Critical Questions to Ask Before You Outsource

By Richard D. Stier, MBA

October/November 2005

This article addresses the fundamental question, "How can you know if you should outsource your healthcare contact center?"  It identifies five key questions you need to answer to make the best choice.  Your decision to own or to outsource your contact center has a profound impact on your organization's effectiveness and bottom line.  Knowing the answers can help you avoid the loss of return on investment (ROI), of competitive advantage, and perhaps even your career options.

Question 1: What is the purpose of your contact center?  What is the core reason your organization has or desires a contact center?

Perhaps the purpose of the contact center in your organization is to provide a community resource.  A community resource contact center provides physician referral, class and event registration, and information.  Metrics include activity indicators such as the number of interactions, number of calls, number of referrals, the number of people served.  The focus is a general connection, a community service with mostly inbound transactions, generally by telephone.  It is most often marketing-centered.  It is a generic service that reports activity, not outcomes.  A community resource contact center is easily and appropriately outsourced.

Possibly the purpose of the contact center in your organization is to drive incremental revenue and market share.

Targeted growth contact centers create incremental volume for carefully selected services.  Activities include referrals to primary care physician referrals, cross sells to carefully selected high-margin services, customer relationship management (CRM) initiatives, programs to attract newcomers, physician-to-physician referral, and an intentional interface with the website.  Metrics include net contribution, share of market, productivity, conversion rates of calls to visits.  Targeted growth contact centers measure outcomes, not mere activity.  The focus is on targeting increased utilization of specific high-margin services, on both inbound and outbound calls, and on creating access through both telephone and the website.  Targeted growth contact centers require the partnership of marketing, finance, IT, operations, and clinical leadership.  Targeted growth contact centers report net contribution.  They can be outsourced with customization of scripts and cross sells tailored to the organization's preferred clinical services.

Maybe the purpose of the contact center in your organization is to create competitive advantage through customer intimacy.

Service-Centric contact centers are the front door showcase for extraordinary service.  They deliver on the promise of the co-created experience.  Activities are relationship nurturing, data mining, extraordinary team training.  Metrics include stakeholder satisfaction, loyalty, lifetime value share of wallet, repeat utilization.  The focus is on lifelong relationships.  Service-centric contact centers support leadership-championed organization wide cultural transformation.  The contact center becomes a front door showcase of that transformation.  Service-centric contact centers address all stakeholders; all access portals and are relationship-skill intensive.  It is very difficult – some may even say it is not possible – to outsource the warmth and ethos of your organization's unique culture.

Perhaps the purpose of the contact center in your organization is to integrate access portals across your enterprise.  Preferred Access contact centers are the central hub for web, fax, voice, mail, and email.  Activities are Web enablement, database integration, appointment scheduling, and the contact center as a clinical point of care including disease management.  Metrics are cost per transaction, FTEs saved by integrating functions, the percentage of calls which respond to stakeholder need without transfer.  The focus is the integration of data to simplify access for all stakeholders.  It requires collaboration of the team at all level across the enterprise.  It is improbable that a healthcare organization would choose to outsource a major portal of entry such as an emergency room or a preferred access contact center.

Question 2: Do you want to provide transactions or transformations?  Webster defines a transaction as "something transacted; especially: an exchange or transfer of goods, services, or funds."  A contact center conversation can be a transfer of information, services, or resources to the caller.  Transactions can be easily outsourced.

A transformation is "an act, process, or instance of transforming or being transformed; the operation of changing (as by rotation or mapping) one configuration or expression into another."  In the book, The Future of Competition: Co-creating Unique Value with Customers, C.K. Prahalad and Venkat Ramaswamy state that "A well run call center can transform a consumer's experience from negative to positive, not only by solving problems and answering questions but by offering entirely new ways to enjoy the product or service."

A contact center provides both the personal connection and the data storehouse to shift customer relationships from generic to memorable.  A contact center can provide competitive advantage by facilitating a visible shift from services to experiences, from transactions to transformations.  Transformations are profoundly difficult to outsource.

Question 3: Do you choose to provide a commodity or an experience?  Is healthcare just a collection of raw materials like a mass of generic aspirin?  Have HMOs forced prices downward to the point where healthcare has become a mere commodity?

Like coffee on the futures market, commodities are extracted.  Like a one-pound package of coffee on the grocer's shelf, goods are produced.  Like the corner coffee shop pours a cup of java, services are delivered.  Like Starbucks personalizes your brew in a friendly and nurturing haven, experiences are staged.  Each shift, that from commodity to good, from good to service, and from service to experience commands greater competitive differentiation.  Each shift earns larger margins.

Unless health providers choose to be postured for extinction, they are compelled to upgrade to the next level of economic value.  The question isn't if, but how to make the shift.

The contact center provides a uniquely powerful opportunity to create compelling, memorable interactions at the beginning of the health care experience.  No other function, save bedside care, has a greater opportunity for direct, heart-felt interaction with patients and other stakeholders, as does the contact center.  What would we do differently if we charged admission for the contact center experience?  That experience may come to be an important competitive advantage for the organization.

Question 4: Is your contact center a cost center or a revenue center?  If your contact center is a cost center with a modest call volume, usually less than twenty-five thousand calls annually, a financial analysis will frequently reveal that the most cost-effective solution is to outsource.  Higher call volumes usually result in a financial advantage to own the contact center.  The break-even point for your organization will depend on type of calls, mix of calls, length of calls, the ratio of inbound versus outbound calls, and other factors.  When you've seen one contact center you've seen one contact center.  It is important to identify the specific own/outsource breakeven volume for your organization.

Healthcare contact centers can be an intentional tool for increased revenue, an important facilitator of the revenue cycle.  In addition to referring patients to participating physicians and to the emergency room, contact centers can benefit the bottom line by recovering revenue for services with high no-show rates by calling patients in advance to confirm or reschedule appointments – keeping the revenue funnel loaded.  Leading healthcare contact centers document up to $6 to 1 for every dollar invested!

An industry panel sponsored by the Healthcare Financial Management Association and General Electric Company recommends against outsourcing revenue cycle functions.

"Before outsourcing any function, and the revenue cycle in particular, hospitals need to go beyond simply determining the labor and cost savings that may result.  More importantly, they need to fully understand the cost to the organization of outsourcing a key opportunity for improving performance and enhancing revenue.  Without a clear sense of this opportunity cost, hospitals may be needlessly sharing with outsourcing firms benefits they could retain and capitalize on internally."

Outsourcing a key revenue driver such as your contact center requires sober evaluation.  Would a hospital be well advised to outsource their open-heart surgery program?

Question 5: What's the bottom line?  Does owning or outsourcing provide the greatest return on investment (ROI)?  Return on investment for owning versus outsourcing your contact center should project ROI over each of three years.  The option to outsource in some cases provides the best ROI in the initial year.  Owning an in-house contact center in some cases provides a greater ROI in subsequent years.  Based on a national study of 25 hospitals and 807,000 callers representing 1.9 million calls, the average ROI is $3 for every $1 invested in a healthcare contact center.

Sample estimated ROI per $1 invested in contact center

A partial list of factors to consider when projecting ROI includes the following.

Outsource: 

• Call volume by type of call

• Inbound versus outbound versus on-line interactions

• Start up fees

• Monthly costs

• Volume-related costs

• Online credit card processing charges

• Administrative fees

• Opportunities for and costs of customer relationship management (CRM) database management for targeted mailings

• Availability and cost of call scripting for inbound and/or outbound interactions, availability, and cost of scripting for intentional support of the organization's branding

• Costs for reports with metrics tailored to your organization's outcome requirements

Own: 

• Call volume by type of call

• Inbound versus outbound versus on-line interactions

• CRM database administration for targeted mailings

• Call scripting for inbound calls and/or outbound call campaigns

• Scripting for intentional support for the organization's branding

• Whether or not an in-house contact center will be co-located with complimentary functions to facilitate cross training for backup during peak call times

• Opportunity for collaboration with existing automated call programs, if any, to provide a live interaction to recover revenue for services with high no-show rates by calling patients in advance to confirm or reschedule appointments

• Opportunity, if desired, to showcase the shift to staging experiences with specific coaching through role-plays and scripting

• Opportunity to create executive report card with metrics tailored to outcome requirements

Summary: If the purpose of your contact center is to provide a generic community resource, then consider outsourcing.  If your purpose is to accelerate revenue and market share growth in high priority clinical services, to showcase extraordinary service, or to integrate access, then carefully evaluate your own versus outsource decision.

Do you want to document a maximum number of transactions, or stage transformations?  Do you want to deliver a commoditized service, or will you intentionally mature your organization's healthcare solutions from commodity to experience?  The contact center can play a key role in that maturation.  Is your organization's objective to minimize costs for a low volume of calls?  If so, consider outsourcing.

Which option provides the greatest return on investment over time?  Carefully evaluate the factors that determine the bottom line benefit for your organization, and whether owning or outsourcing generates the maximum return.  Your decision to own or to outsource your contact center can profoundly benefit or negatively impact your organization's effectiveness and bottom line. 

Take action!  Schedule a meeting with your key decision-makers.  Thoughtfully evaluate these questions.  Bring the ROI analysis.  Lead the discussion.  Make a decision that is informed and intentional; make the decision that is right for your organization.

Richard D. Stier, MBA is Vice President of HealthLine Systems, Inc.  He can be reached at 800-733-08737 x7265 or RStier@HealthLineSystems.com.