Overcoming challenges in Healthcare Services: A comprehensive video series

We are in the midst of some of the most turbulent market conditions in recent years and the healthcare sector has been disrupted by various cost pressures.  We’re all aware of massive price inflation, supply risks as well as of course the staggering labour shortages in the market.

In particular from a provider perspective, we’ve also seen an ongoing consolidation within the market. The healthcare provider sector was previously made up of smaller clinics. As a result it has been typically characterised by both spend fragmentation & limited transparency. In turn this has meant that clinics have limited capabilities to influence their spend. As a result, we have seen an increase in M&A activities in recent years, but the newly formed groups still struggle to manage their spend.

It’s in the context of these market conditions, that as part of a wider procurement transformation project, we set out to support our client – a Healthcare provider – who was facing some of these challenges. We were tasked with finding a solution for their support services to improve service quality whilst delivering savings in a challenging market environment. But before we delve deeper into this, let’s take a moment to review these market challenges in a bit more detail.

Firstly, price inflation has a wide-ranging impact on both products and wage pressures. Secondly, supply risks – such as Covid-19 & the war in Ukraine – have disrupted the supply of products. However, the biggest problem has been labour shortages which have impacted healthcare providers in several European countries.

To overcome these, we considered three main alternatives for our client:

The first option on our list is that firms can renegotiate the terms of procurement for products & services. Whilst this may improve costs over the short term, it leaves long term structural problems neglected. Problems like labour shortages for instance.

Option 2 looks at redesigning the services. A service redesign can enable healthcare providers to pivot to long-term trends but may be an inadequate solution in the short term. A service redesign takes time to bed in and won’t solve immediate problems like inflation.

The final option on our list has just the right balance. It balances the concerns of the other alternatives and it’s the one we’re here to focus on today – Outsourcing.

Services outsourcing is a flexible solution to some of the challenges Healthcare providers are facing today and it can deliver extensive benefits when applied correctly.

However, whilst it may solve a lot of problems, there are issues to be aware of when implementing an outsourcing solution.

The first and most important point is patient safety. No saving can be properly validated if it puts patients’ health & safety at risk. At the end of the day, service quality is key and needs to be 100% ensured before considering any bottom-line effects.

Furthermore, countries and regions have specific Health Service requirements that mandate given service level frequencies. All services, whether run in-house or by an external party need to meet those mandated levels by law.

Lastly, firms such as our client may need to overcome the specific obstacles of a first generation outsourcing. Tom, could you please share a few more details on what this means?

While outsourcing comes with its own inherently complex requirements, first-generation outsourcing has its own nuances that need to be considered as our healthcare client discovered.

First of all, a first-generation outsourcing process requires a lot of internal effort. One of the key success factors is to get all parties aboard on the journey to make sure that the transition to the outsourced service is successful.

Furthermore, it can be difficult to define what the new service should look like. It may not be clear where the service to be outsourced officially ends and the service to be kept internally actually begins. Roles may overlap at firms and role creep can settle in over the years. This is critical to overcome in order to avoid any potential problems like role clashes or cost claims when outsourcing a service.

And finally when outsourcing hasn’t been done before, it can seem daunting so a lack of expert support can be challenging. In this case it is important to find the right mode of collaboration with the suppliers during the tender process.

Each service outsourcing case is different, and no client will face identical challenges. In the case of our client, we leveraged three key success factors that were instrumental in unlocking the anticipated outsourcing value. These factors are universally applicable across healthcare service outsourcing.

Firstly, we ensured that patient requirements were met by putting the patients first. Taking a patient-centric approach meant that we considered patient needs at every step of the way. By putting the patient at the centre of what we did, we were able to build support amongst stakeholders and help the suppliers to focus on what really added value for the patients.

Secondly, we brought the clients onside by adopting a multi-stakeholder approach. This ensured critical buy-in for this first-generation outsourcing project by close involvement of all key affected stakeholders such as local site directors, nutrition experts, service quality managers, etc.

Finally, we leveraged the suppliers´ expertise and achieved the right balance between competition and collaboration with the suppliers. On the one hand, we ensured that a good level of competition was kept during the whole RFP process, on the other hand we used their capabilities in demonstrating outsourcing benefits very pragmatically, e.g., in joint food tasting workshops.

But what did the client appreciate the most from the new solution?

There were several key benefits that the client appreciated the most from the new solution.

By leveraging external expertise to find a solution to their healthcare challenges they were able to increase transparency and measure the service quality on precisely defined KPIs. Based on this, client and supplier could take ad-hoc measures to improved patient satisfaction and establish an ongoing improvement process.

Secondly, by ensuring clarity around the roles and responsibilities for internal and external parties, the client was able to deliver improvements in resource efficiency. Better resource allocation mitigates the risks of healthcare labour shortages.

Finally, the double-digit percentage savings the outsourcing generated meant that our client was able to free up investment on value-adding services to help grow their business and serve the needs of more patients.

We from KGM Strategy can support the complex needs of first-generation outsourcing in healthcare. With our diverse and cross-functional background, built over the last 20 years and the expertise of our procurement experts, we can leverage our knowhow in delivering similar services outsourcing projects to apply best practice from extensive previous experience.

As a trusted partner, KGM Strategy can help guide you throughout the process. We can help you to understand the true scale of your costs and support you through the mechanics of building the right approach to outsourcing. Depending on your preferences, we can lead the search for suitable partners or provide you with the tools and support to step into that role yourself.

For our client, on a day-to-day level, KGM Strategy ran that search from setting up the tenders through to negotiating the best prices by applying our diverse internal benchmarks. The team visited all the locations to be outsourced and we leveraged our procurement toolkit to unlock at the end of the day, the value promised on the drawing board.

An experienced facilitator like KGM Strategy can take the weight off your shoulders by ensuring that critical requirements are identified, captured & managed at the start from diverse key stakeholder groups. KGM Strategy can work with groups as varied as healthcare specialists, site & regional directors and patient focus groups whilst ensuring that national and regional health standards are aligned and met.

Above all, it goes without saying that only a managed and united team will succeed in delivering Outsourcing.