The Future of Business Process Outsourcing in Healthcare

Post Written By Rohan Kulkarni, Vice President of Healthcare Strategy and Portfolio at Xerox

The successes of Accountable Care Organizations (ACOs) and the boom of practices that embrace Population Health Management are pushing the adoption of outcome-based pricing. While we are still in the early stages, and it may be awhile before it becomes the principal payment mechanism, it’s still noteworthy to understand the downstream impacts, particularly to Business Process Outsourcing (BPO) service providers.

I began to explore this in my post on “Traditional Healthcare BPO Sourcing Will be Tested as Never Before,” making the argument that as consumerization takes effect in healthcare, it will force providers to focus on their core offerings while looking to outsource their modified needs through fewer partners who are able to provide full lifecycle or integrated enterprise solutions.

Consumerization, the Affordable Care Act and the entrance of technology innovation giants like Apple and Google are just some of the forces that are revolutionizing the way healthcare is delivered today. These forces have increased awareness, attracted significant investments and continue to drive technology innovations. But more importantly, they are helping solidify and elevate interest in outcome-based pricing.

My hypothesis is that as the industry shifts from fee for service to value based payment, traditional BPO services paradigms will have to shift to align more to the outcome based pricing versus the traditional transactional pricing that issues payment for the quantity of goods or services provided rather than the quality of outcomes achieved.

Here are four drivers contributing to this shift:

  • Payers and Providers are migrating away from fee-for-service to outcome-based pricing: Fee-for-service is the most common type of payment that healthcare consumers experience. It is also the type of fee that does not have any bearing on the quality of care. You may go to your primary care provider a number of times for the same ailment and still get charged every time, with almost no fiscal responsibility on the provider. As payers and providers are forced to shift their payment models to focus on quality outcomes, they will begin to look for partners vs. service providers who can help mitigate risks and help them achieve their quality and financial outcome goals.
  • Realignment of risks: Risks are being shifted away from payers to other stakeholders such as providers via ACOs and consumers via high deductible health plans. As risks shift, business processes will change, as will the level of collaboration across stakeholders. In the future of healthcare, it will be critical to connect these various stakeholders with interoperability, information-sharing and real-time analytics.
  • Misaligned incentives: Outcome-based models are showing us that incentives can be better aligned to drive commensurate benefits across the stakeholder spectrum. Providers are responsible for the end-to-end consumer care and get paid based on the consumer’s health outcomes, forcing optimization of resource utilization. Payer businesses become more predictable as focus shifts away from the transactional components and costs to managing outcomes. And consumers are more likely to utilize care appropriately without having to fear unexpected costs.
  • Technology has progressed: Technology continues to evolve in the BPO space, giving BPO providers the ability to deliver full lifecycle or integrated enterprise solutions. Automated tools can support workflow, save time and help manage risk, but in the future of healthcare, payers and providers will be best served by healthcare technology partners that can provide complete, integrated and end-to-end solutions.

As payers and providers define the rules of outcome based pricing in the front office, there will be an appropriate alignment in the way middle and back office functions are sourced. The payment system for vendors will begin to match the front office construct and be outcome based.

BPO service providers will offer holistic lifecycle solutions that will ensure specific contracted outcomes can be influenced and managed. BPO’s will have to transform themselves in to service partners and  will have to agree to meet a series of outcomes that could include enrollment, cost of care, retention rate and/or satisfaction rates, quality and improved consumer health, while the payer will likely then abdicate some operational control to their partners.

The market is primed for outcome based constructs to continue to take shape and there are intrinsic benefits to outcome based constructs across the business value chain. Only those BPO service providers with the right expertise, resources and the willingness to take new types of risks –  and the ability to up their value proposition to become “service partners” – will benefit and win in this market.