convert fixed expenses when you are a practice that employs only a handful of people versus a corporation with thousands of employees on the payroll. A corporation can continue to operate efficiently when it slashes its workforce, compared to a medical practice that has only one employee assigned to perform one function.

Still, small businesses, especially medical practices, are increasingly waking up to the myriad benefits of embracing outsourcing solutions. BPO is quickly becoming a real consideration for an increasing number of small businesses, including medical practices. Simply put: when you purchase services from someone else, you use only what you need. When the entire business solution is handled by an external company, the rewards are greater.

BPO BENEFITS TO A SMALL PRACTICE? DO THE MATH

The basic premise of BPO allows an entity to convert a fixed cost to a variable cost. BPO provides the ability to modulate your expenses with the rise and fall in your volume. The cost efficiencies and the expertise offered via BPO have a positive impact on your Return on Investment (ROI).

In a New York Times article, entitled “The Benefits of Outsourcing for Small Businesses,” the author states, “Cost-cutting may not be the only reason to outsource, but it’s certainly a major factor. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of your business…. An outside provider’s cost structure and economy of scale can give your firm an important competitive advantage.

What are fixed costs? Fixed costs are those costs that do not vary with volume. Take the case of a receptionist who works a shift from 8 a.m. to 4 p.m., five times per week. You pay the employee the same salary, whether you see one or 50 patients. Variable costs are those costs that vary directly with volume. For example, if you pay five dollars per unit for immunizations, your total cost for 20 immunizations is $100.

WASTE NOT, WANT NOT

By using only the services you need, you eliminate waste. Outsourcing enables you to take a fixed staffing cost and replace it with a variable cost. As such, the practice does not have to hire an employee for $50,000 per year, thereby eliminating the need to pay for health and other HR benefits as well as the physical space to house them. In addition, you don’t have to allocate time to manage hiring, firing, training, scheduling, etc. By outsourcing medical billing, medical practices can save thousands of dollars in annual salary and benefits, as well as the overhead costs for office supplies, furniture and computer equipment.