Rising Healthcare Costs and Outsourcing

The cost of healthcare in the US has been steadily increasing in the past few years, and according to some projections by consultancy firms, the trend will continue. This has lead to increasing acceptance of outsourcing by different hospitals and healthcare providers across the country. Information technology, medical transcription, medical billing, and medical coding outsourcing have been increasing in response to the need to reduce cost.

Healthcare Costs On the Rise

On the 15th of September, New York based consultancy firm, Towers Watson (NYSE:TW), projected an 8.2% increase in employer health care costs for 2011. According to Ron Fontanetta, senior health care consultant with Towers Watson, “Employees today are adjusting to historically lower-than-average merit pay increases, while at the same time facing higher health care contributions, copays and deductibles. This combination could adversely affect many employees and intensify the growing affordability crisis.”

Meanwhile, Chicago based company, Hewitt Associates (NYSE:HEW), estimates that it may be as much as 9%. In Chicago, the projection is as high as 12.4%. The figure is the highest it’s been in five years.

In a statement by Hewitt’s health care practice leader Ken Sperling said, “Employers continue to struggle to balance the significant health care needs of an aging workforce with the economic realities of a difficult business environment.”

The report attributes the increase to an aging workforce, coupled with increasing costs of technology as well as the health care reform act.

Cost And Outsourcing

There’s certainly no doubt that the cost of healthcare is increasing and in response, healthcare providers and hospitals are struggling to maximize revenue while minimizing expenses in order to reduce the cost on consumers.

One example is Hendrick Medical Center, who, on the 7th of September, signed a managed service and recruitment process outsourcing contract with AMN Healthcare Services (NYSE:AHS). Ralph Henderson, AMN President for the Nursing and Allied divisions, said that the contract would result in, “lower bill rates and operational costs, reduced liability and mitigated insurance risks, and increased compliance with clinical standards.”

Outsourcers in the meantime are expanding into the healthcare space in order to take advantage of the opportunity.

As MaryAnne Pace, co-founder of company, Health BluePrints stated, “Healthcare providers are looking for solutions to increase net cash, achieve revenue cycle performance improvement, enhance operational efficiency, and improve overall patient and physician satisfaction.” The company was recently acquired by NCO Group, who along with the acquisition also released a new end-to-end Healthcare Revenue Cycle Management (RCM) solution on the 13th of September.

Another company moving into the healthcare space is Tricom India (NSE:TRICOM), who is currently acquiring US healthcare service provider GTESS Corporation. The news announced on the 14th of September came after Tricom India announced that it recently secured a five-year contract from a US-based healthcare firm for $10 million. Meanwhile, Conifer Health Solutions also announced an acquisition on the 28th of September. The company is acquiring MediHealth Outsourcing in order to strengthen its position in the healthcare outsourcing space.

Healthcare Numbers

As the trend of rising healthcare continues, healthcare providers and hospitals are looking to reduce costs, and at this point one of the solutions they are turning to is outsourcing – an opportunity that outsourcers are gearing to take advantage of. Healthcare, just like any other business, has to worry about the numbers.