The Study on the Hospitals’ Outsourcing

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(1)2006 工研院創新與科技管理研討會. The Study on the Hospitals’ Outsourcing Pai, Jar-Yuan MHA, Dr. PH. Tsai, Tsung-Po MD, Ph D. Chung-Shan Medical University. jpai@csmu.edu.tw According to Modern Healthcares 27th annual Outsourcing Survey in USA, the number of outsourcing contracts for respondents continued to grow and the European healthcare IT outsourcing market generated revenues of US$396.4 million in 2005 and estimates they will reach US$697.7 million in 2010. This study explored the outsourcing situations for Taiwan’s hospitals, and their difference in hospital type and in accreditation level. This paper also reveal hospital satisfaction degree on non-medical and medical items of outsourcing. This research combined the questionnaire survey method, and the in-depth interview. The results showed: In non-medical items: medical reject and common reject both have the same highest percentage (94.6%) of outsourcing. The gift store (75%) and linen (73%) are on the following high. The lower percentage is the utility maintain (13.5%). In medical items, the highest rate is the ambulance (51.4%). The hemodialysis also has the higher rate of outsourcing (50%). In nutrition, pharmacy, and nurse, the outsourcing rate is lower than 3%. This showed that Taiwan’s hospitals still conservative on outsourcing medical items. The results of the satisfaction paired t test between non medical items and medical items showed the non-medical item has higher score than medical items. This research suggest that hospitals outsourcing more items as far as possible since it can bring financial and human resource saving. Keywords: outsourcing, hospitals, healthcare. Introduction. 2005 and estimates they will reach US$697.7 million in 2010. One of the strategic tools healthcare executives used to meet the cost-saving target is outsourcing. Even. According to Modern Healthcares 27th annual Outsourcing Survey in USA, the number of. though outsourcing has many benefits, outsourcing will. outsourcing contracts for respondents continued to. fail if not managed successfully. Hospital executives. grow. The 20 largest outsourcing companies reported a must choose outsourcing providers who hold the combined 11,324 Healthcare clients, up 10.6% from. necessary leadership capabilities. Managing. 10,242 the previous year. Laundry jumped ahead of. outsourcing requires an understanding of outsourcing. housekeeping as the top hospital. strategy, the benefits and risks of outsourcing, the. department-management contract in this year's annual. evaluation process, and the methods to managing. Outsourcing Survey, with a total of 4,443 contracts in. outsourcing providers. With appropriate management,. 2004. Housekeeping contracts increased 8.7% to 3,270, strategic outsourcing should provide healthcare while food service contracts increased 7.4% to. executives with a viable strategy for controlling costs. 2,065(Kirchheimer, 2005). Frost & Sullivan (2006). and maintaining quality patient care (Robert 2001,. finds that the European healthcare IT outsourcing. Quinn 2000, Jennings 1997). market generated revenues of US$396.4 million in 1.

(2) 2006 工研院創新與科技管理研討會 decision on economic principles (Young, 2003).. The most outsourced functions in healthcare are. The "severe acute respiratory syndrome" (SARS). information technology (29 percent), finance (20 percent), and support services (19 percent) (Shinkman. disease outbreak to Taiwan in March 2003 (Ksiazek,. 2000). By outsourcing, hospitals can reap the benefits. 2003), this outbreak of 21th century disease have a. of medical device reprocessing without assuming. obvious impact to hospitals’ outsourcing, Dr. Sue. additional staffing and compliance burdens,. (SARS, 2003), Director of Center of Disease Control,. Outsourcing enables hospitals to implement a medical. Taiwan, stated that the outsourcing system should be. device reprocessing program quickly, with no capital. canceled within hospitals since during this SARS strike,. investment and minimal effort( Haley, 2004). the SARS virus were transmitted to all area of hospitals. Before negotiating any outsourcing transaction,. by the improper management‘s housekeepers and the. hospital executives should carefully analyze the legal. laundry workers (they need to change the linen for the. and regulatory implications, which will vary according words). to the type of services and the vendor involved. Purposes. (Callahan, 2005) In some cases, lower bids may not mean additional savings for the outsourcer because sometimes the apparent cost of delivering a service. This study explored the outsourcing situations for. may not represent actual cost. For example, savings. Taiwan’s hospitals, and their difference in hospital type. from low-- cost wages may not compensate for the. and in accreditation level. This paper also hospital. costs incurred from turnover and quality problems that. satisfaction degree on non-medical and medical items. come from an inexperienced, poorly trained, and. of outsourcing.. unstable workforce (Mobley 2000; Allen 2000).. Samples. Young (2003) stated that Outsourcing resulted in increased staff morale, upgraded capital equipment and improved services. The outsourcing of pathology and. The research samples are from the hospital data. dental technical services aimed to increase labor. from the year 2000 to 2004, Department of Health,. flexibility, thereby decreasing costs. The outsourcing of qualify lists of accreditation from Taiwan. According to lawn mowing was simply to reduce costs. Food. Taiwan’s system, the hospitals were accredited into. services were not outsourced because there was a lack. three levels: there are medical center, regional, and. of evidence that costs could be reduced.. local. Medial center always have more than 800 beds. The Australian Government, in the health sector,. and have affiliations with medical school.. the Human Services Department directed that non-clinical and clinical areas be market tested through Methods benchmarking services against the private sector, with the possibility of outsourcing. These services included. This research combined two kinds of methods.. car parking, computing, laundry, engineering, cleaning, First one is the questionnaire survey method, and the catering, medical imaging (radiology), pathology,. second one is the in-depth interview to two CEO of. pharmacy, allied health and general practice. Managers, sample hospitals. All are medical centers with more when they choose between outsourcing, and internal. than 1000 beds, and one is not-for-profit hospital, and. servicing and production, would thus ideally base their. the other one is public hospital. 2.

(3) 2006 工研院創新與科技管理研討會 The questionnaires were mailed to all 17medial. hospital size is smaller and without medical center,. centers and 71 regional hospitals while the 77 local. while the not-for-profit hospital size is much bigger,. hospitals were chosen by system sampling methods. and none of them is local hospital.. from 382 local hospitals. The total sample size is 165, and finally 37 returned questionnaires are completely. Table 1. Sample hospitals in Hospital Level and. and effectively. The return rate is 22.4%. The data. Hospital Type. collect period was from the year 2004 to year 2005.. Level. The returned questionnaires were analyzed with. Type:. Type:. Type:. Row. Private. Not-for. Public. Totals. the STATISTICA 7.1 version. The person chi-square,. Profit. ML chi-square, and paired t test were used to get the. Local. statistic results.. Hospital Regional. Instruments. 7. 0. 3. 10. 4. 11. 6. 21. 0. 5. 1. 6. 11. 16. 10. 37. Hospital Medical. The questionnaire design was combine the. Center. research of Kirchheimer (2005), Shinkman (2000), and. All Groups. Martanegara (2003). The questionnaire used in this study is semi-structured questionnaire, and composed. The results of the third part of questionnaires. of four parts. The first part consists of the questions. showed in Table 2. In non-medical items: medical. regarding the title and reasons to conducting this. reject and common reject both have the same highest. research. The second part is the hospital accreditation. percentage (94.6%) of outsourcing. The gift store (75%). level, such as medical center, regional, or local;. and linen (73%) are on the following high. The lower. hospital total beds; and hospital type, such as public,. percentage is the utility maintain (13.5%). The reasons. private, not-for-profit. The third part is the definition of. that the medical reject and common reject outsourcing. outsourcing, and asks whether hospital did outsourcing. rate so high are that Taiwan’s hospitals have limited. on 9 items of non-clinical items and 10 items of clinical. space, and without spared area to build burning stove to. items. The fourth part is the satisfaction scores, use. dispose reject. The gift store also not hospital’s major,. Likert 5 scales to evaluate the outsourcing on. therefore, hospitals always just rent the space or. non-medical and medical items.. cooperate with the retail chain store. The linen (sometimes call laundry) takes a lot of space and labor. Results. workers in wash, iron, sewing, and package all the uniforms and bed sheets. For those hospitals built in. The results of the second part of questionnaires. recent 10 years, they tend to be not to set up laundry on. showed in Table 1. For hospital type, the private. hospitals to save space as well as the maintain cost.. 3.

(4) 2006 工研院創新與科技管理研討會 Table 2. Summary for Hospital Outsourced Behavior Non Medical Item. Number. Outsourced Outsourced number Percentage (%). Medical Reject. 37. 35. 94.6. Common Reject. 37. 35. 94.6. Gift Store. 37. 28. 75.6. Linen. 37. 27. 73.0. Restaurant. 37. 21. 56.8. Security Guard. 37. 20. 54.1. Information. 37. 18. 48.6. Medical instrument Maintain. 37. 14. 37.8. Utility Maintain. 37. 5. 13.5. Medical Item. Number. Interpretation. Outsourced Outsourced Interpretation number Percentage (%) 19 51.4 17 50.0 3 hospitals are not included 8 25.0 5 hospitals are not included. Ambulance. 37. Hemodialysis. 34. Laser. 32. Shake Wave. 31. 7. 22.6. Laboratory. 37. 5. 13.5. Radiology. 37. 4. 10.8. Health Exam. 37. 4. 10.8. Nutrition. 34. 1. 2.9. Nurse. 37. 1. 2.7. Pharmacy. 37. 1. 2.7. 6 hospitals are not included. 3 hospitals are not included. The outsourcing results also test whether the. In medical items, the highest rate is the ambulance. hospital type and hospital level is associated with the. (51.4%). Hospital CEO expressed that it is due to the. higher cost and human resource concern, the night shift outsourcing tendency. The Person Chi-square tests and ambulance always contract out. The hemodialysis also. ML Chi-square were performed and listed on Table 3.. have the higher rate of outsourcing (50%). The reason. On the factor of hospital type, the utility maintain and. is that there are three to four giant hemodialysis. security guard are statistically significantly at alpha. companies in Taiwan and they hired physicians, nurses, equal to 0.05 level, and they both on the not-for profit technicians, and use the quantity discount advantage to hospitals have more outsourcing percentage than others purchase the hemodialysis filters and supplies. The. (private and public) hospitals. In the hospital level. other medical items have low percentage of. factor, there are two items are significant, there are gift. outsourcing. In nutrition, pharmacy, and nurse, the. store and ambulance. Between them, ambulance has. outsourcing rate is lower than 3%. This showed that. higher outsourcing percentage in the regional hospitals. Taiwan’s hospitals still conservative on outsourcing. and gift store is higher in regional hospitals as well as. medical items.. in medical center.. 2.

(5) 2006 工研院創新與科技管理研討會 The results of the satisfaction scores on fourth part. Table 3 Summary for Significant Chi-square test By. Hospital. Level. Chi-square. Non Medical – Gift Store Medical – Ambulance By. Pearson. 8.98(p=.011). 8.10(p=.017). 8.51(p=.014). Utility Maintain Non Medical – Security Guard. while the SQ and SC got the lowest score (3.03). In medical items, the PR and SQ have higher score (4.16). Pearson Chi-square. Non Medical –. between medical items and non-medical items. In non-medical items, the higher scores is HR (3.92). 9.60(p=.008). Hospital. Type. listed on Table 4 and a paired t test was conducted ML Chi-square. and IL has the lower scores (3.38). The paired t test between non medical items and medical items show. ML Chi-square. only the HR have no statistic significance; other items such PR, SQ, SC, EA and TS, medical items have. 7.56(p=.023). 9.43(p=.009). statistic higher score than non-medical items. Only in IL, the non-medical item has higher score than medical. 8.74(p=.013). 9.26(p=.010). items. In general, the medical items have higher scores than the non-medical items.. Remark: testing alpha = .05. Table 4. Summary for Satisfaction on Medical item, Non-medical items, and Paired t-Test Survey Item. Mnon_out. Mout. SDnon_out. SDout. N. t-Value. Professional. 3.24. 4.16. .723. .602. 37. -7.03. 0.00000*. Service Quality. 3.03. 4.16. .726. .553. 37. -7.52. 0.00000*. Saving Capital Investment. 3.03. 4.08. .687. .640. 37. -8.22. 0.00000*. Increase Income or Lower Cost. 3.59. 3.38. .725. .828. 37. 2.09. 0.04385*. Human Resource Saving. 3.92. 3.86. .682. .822. 37. 0.47. 0.64374. Environment Adaptive. 3.62. 4.00. .721. .745. 37. -3.87. 0.00043*. Total Satisfaction. 3.49. 3.84. .692. .602. 37. -2.84. 0.00744*. p-Value. Remark: Professional: PR, Service Quality: SQ, Saving Capital Investment: SC, Increase Income or Lower Cost: IL, Human Resource Saving: HR, Environment Adaptive: EA, Total Satisfaction: TS. M=mean, SD=standard deviation, non_out = Non-medical items outsourcing, out = medical items outsourcing, alpha = .05, “*” means statistical significant. Results of the in-depth interview of the two hospitals2. 1.. Advantage of outsourcing of two kinds of hospitals i.. Which items can and can not outsourcing: there are. Saving hospital management span of. quite differences between the public and private. control: outsourcing contractors can. hospitals. In not-for-profit hospital, the CEO stated. help to management their staff,. that only the CEO, CFO, and the director of casher.. therefore, hospital managers can save. However, the public hospital’s CEO is more. a lot of energy on it. ii.. conservative, and stated that unless the. Improving the efficiency and morale:. government permit, it is better for comply with the. in some departments, such as the. law and regulation.. physician therapy, the working hours 3.

(6) 2006 工研院創新與科技管理研討會 extents from two shifts to three shifts,. companies consistently provide high. and the worker can get 60% to 100%. quality service. 4.. more salary compare before. i.. outsourcing. iii.. iv.. v.. 2.. i.. Concerns to outsourcing. Labor regulation consideration:. restaurant, gift shop, and restaurant;. Taiwan implemented strict labor law. conversely, a hospital that contracts. since 1998 and require the employer. for highly multi-detector CT scan,. pay more on the retirement. laboratory should take more concern. beneficiary.. on it. ii.. Capital consideration: the upgrade of. director to review and monitor the. for hospital to afford. Therefore,. implementation of the outsourcing. outsourcing can help hospitals to. companies, and if it con not comply. replenish new instruments without. the contract, it need to be rectified. financial burden.. immediately. iii.. Improved services: outsourcing. Epidemiology concern: During the. services have flexible in recruit,. 2003 outbreak of severe acute. better training program, and salary,. respiratory syndrome (SARS), the. therefore, always can offer better. outsourcing workers, such as the. service to customers.. housekeepers, were caused as the. Advantage of outsourcing for public. major media to spread the virus due. hospitals. to lack of proper trading. 5.. Full-time-equivalent (FTE) concern:. Disadvantage and drawback of the outsourcing i.. public hospitals have limited FTE for. when hospitals encounter malpractice. each hospital, and outsourcing can. or law suite from patients, it is not. help hospitals to get more FTE. easy to identify the responsibility ii.. without to hire workers themselves.. i.. Hospitals have to set up a system or. medical instruments runs too quick. Due to the government regulations,. 3.. Hospitals could easily contract for. The outsourcing companies will hold. Disadvantage of outsourcing for public. the cutting edge knowledge and. hospitals. technology, if they cease contract. Due to the regulations, the public. suddenly, hospitals will face a tough. hospitals have to use bids to choose. situations. iii.. the outsourcing companies. Although. The contract documents are not easy. some items can take quality into. to fill up, and it must base on the. consideration, therefore, price always. honest, equality, and mutually trust.. play the key indicator. Also, when. Conclusion. the contract is due (normally one to three years), they have to bids again, and it is not easy for the outsourcing. Compare with Shinkman (2000) study, this study 2.

(7) 2006 工研院創新與科技管理研討會 3.. shows higher outsourcing percentage in information. Haley, Deborah, A Case for Outsourcing Medical. (48.6% vs. 29%). One of the reasons is that Taiwan’s. Device Reprocessing Association of Operating. software industry hold power ability and can provide. Room Nurses, AORN Journal, Vol. 79, No.. strong support to contract hospitals. The other reason is. 4, pp. 806-808, 2004.. that due to Taiwan’s single payment system of National 4.. Jennings, D., Guidelines for Strategic. Health Insurance, software companies can copy almost. Outsourcing Decisions, Strategic Change, Vol. 6,. uniform software system to contract hospitals with the. pp. 85-96, 1997.. quantity discount advantage under today’s open system 5.. Kirchheimer, Barbara, RCING INS AND OUTS,. of mainframe computer.. Modern Healthcare, Vol. 35, No. 40, 2005. 6.. The results of this research also showed that the. Ksiazek, and the SARS Working Group (2003),. outsourcing of common reject and medical reject is in. A Novel Coronavirus Associated with Severe. very high percentage (94.6%). On the other hand, the. Acute Respiratory Syndrome, The New England. outsourcing of nutrition, nurse, and pharmacy are the. Journal of Medicine, Vol. 348, 1953-1966.. fewer low percentage (less than 3%).. 7.. According to results from Table 4 and this. Martanegara, Vonny, Brian H Kleiner, Effective Employment Screening in the American Health. research results, we suggest hospitals pay more. Care Industry, Management Research News, Vol.. attentions on service quality on outsourcing non. 26, No. 12, pp. 59-72, 2003.. medical items. Also, evaluate the items such as the. 8.. Quinn, J. B., Outsourcing Innovation: The New. linen, gift store, information, and try to outsourcing this. Engine of Growth, Sloan Management Review,. items as far as possible since it can bring financial and. Vol. 41, No. 4, pp. 13-29, 2000.. human resource saving. In general, hospitals have. 9.. Roberts, Velma, Managing Strategic Outsourcing. higher satisfaction scores in the medical items than in. in the Healthcare, Industry Journal of Healthcare. non-medical items.. Management, Vol. 46, No. 4, pp. 239-249, 2001. 10.. References. Modern Healthcare, pp. 46-54, 2000. 11.. 1.. 2.. Shinkman, R., Outsourcing on the Upswing,. Young SH., Outsourcing and Benchmarking in A. Callahan, John M, 10 Practical Tips for. Rural Public Hospital: Does Economic Theory. Successful Outsourcing, Healthcare Financial. Provide the Complete Answer?, Rural and. Management, Vol. 59, No. 9, pp. 110-116, 2005.. Remote Health, Vol. 3, No. 1, pp. 124-137, 2003. 12.. Frost & Sullivan, Reports European Healthcare. SARS／從疫情得教訓蘇益仁：醫院外包制. IT Outsourcing Market to Offer Lucrative. 度該取消. Opportunities, Hospital Business Week, pp. 37,. http://www.ettoday.com/2003/06/09/23-1466410.. 2006.. htm. 3.

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