EquaTerra Perspective, Doc Svcs Outsourcing in Healthcare (6024) 2009

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Get to what matters.

Assessing the Opportunities for Document

Services Outsourcing in the HealthcareIndustryby: Mark Voytek, Managing Director, Healthcare

Stan Lepeak, Managing Director, Research

Introduction

Print, mail and outbound client and partner communications

operations are not a core competence for most organizations.

They are typically viewed as a necessary evil or, when

considered more strategically, an opportunity to improve

the quality of outbound communications. Healthcare

organizations face special challenges relative to these

types of outbound communications given the sensitive and

highly regulated nature of the data and information they

manage and process. There is a growing trend for healthcare

organizations to explore options to outsource components

of these document services areas. Their goals in outsourcing

these areas are to reduce costs, better address regulatory

requirements and improve communications.

Document services outsourcing as a category of business

process outsourcing (BPO) is not new, especially printing

and mail services. Document services BPO scope has been

expanding in recent years. Today it includes basic print and

mail services, integrated imaging and electronic document

services, and a focus on managing and optimizing the overall

document services lifecycle. The nature of the service provider

market is changing as traditional IT service providers become

more active in the space.

The American Recovery & ReinvestmentAct of 2009 articulates the over-archinggoal for health IT spending is to facilitatethe adoption of an electronic healthrecord (EHR) for every US citizen by 2014.Long term, this should term cut back onthe volumes of paper produced as partof the healthcare process. Documentservices, especially those related to print,mail and related outbound patient andclient communications, represent a costlyand labor-intensive operational area in

any healthcare organization. Despite thegrowth of electronic communications,the healthcare paperless ofce remains

aspirational. Additionally, healthcareorganizations face burdens and complexitiesrelated to managing documents due tothe highly regulated and sensitive natureof many of their communications. Giventhe trend towards more restrictive andcomprehensive regulatory environments,

these standards will continue to grow. Aswith any paper-based and labor-intensiveprocess, there are outsourcing options thathealthcare organizations should evaluateas a potential means to reduce cost,improve process performance and provide astepping stone for electronic health recordsmanagement.


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By implementing options for print and mail services, healthcare

providers can focus on their core strengths, potentially reduce

costs and strategically plan for a future that allows for secure,

electronic exchange of health information and ultimately

better client care.

Current State Print and Mail Service Models

in Healthcare Organizations

Operating Models

Most healthcare organizations use a distributed model to

support print, mail and related document services. The model

typically includes the following components:

Production print (e.g. billing statements and routine

mailings)

Print on demand (e.g. test results, patient records, ad-hoc

mailings)

Specialty print (i.e. for color documents and other inserts

to be included in distributions)

Electronic communications and fulllment

Mail operations (i.e. to gather, process and distribute

mailings)

Typically these operations are not centralized nor is it

possible to ever fully do so. Redundant and underutilized

production print and mail operations can create signicant

overhead costs. Adding to the complexity is that many

healthcare organizations have grown through acquisition

and the delivery model for their print and mail services

has grown and fragmented in a similar pattern. There is no

simple way to centralize and manage these operations, and

most organizations do not have the bandwidth needed toundertake these efforts.

Correspondence Types

There are many types of correspondence that healthcare

organizations generate and distribute as part of their normal

course of business. Adding to the complexity of document

services, each type has different levels of regulatory oversight,

process, retention and communication requirements. There

The Numbers Make Sense for Todays

Economic Environment

Healthcare organizations have clear duciary responsibilities

to facilitate earnings growth for investors. Succeeding at this

in a ercely competitive business climate requires that rms

maximize available capital and deploy capital that enable

both organic and acquisition growth initiatives. Healthcare

payers are increasingly outsourcing their print, mail and

related document services as one means to help achieve

these objectives. One of the benets is that organizations that

outsource their print and mail services can better maximize

and redeploy capital assets. Document services are capital-

intensive functions that require signicant ongoing investment

with little identiable or captured direct benets in terms of

driving top-line growth. More often poor quality document

services capabilities take away from top line growth.

Healthcare organizations must communicate effectively and

on a timely basis with their members and providers. This is

driven by both an objective for consumer satisfaction and by

extensive regulatory mandates. Print and mail services are an

important function but the production of the communications

(primarily print) is generally not a core competency for most

healthcare organizations, nor should it be. Appropriately,

this function could be accomplished more efciently and

effectively by someone with core expertise in this arena.

The potential benets healthcare organizations can gain

from improving the operational efciency and effectiveness

of their print, mail and document services operations is

not insignicant. While it is possible to gain some benets

from internal process improvement efforts, outsourcing is

increasingly a viable means to maximize and extend these

gains. The range of savings is 15-25%, based upon EquaTerras

current projects and previous deals completed.


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Leverage third party expertise, divest capital assets

and ofoad operational management requirements.

Requires, most likely, multiple service providers tosupport different services and geographies.

Invest to upgrade and improve document services

capabilities as required.

Access to innovation and economies of scale more

difcult via centralization.

Full outsourcing

Migrate print, mail and related document services

operations to an existing commercial service provider

for a multi-year term.

Focus of the benets gained from the serviceproviders delivery of IT and process innovations is on

print, mail and document services.

Mitigate risks associated with uctuating document

services volume, improperly addressed document

handling and management requirements, etc. This

approach is better able to address changes resulting

from acquisitions, divestitures and other business

change events.

Receive prorated investment costs made by

the service provider for operations and process

improvement, often at a lower total cost.

Leverage service provider best practices for further

innovation and transformation.

Key Benets from Document Services

Outsourcing

Healthcare organizations can achieve nancial benets when

migrating from a traditional to a fully outsourced print and

mail services solution. In addition, by implementing a solution

that gains access to third party capabilities and technologies,

the buyer can focus on their core strengths. One of the

challenges will be for healthcare providers to adopt and

meaningfully use certied electronic health records within the

next decade. Today, we are still using paper. Forms are lled

out in triplicate. The introduction of electronic medical records

will reduce error rates, improve care and provide signicant

savings. Addressing the print and mail challenges of today will

position healthcare providers to clear their agendas to work

on their IT plans and strategy for obtaining electronic records

are several member document types: EOB (explanation of

benets); individual premium bills; system-generated letters;

and additional information requests (i.e. student status forms,

letters, etc). There are also several provider document types:

single claim check/remit; bulk check/remit; capitation remits/

checks; encounter reporting; system-generated letters; and

general provider communication letters.

Print and Mail Alternative Services Delivery

Options

Healthcare organizations have several alternative delivery

options to choose from when considering how to improvetheir print, mail and related document services capabilities.

The best option for the future state is dependent on the

current state situation. Ideally any improvements will extend

and improve the existing organization operating model, limit

service disruptions and leverage systems and information

technology capabilities. Below are four options available to

buyers:

Buyer Options to Address Print, Mail and

Document Services ImprovementsStatus quo

Live with it as is. Make incremental improvement to

distributed operations over time.

Internal process improvement/move to shared services

environment

Gain benets from economies of scale,

standardization, consolidation of new investments.

Drive consolidation efforts and address change

management needs.

Fund any required staff, IT and facilities investments.

Treat investments as capital expenditures.

Maintain risks associated with uctuating document

services volume, improperly addressed document

handling and management requirements, etc.

Facilities management outsourcing

Undertake partial outsourcing, for example, to a print

services provider or a provider that can take over

production and mail facilities.


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capabilities. And, it is likely that the print and mail service

providers will have a part in the creation and/or execution of

those solutions.

This is not to imply an outsourcing effort is a quick or easy

solution. Outsourcing of any type is always easier on paper,

and document services outsourcing is no exception. A

requirement to make outsourcing work is that the key parties

must understand their requirements and obligations as part

of the effort and address them. Stakeholders must participate

in the planning, transition, execution and management of any

outsourcing effort.

Key Challenges to Document Services

Outsourcing

There are many potential barriers that healthcare

organizations must address when planning and undertaking a

print, mail and related document services outsourcing effort.

The following are some of the most common barriers.

Inability to dene a solid, realistic and defensible business

case.

Lack of business unit stakeholder and executive support

or interest.

Incomplete understanding of how to account for

all relevant regulatory requirements if activities are

outsourced and/or a misperception that it is not possible

to adequately address them.

Perception that improved operational efciency and

maintaining good customer service are incompatible

goals.

Inability to identify viable service providers to effectively

deliver the required savings and benets.Inadequate understanding of required change

management requirements.

Inability to sell change effort inside and outside the

organization.

Culture of inertia.

Organizations can overcome these barriers. The key is to

address them early and head-on. An inability to successfully

address and overcome these challenges indicates an inability

to successfully execute on the overall outsourcing effort.

One of the common reasons for failure in document services

outsourcing is an inability by those initiating the project to

gain and maintain adequate executive commitment and

sponsorship. The same holds true with other key business unit

stakeholders.

It is not just CXOs whose active support is required for major

document services outsourcing efforts. All stakeholders must

have active buy-in, regardless of whether it s gained via direct

or coercive support. When undertaking a multi-business unit

or multi-regional project, the key stakeholders are multiplied

many times, particularly if distribution channels or business

models differ. This is often the case, for example, in healthcare

payer organizations that have grown through acquisition.

While a complicating factor, it is one that business change

owners must address.

This challenge highlights the need for a robust change

management plan that addresses effective communications

to many different business and operational leaders. The

requirement is to validate and sell the potentially conicting

goals of improving internal and external customer service

while lowering operating costs.

Key Message for Stakeholders

The key message is that efciency and customer service are

compatible. Even for customers that prefer to have it done

the way it has always has been done, there is a potentially

better way. Below are more key points to keep in mind when

educating CXOs and stakeholders on the benets of print and

mail outsourcing, as well as the requirements to make it work.

Select a service provider that has exhibited expertise

in comprehensive print, mail and related documented

services outsourcing in the healthcare industry.

This is a bifurcated market with many small, legacy


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providers and a small but growing number of larger

and more comprehensive providers, often with other

complementary service offerings. Many of the legacyproviders offer narrow point solutions around off-site

printing and mailroom services, and they may not

exist ve years from now. Select a provider with strong

regulatory knowledge and a strong IT strategy, including

capabilities around electronic document management.

Do not cut corners. Engage in a formal sourcing process

and structure a formal contract. Utilize statements of

work, requests for proposal, service level agreements,

resource unit-based pricing (where possible), etc.

Ensure relevant stakeholders are involved through-out

the process. Ensure all relevant angles (business, IT,

regulatory) are represented within the stakeholders.

Ensure that the strategy for print and mail will

complement the IT strategy for electronic health records.

Streamline the distribution of information. This can

have a direct impact on member/provider satisfaction,

and could reduce the number of calls into a health

plans contact center due to a better and more efcient

communication strategy.

Determine the best use of scarce investment dollars.

While investing more IT into current operations may

improve existing capabilities, it may not offer the best

return for the business.

Clearly dene and promote the change benets to

stakeholders as part of preparing their support for

change efforts.

Build the business case on comprehensive and

measureable metrics, including current and future

performance levels, total postage spend, potential paper

savings, benets from facility centralization, etc.

Include estimated savings from indirect sources (e.g.

report rationalization) as well as direct savings (e.g.

postage savings, paper and envelopes, staff reduction,

facilities costs, etc.).

Model an end-to-end process view across print and mail

services.

Getting Started

The rst step is to socialize the business plan straw manwith key operational and business executives. It is also

important to staff a project team and appoint process owners

empowered to affect change at all steps in the process, not

just in individual departments. These individuals will drive the

following key steps:

Redesign end-to-end print and mail processes.

Develop a base case for the current state, including

volumes, pricing and facilities, and highlight scheduled

projects.

Develop the business case.

Indentify the service providers that have this capability

and those that will align with your company.

Conclusion

Print and mail services are a back-ofce healthcare function

that has traditionally received little attention from operational

executives. Yet it is a function characterized by signicant

and growing costs. It is also an important link to clients and

partners because it processes and manages sensitive and

highly regulated data and information. Based on market

trends, including the increase in basic print and mail costs,

increased regulatory requirements, and the growth in viable

comprehensive third party service providers, the potential

cost savings are greater than ever. Leading service providers

are making strides in delivering comprehensive print and mail

outsourcing tailored to the healthcare industry. It is important

that healthcare organizations assess their opportunities to

both reduce print, mail and document services costs and

receive added value for the dollars they spend. Implementing

a forward-thinking approach to print and mail services

addresses regulatory requirements and provides savings that

will effectively position healthcare providers to address future

electronic challenges and opportunities.


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Copyright EquaTerra 2009. All rights reserved. The prior written permission of EquaTerra is required to reproduce all or any part of this

document, in any form whether physical or electronic, for any purpose. 6024_052009.

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