Outsourcing:

A Strategic Essential in
Healthcare Systems
OUTSOURCING IN HEALTH CARE
An Overview

•WHAT IS OUTSOURCING ?

•WHY OUTSOURCE ?

•WHEN TO OUTSOURCE ?

•WHAT TO OUTSOURCE ?

•HOW TO OUTSOURCE ?

•WHOM TO OUTSOURCE ?

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WHAT IS OUTSOURCING?

• To outsource is to give, to an outside agency, the

authority and responsibility of operations, of a
department/ facility in an organization.

• To outsource is to appoint an agent to take care

of services of the organization independently or in
conjunction with the management policies and
procedures.

• To outsource is to engage skilled manpower to

cater to the requirements of an organization from time to
time for the purpose of enhancing business and/ or
efficiency within the framework of its policies and
procedures.
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WHY OUTSOURCE ?
ADVANTAGES

•Effective and efficient management of Operations

Since the activities are carried out by an outside

agency, the management has a single window contact for
the services provided which enables effective and efficient
operations.

•Minimizing long term liabilities

The agency is given the entire responsibility of

delivering the services, with clear cut expectations, the long
term liability of execution lies with it.
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Advantages Why Outsource ?
•Cost effective

Since the liability of execution is given to an outside

agency, the management has a wider scope to decide the
cost of the services it avails of.

¤ As a principal employer, minimum wages have to be

given to the workmen with respect to the rules laid down
by the respective government authorities alongwith the cost
towards compliance of various legal provisions.

¤ The services can be outsourced with material, which

reduces the cost of procuring the same.

¤ The maintenance of material is avoided,

subsequently the cost towards storage of material is
reduced.
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Advantages Why Outsource ?
•Easy to control

Since the service contract is awarded to an agency,

Management exercises control over the agency and not on
the number of workmen. The management has a liberty to
change the workforce as per the requirement.

•Scope for quality improvement:

Since the job is done by an agency there is lot of

scope for quality improvement from the point of view of
change management in all areas like manpower, systems,
materials, procedures etc.

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Advantages Why Outsource ?
•Professional out put:

Since the agency identified is professionally

managed, there is always scope for development of new
ideas and better implementation strategies.

•Better commitment towards job by staff:

With a continuous job evaluation process in place,

the agency and its workforce always shows the
commitment towards the assignment.

•Assured manpower availability at all times:

Since the responsibility of manpower allocation and

availability lies with an agency, management need not
worry about providing manpower in case of absenteeism.
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Advantages Why Outsource ?
•Minimizes union involvement:

Since the manpower is engaged by the agency, the

workforce getting affiliated to the union activity is
minimized. Chances of formation of a Union is also
minimized due to presence of various contractors.

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WHY OUTSOURCE ?
DISADVANTAGES

•Cost of training high due to floating population.

Since, the population of staff working is usually a

floating population, Cost of training and retraining can be
higher due to repetitive changes in the manpower.

•Absence of long term reliability of staff

The staff on contract may not stay with one

organization for a long time leading to a high turnover
rate.

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Disadvantages Why Outsource ?
•Confidentiality of process/systems

Since the contract is run by an outside agency,

confidentiality of the organization can be at stake.

•Permanency in the long run

If the legalities involved are not monitored properly,

it may lead to the contract workers asking for permanency
in the organization.

•Selection criteria in Emergency

In Emergency situations, when there is an

unforeseen shortage of staff supplied by the contractor, the
selection criteria may not suit the organizational policy,
affecting the quality of job.
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WHEN TO OUTSOURCE ?

•Ideally during the project stage.

Ideally, the services should be outsourced during

the project stage/ start up of the activity of the
organization. This should be done to set a trend for future
activities of the organization.

•At the time providing new service.

Outsourcing of activities of a new department/

service can be implemented at the time of its
commissioning, so as to do away with various issues
arising out of in-house development, especially with
respect to manpower.
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 •Need based

Outsourcing can be introduced for a particular

department/service, based on the need of the management.

- The need of the outsourcing depends upon the size and

When To Outsource ?

turnover of the organization .

- Need can be classified into :

a) To enhance the utilization of the service/equipment.
b) To increase the revenue for the organization.

- Proper study of the needs should be carried out so as to

enable the management to achieve its vision, mission and
objective.

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WHAT TO OUTSOURCE ?
Ideally, it is always a better idea not to Outsource the
facility viz., equipment and machinery so as to retain the
facility even if the contract ceases to exist.

The following departments can be outsourced (Facility &

Manpower), based on requirement.

CORE SERVICES:

1. Nursing (Manpower)
2. Diagnostic services (Facility & Manpower)
• Pathology Laboratory
• Radiology (X-Ray, CT Scan, MRI)
3. Pharmacy (Facility & Manpower)
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 SUPPORT SERVICES:

1. Housekeeping (Facility & Manpower)

2. Security (Manpower)
3. Ambulance services (Facility & Manpower)
4. Laundry (Facility & Manpower)
What to Outsource ?

5. Kitchen (Facility & Manpower)

6. Maintenance & Engineering Services (Manpower)

CLERICAL & TECHNICAL STAFF:

1. Front Office & Reception Staff

2. Accounts Department Staff
3. Technical Staff for Medical and Non-medical Services

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WHOM TO OUTSOURCE ?
•By inviting expertise:
One should invite experts in the areas to finalize the
related functions to be outsourced. This will help in
formulating the long term plan in outsourcing various
services in organization.

•By hiring professionals/consultants:

While outsourcing any activity, one should look for

professional expertise in the concerned area . This will help
in establishing best practices.
The consultants/professionals can be hired to provide their
expertise in the following -
- Technical know-how & support.
- Manpower support.
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 •By awarding manpower contracts

While outsourcing the function, one can go only for

manpower supply and train them to one’s requirement with
the help of the contractor. Accordingly the manpower burden
on the organization can be avoided. Over and above one can
Whom to outsource ?

enjoy manpower flexibility for effective service.

•By way of automation:

As we have seen by consulting experts, one can seek

technical know-how of certain processes involved in
automation, so the entire activity can be outsourced along
with machine and manpower. It is called Facility
Management in various services.

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HOW TO OUTSOURCE ?
•Awarding the contract for services

The contract should be awarded to right parties

by inviting tenders/quotations through advertisements.
Credentials of all competing parties should be critically
seen while awarding the contract.

•Legal compliance - contractors’ responsibility

Due care should be taken while discharging the

responsibility of legal compliance by the contractor. A
single lapse may result in being forced to regularize the
manpower on permanent rolls of the organization.

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 •Proper language while awarding the contract:

Appropriate language should be used to avoid the

relation of the contractee and the contractor while
awarding the contract. The relationship and job scope
should be clearly mentioned in the contract/agreement.
How to outsource ?

•Effective supervision over manpower:

Though the responsibility of the manpower lies with

the contractor, one has to continuously supervise over the
placement of manpower viz., right person for right job at
the right time to achieve best results.

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 •Maintenance of records:

The most important point in any relationship is

proper and up-to-date maintenance of records.
How to outsource ?

Caution!!

Thorough whetting of the agreement should be

done to do away with problems arising out of
misread clauses and terms at a later stage of the
contract.

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In-house Vs Outsourced Manpower
Details of expenditure made on staff as per Minimum
wages act applicable to zone I in Maharashtra state.
Additional expenditure may be incurred towards washing/
transport/ housing/ uniform for the workman under contract
depending on the location of the hospital setup.
An organization spends a lot more on a permanent workman
when compared to minimum wages outsourced contract
workman as mentioned here:

Minimum Wages Permanent Employee

Unskilled: 4352.00 8600.00
Semi skilled: 4520.00 9285.00
Skilled: 4673.00 14000.00
Payment inclusive of indirect expenses such as PF, Gratuity Bonus etc..

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CONCLUSION
•Outsourcing certainly helps in achieving high standards
of Best Practices.

•To achieve success through outsourcing, one has to

plan/ think and strategize right at the beginning of the
project.

•In the current scenario of changes in Labour Laws

across the country, this is the best suitable method to
avoid wastage of manpower in terms of cost and
numbers.

•This concept has been accepted worldwide, across

industries and has proved itself successful in the service
sector especially in Health Care.
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Thank You !

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