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| OUTSOURCING
IN OPTHAMOLOGY PRACTICES
Certain functions obviously require expertise beyond the capabilities of the ophthalmologist and the practice staff, such as accounting, legal, and equipment maintenance services. But what about other services, such as personnel, special testing, billing, transcription, etc.? How do you know when it is a good business decision to outsource these services? Three Major Reasons to Outsource Performance, cost, and quality of life are the criteria to consider in evaluating an outsourcing decision. The choice to outsource is not always a clear-cut decision. There is usually interplay among the three factors of performance, cost, and quality of life. For example, if you outsource billing and the cost is slightly higher than the cost of doing it internally, but the performance is significantly higher, outsourcing becomes an easy choice. Similarly, if a practice is achieving optimal collection performance at a cost near the outsourced cost, but staff time could be more economically used elsewhere, then outsourcing may make sense. Analyzing each business process will help you determine what to keep as part of your internal operations and what to outsource. Performance
If there are processes that you cannot perform adequately, no matter what resources you apply, or processes that will clearly be performed at a higher level if outsourced, the decision is relatively simple‹simple, that is, if increased performance will make a difference in your practice. Cost
If outsourcing will significantly lower the cost of performing the process (without impairing performance), then outsourcing makes sense. Some of these services might include more sophisticated computer systems and technical staff, as well as systems or staff to manage your computer, tax preparation, and financial performance. Quality of Life
Although some services are more cost effective when performed in the practice, the time taken by the physician and manager to either perform or manage them has a negative impact on the staff’s primary mission, and a potential erosion of well-being occurs. Similarly, certain tasks, competently performed by an outside contractor, will usually improve the morale of practice staff (such as office cleaning). Conversely, a regularly repeated task, done internally and not done well, can lower morale (such as staff payroll and taxes). What Services Are Outsourced? The services most commonly outsourced are legal, accounting, billing and receivables management, bookkeeping, payroll, laundry, eyeglass lens production, office cleaning, staff (leasing), and clinical laboratory. Other services that are not common to all practices but that are often outsourced include various management services, such as consulting for a specific ongoing project management. The example below demonstrates how performance, cost, and quality of life can be used to make these decisions. Legal and Accounting Performance Cost For example, demand itemized bills from your attorneys, listing the time spent and the legal matter concerned. Review these listings and determine if you could shorten the attorneys’ future time by providing more information or preliminary work from the physician and staff. Another cost-saving measure is to employ a law firm geared to providing efficient and effective services, limiting attention to matters that really require expertise and spending no more time than necessary on those matters. Our experience, by the way, is that most law firms specializing in the representation of physicians meet these criteria. Be wary of “healthcare” attorneys whose major clients are hospitals, insurers, or healthcare businesses. Quality
of Life Bookkeeping Performance A decrease in the level of performance most commonly shows up not in bookkeeping per se but in other business processes that cannot be adequately performed because of the bookkeeping responsibilities. A common pitfall is to focus on a mechanical task like bookkeeping and to postpone more difficult tasks within the practice. Cost Quality
of Life Payroll Closely related to bookkeeping, this task has its own nuances and opportunities for problems along with many regulatory, tax, and record-keeping issues. Performance Cost Quality
of Life Billing and Receivables Management This is the operation at the center of the practice's financial performance and is one of the most anguished-over outsourcing decisions. Performance Another aspect of performance is proper checks and balances in the billing process. Charge entry and payment posting should be performed by two different staff members. This is a basic rule of embezzlement protection. In a solo practice, there is generally an insufficient number of staff to allow separate performance of these functions, even if part-time employees or employees with split responsibilities are used. Consequently, the billing process cannot meet commonly accepted standards of performance in the area of embezzlement prevention unless inordinately high costs are incurred for extra staff. Yet another aspect of performance includes expert systems and staff expertise. The billing company may have computer capabilities beyond those afforded by the typical practice computer system and staff. Data analysis and interpretation may be provided as a part of the standard billing package, offering aspects of performance not achievable by the practice on its own. Cost
This analysis assumes that the collection performance of the outsourcing vendor and the practice's internal business office are equal. If the practice is having any difficulty achieving its targeted collections, the decision to outsource should offer an expectation of improved performance. Another aspect of the cost comparison is in the area of staffing. The $35,000 staff cost in the example above reflects salary and benefits for one full-time biller and a portion of the employee cost for adding a second staff member to assure an embezzlement-proof process. The cost impact to the practice of any staff turnover in the business office will be significant. The training of a new staffer in the computer system and in the business processes of the practice will take time‹time for which the practice will pay. This is also an area that impacts performance. Quality
of Life Due Diligence The key steps in evaluating outsourcing decisions include the following: Keep it simple at the beginning. Eliminate risk by selecting projects that will not undermine the practice if the outsourcing decision or if the vendor selected proves to be a mistake. We suggest that payroll, transcription, and equipment maintenance are good beginning outsource projects. Make sure you do thorough research on the vendor.
Use this table, adding your own criteria to these, as well as any other practice operations you find appropriate for outsourcing. Ron
Rosenberg, PA, MPH, Author, Practice Management Resource Group |
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