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Updated by Charles Bystock on 01/11/2023
it outsouring

Outsourcing makes sense amid rising costs and a persistent talent shortage. Healthcare is just the latest industry to make use of third-party providers to accomplish more for less. In fact, the U.S. healthcare IT outsourcing market is expected to increase by 40% over the next five years. What does this trend mean for U.S. hospitals and other medical facilities? And how will it affect patient care?

Why healthcare IT outsourcing?

The cost of healthcare increased 7% in 2021 compared with the prior year, as a result of continued effects from the pandemic across the industry, according to research from PwC’s Health Research Institute, and, today, spending remains higher than pre-pandemic levels. Inflation continues to contribute to these higher rates as well, with an 8.3% inflation rate in the U.S. as of August 2022.

This summer, the Centers for Medicare and Medicaid Services (CMS) released a final rule for inpatient and long-term care hospitals that increases the operating payment rates to 4.3% if an acute facility participates in required Hospital Inpatient Quality Reporting (IQR). This represents the highest bump in payment rates in 25 years, but is it enough to counteract the effects of inflation and rising healthcare costs?

Healthcare organizations cannot cut their way to a healthier bottom line without negatively affecting the quality of care and potentially damaging their HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) scores. It’s a vicious cycle that has prompted many healthcare organizations to turn toward outsourcing for support. It’s a logical response, given that healthcare IT outsourcing has long been recognized as a value-add for organizations that do it well.

The benefits of healthcare IT outsourcing can be seen in a variety of ways. For example, healthcare IT outsourcing is:

  • Scalable to meet the evolving needs of the hospital
  • Flexible and reliable to address resource and skills constraints
  • Insightful to introduce caregiver and patient experience metrics
  • Predictable, enabling leaders to effectively project costs
  • Forward-thinking, enabling teams to explore new technologies through digital transformation and innovation, including automation, AIOps, and cloud-based solutions
  • Safe and secure to mitigate risk and ensure compliance

It also can support and foster a stronger reputation for the facility by relieving overburdened internal staff and enabling them to focus on other strategic initiatives.

Modern Healthcare calls outsourcing “a strategic option for optimizing revenue and patient satisfaction.” This is especially true on the revenue side. Hospitals typically operate with thin margins, which means creating financial efficiencies in the form of an effective revenue cycle is particularly critical. However, given today’s staffing shortages, selecting outsourcing partners extends well beyond a plug-and-play third-party provider to handle a hospital’s revenue cycle.


What does healthcare IT outsourcing entail?

Many healthcare leaders are turning to third-party outsourcing relationships to support operations and contribute to better patient care and outcomes. Some key areas for healthcare IT outsourcing include:

  • IT infrastructure and managed services. Many hospitals are moving to a cloud or hybrid IT model. Cloud-managed service providers can support everything from security and monitoring to platform and infrastructure tools, providing a true hybrid IT solution that maximizes flexibility.
  • Software application management. Identifying, selecting, implementing, and maintaining health IT software is a time-consuming process. With limited resources available within internal IT teams, outsourcing these assessments and management protocols saves a considerable amount of time and money as well as reduces risks.
  • Technical debt reduction. Accumulating too much technical debt can impede growth, impact productivity, and damage your ability to enhance systems and processes. The growth in technical debt accelerated during the pandemic and has placed healthcare organizations at risk for increased costs and falling behind the technology curve. Healthcare IT outsourcing can help teams assess and upgrade or sunset existing systems, identify new opportunities, and free up resources to further support internal teams to reduce their overall technical debt.  
  • Revenue cycle management. Increasing staffing shortages, compliance complexities, and tight budgets all point toward outsourcing as a key avenue for support. Outsourcing in revenue cycle management could include patient registration, medical coding, claim denials, and medical billing.  

As the healthcare industry continues to feel the effects of staffing shortages and resource constraints across the continuum of care, it’s critical that healthcare leaders seek alternative options. Healthcare IT outsourcing is quickly becoming a must-have solution.

What does the future look like for healthcare IT outsourcing?

The growing healthcare IT outsourcing market has grown significantly in recent years and is predicted to remain on an upward trajectory in the coming years. The use cases for healthcare IT outsourcing are not only compelling, they are continually expanding as teams get more creative and seek support in new areas.

Healthcare IT outsourcing is breathing new life into the healthcare system, offering critical resources and expertise that enable internal teams to improve productivity, enhance patient care, improve both patient and caregiver experience, and support growth throughout the organization.

The stakes are high when considering an outsourcing model. Choosing the right outsourcing solution from the right outsourcing provider is a critical process that must go beyond the lowest price. Given that these functions are often tied to the success of your organization, having an outsourcing advisor to assist in the selection of these providers is imperative. The Windsor Group Sourcing Advisory methodology helps healthcare organizations improve their bottom line by introducing new solutions and the right providers they need to succeed. Windsor Group will assess your existing environment, identify alternative solutions and providers, help you select the right solution for your particular requirements and culture, and assist you with negotiating contracts, SLAs/XLAs and transition to ensure long term success.

Start the conversation with our team to ensure resource alignment for the future.