A late starter in the adoption of advanced operating models (such as shared services and outsourcing), the healthcare sector has significantly evolved in maturity and is now poised to take it to the next level by leveraging the experience of other industries and redesigning service delivery for industry-specific functions. A recent survey of 650 respondents across enterprises, service providers, and industry influencers provide actionable insights.
The healthcare industry is in a flux with payers, providers, and life sciences companies witnessing unprecedented changes in their business environments. This calls for pushing boundaries and the development of new operating capabilities. Much of the growth in advanced operating models such as shared services and outsourcing has traditionally been in horizontal functions such as finance and accounting, human resources, and IT. However, with the maturation of experiences in advanced operating models, industry-specific functions are increasing in scope and scale through “industrialized” operations – a combination of process, technology, and analytics. To better understand these trends, the Everest Group and the Shared Services and Outsourcing Network (SSON) conducted the first-ever survey1 focused on industry/vertical-specific strategies in shared services and outsourcing. The research provides a comparison of respondent opinions across three groups: Healthcare and Life Sciences companies, all companies, and self-reported “mature organizations” that have more representation than large organizations with a higher degree of centralization.
Levers for process optimization
Process optimization remains the most important area of focus across all industries. When asked about the “top three areas for optimization of service delivery", the healthcare and life sciences industry seems very focused on the adoption of new tools and technologies (73% of respondents compared to 50% for other industries). Technological shifts, like social media, mobile, and digital technologies, are transforming the landscape of healthcare service delivery. Implementing new tools and technologies emerged as the second most important initiative for healthcare and life sciences companies following reengineering and standardization, and was ahead of consolidation and centralization.
Interestingly, business intelligence and analytics were indicated as a “top 3” by only 14% of respondents in healthcare (compared to 28% across all industries), and collaboration with business users was also comparatively lower (23% vs. 44% for “mature” companies) – perhaps reflecting the relatively transactional nature of delivery models in healthcare and life sciences.
While centralization and consolidation, reengineering and standardization, and offshoring or nearshoring were highlighted as the most important initiatives for healthcare payers, for providers, it was reengineering/standardization, followed by implementing new tools and technologies.
Increasing scale and scope: Moving beyond low-hanging fruit
Historically, much of the growth in shared services and outsourcing has been oriented along traditional “horizontal” functions such as finance and accounting, human resources, and IT— all of which show consistently high levels of adoption across industries. Healthcare is similar to other industries in this regard. Day-to-day purchasing and requisitions management, for example, together with payroll, benefits, employee data management, compensation, and recruitment, are the most commonly included procurement processes in scope for outsourcing contracts or shared services for healthcare and life sciences companies. Life sciences companies have also taken the lead in including F&A processes, like payables, receivables, general ledger, and fixed assets, in global business service delivery models.
The survey results also show the increasing adoption of higher-touch, judgment, and knowledge-based processes like audit, risk management, budgeting, and forecasting in F&A; strategic sourcing in procurement and employee relations and performance management in HR are also being frequently included in scope for advanced operating models, including outsourcing and shared services.
However, healthcare related industries’ adoption of advanced delivery models in industry-specific functions is much slower than other industries. The results, however, are not homogeneous between healthcare providers, payers, and life sciences companies. Revenue cycle management for providers, claims processing and management for payers and clinical trials, and pharmacovigilance for life sciences companies are some of the key areas where early adopters have met with success.
Conclusion: The path forward
There is a clear trend toward the advancement of operating and delivery models in functions such as Revenue Cycle Management (RCM) (eligibility, billing, coding, receivables, and payer services), claims processing and management, clinical trials, and pharmacovigilance.
With the maturation of practices evidenced by the significant adoption of horizontal functions, including high-touch functions, the healthcare sector can gain significantly by leveraging knowledge accumulated in industries where the transformation started earlier. Combining this experience with a clear understanding of the strategic needs unique to the company can help craft the right strategy for a target-operating model.
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- The survey conducted in 2012 polled 663 executives (as well as their advisers) in charge of strategic sourcing/procurement, vendor management, corporate strategy, and shared services/captives in 28 industries.
- Operating models – Shared services, outsourcing, or global business services.