Optimizing Cost Savings in the Healthcare Industry through Nearshore Outsourcing: A Case Study

April, 2024

The healthcare industry is facing increasing pressure to reduce costs and improve efficiency, while maintaining high standards of quality and patient satisfaction.

One of the ways that healthcare organizations can achieve these goals is by outsourcing some of their non-core functions to external vendors, such as IT, billing, customer service, data entry, and transcription. However, traditional offshore outsourcing models often pose challenges in terms of communication, cultural differences, time zones, and regulatory compliance.

In this case study, we present how a leading healthcare provider in the United States leveraged nearshore outsourcing to optimize its cost savings and operational performance.

The Client

The client is a large healthcare organization that operates several hospitals, clinics, and nursing homes across the US. The client offers a wide range of services, including primary care, specialty care, emergency care, surgery, rehabilitation, and home health. The client has over 20,000 employees and serves more than one million patients annually.

The Challenge

The client was looking for ways to reduce its operational costs and streamline its processes, without compromising the quality of its services or the satisfaction of its patients. The client identified several areas where outsourcing could potentially generate significant savings and efficiencies, such as IT support, medical coding, billing, customer service, data entry, and transcription. However, the client also recognized the risks and limitations of traditional offshore outsourcing models, such as:

  1. Lack of alignment with the client’s business objectives, culture, and values
  2. Communication barriers due to language differences and accent issues
  3. Time zone differences that hamper collaboration and responsiveness
  4. Different legal and regulatory frameworks that affect compliance and security

Therefore, the client was looking for an outsourcing partner that could offer the benefits of lower costs and scalability, while minimizing the drawbacks of geographic and cultural distance. The client wanted an outsourcing partner that could provide:

  1. High-quality services that meet or exceed the client’s expectations and standards
  2. Seamless integration with the client’s systems, processes, and workflows
  3. Effective communication and coordination with the client’s internal teams and stakeholders
  4. Compliance with the relevant laws and regulations governing the healthcare industry

Recommendation: Nearshore Outsourcing Solution

Our team proposed a nearshore outsourcing solution that met the client’s requirements and objectives. Nearshore outsourcing refers to outsourcing to a nearby country that shares similar cultural, linguistic, and legal characteristics with the home country. We recommended outsourcing services from delivery centers in Mexico, which is obviously close to the US both geographically and culturally. We highlighted the advantages of nearshore outsourcing over offshore outsourcing, such as:

  1. Lower costs due to lower wages, taxes, and overheads
  2. Similar time zones that facilitate real-time communication and collaboration
  3. Cultural compatibility and affinity with the client’s values and expectations
  4. Fluent English speakers with neutral accents and strong communication skills
  5. Familiarity with the US healthcare system, standards, and regulations

Key Considerations

While we have already touched on the various benefits of nearshoring, there are also challenges that need to be addressed and managed by both the client and the service vendor. In this section, we will discuss some of the possible challenges that may arise when collaborating with a nearby service vendor, and how they can be mitigated.

  1. Change management and stakeholder engagement: The client, depending on if it is the first time sourcing nearshore, may have to manage the expectations and concerns of its various stakeholders, such as its executives, employees, customers, and partners, who may be resistant or skeptical about the near sourcing solution.
  2. Legal and regulatory compliance: The nearshore service vendor may have to ensure compliance with different regulations, standards, and policies than the client, which can involve additional documentation, verification, and auditing. This can increase the complexity and risk of the outsourcing contract, as well as the cost and time of the service delivery.
  3. Technical and operational challenges: The service vendor may have to deal with different systems, tools, platforms, and processes than the client, which can require adaptation, integration, and customization.

To mitigate these issues, it is imperative for the client to consider the following:

  1. Prior to beginning the service vendor selection process, conduct a thorough review and assessment of its needs, requirements, and expectations. This will be vital in aligning its needs with the potential service vendor’s capabilities, resources, and goals.
  2. During the selection process, provide a list of required compliance standards and certifications that the vendor should adhere in. Potential compliance standards and certifications the client may want to require include HIPAA, HITRUST, SOC 2 Type 2, PCI-DSS, ISO 900, ISO 27001/27002, COPC CX Standard, and Six Sigma. When asking about certifications and compliance, clients should confirm the date of compliance/certification, certification/audit agency name, operational areas covered, and frequency of personnel training. This will help ensure early in the selection process that the client only evaluates service vendors that are up to their standards in terms of compliance and capabilities.
  3. Share a list of required technical and operational systems and processes to the service vendor during the selection process. By providing advance notice to the service vendor, the client can confirm if the vendor is able to support and is compatible with its required software, hardware, network, security, and quality standards.
  4. During transition planning, it is important for the client to establish a clear and detailed transition plan and governance structure, with defined roles, responsibilities, timelines, milestones, deliverables, and risks.
  5. Assign a dedicated person to monitor and measure the vendor’s performance and quality of the service delivery with various metrics and reports. This will be key to ongoing service vendor management.
  6. Establish clear and frequent communication and feedback mechanisms with the service vendor, using various channels and tools, such as phone, email, chat, video conferencing, and online portals.

Significant Results

When working with our client, we followed all of the actions we had recommended above during the selection and transition planning process, allowing our client to minimize risk when transitioning and working with its new nearshore service vendor.

The nearshore outsourcing solution recommended by our team resulted in significant cost savings and operational improvements for the client. The client achieved the following benefits from the partnership:

  1. Reduced operational costs by up to 40%, due to lower labor and overhead costs, as well as improved efficiency and productivity.
  2. Increased operational flexibility and scalability, due to the ability to adjust the outsourcing services according to the client’s changing needs and demands.
  3. Improved service quality and customer satisfaction, due to the high level of professionalism, expertise, and communication of the service vendor team, as well as the adherence to the client’s standards and regulations.

The nearshore outsourcing solution proved to be a win-win scenario for both the client and our team. The client was able to optimize its cost savings and operational performance, while maintaining or enhancing the quality and satisfaction of its services. Our team was able to showcase its capabilities and value proposition in the healthcare industry.

By Audrey Zhou, Senior Consultant