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Journal of the Academy of Hospital Administration

Outsourcing CT Scan - A Boon for Patients, Physicians and Hospital Administrators in a General Hospital

Author(s): Sona Bedi*,R K Sarma**, Sanjay Arya***

Vol. 14, No. 2 (2002-07 - 2002-12)

Introduction

Outsourcing is the management buzzword of the 1990s1. Outsourcing is defined as "a long term, result oriented relationship with an external service provider for activities traditionally performed within the organisation"2. It is a redefinition of an organisation around its core competencies3 and is a long term exercise done to concentrate and improve on one's core competencies and skills such as patient care, medical education and research and at the same time, leverage external skills and resources to reduce costs and sustain levels of productivity without compromising on quality. It may also be termed as "Facilities Management"4. This management tool is used to counter the problems currently being faced by modern hospital administrators on account of:

  1. Rising costs of healthcare over the past decade
  2. Extreme market completion forcing hospital administrators to find ways of providing latest technology to its customers despite having limited access to a huge capital investment.
  3. Increasing number of super specialties leading to a large number of activities under the direct charge of hospital administrator, thereby causing lack of micro management.
  4. Lack of focus on core competencies i.e. patient care, teaching and research, which may also generate revenue for the hospital.
  5. Lackadaisical attitude to work by personnel of government run hospitals taking recourse to strikes and unionism thus leading to dissatisfaction and delays.
  6. Demand of quality healthcare services by the customers.

Outsourcing has been done by other industries worldwide for the last 30 years, however healthcare organisations have woken up to this concept rather late in the day, having caught up in the last 10 years only. Activities being outsourced currently in hospitals are all non-core activities such as dietary services, housekeeping, laundry, transportation, material management, plant operations and maintenance, residence operation and maintenance, laboratory services, imaging services, parking, conference and banquet scheduling and information desk5. Clinical and diagnostics facilities are increasingly being outsourced now6

AIM
Outsourcing CT Scan facility is a boon to patients, physicians and hospital administrators in a general hospital, in terms of better patient satisfaction due to lesser waiting time, acceptability of outsourced CT Scan by physicians and lesser cost per unit CT and lesser downtime costs to hospital administrators.

Methodology

A comparative study was undertaken between 2 government hospitals on basis of CT Scan facility being in-house (AIIMS, New Delhi) and CT Scan facility being outsourced (ESI Hospital, Noida NCR of Delhi). A sample size of 100 was taken which was from physicians referring patients for CT Scans, and patients undergoing CT Scans in AIIMS Hospital and Noida Medicare Centre (external service provider of CT Scan facility for ESI Hospital). Both groups were interviewed for their opinion on various accounts. Records of both organisations were studied for data regarding cost and waiting time for CT Scan. CT Scan was chosen as a comparative measure, as it is an increasingly frequently used diagnostic tool by most physicians. Relevant literature on the subject was reviewed.

Review of literature

Outsourcing is the world's most important management trend7 and has percolated into all industries. Industries ranging from automobiles to pharmaceuticals have all registered tremendous growths in outsourcing8. Even the IT giant Microsoft has outsourced operations of its computers and networks to an application services provider1. Fastest growing functional areas in outsourcing in Asia are, human resource, media management, and information technology and customer care9. The 1998 Outsourcing World Summit in Florida indicated an increase of outsourcing world market from $100 billion in 1996 to $318 billion in 2001. In the healthcare sector, organisations spent $53 billion on outsourcing in 2000, out of $340 billion spent by all industries in USA, as per a study by VHA Inc., Texas. VHA also said that non-healthcare industries typically spend about half of their operating budgets on outsourced services, as against hospital executives who spend 17% of their operating budgets on outsourced services, up from 16% in 1999, and expect it to expand to 22% by 2003. Another study says that by 2006, 40% hospitals executives plan to increase10 their spending on outsourcing services9. The VHA Strategic Outsourcing Study11 conducted by Michael F Corbett and Associates, reveals outsourcing trends in healthcare and general industry in the West. These are:

  • healthcare executives are slower to adopt outsourcing than general industry executives.
  • Currently the growth of external sourcing is faster in healthcare than in general industry.
  • In the next two years, healthcare executives will shift 5.6% of their budgets from internal to external sourcing, whereas, general industry may shift only another 3.6% of their corporate budgets to external sourcing. Healthcare seems to be in a "catch-up mode'.
  • Larger organizations outsource more.
  • Decentralized firms outsource more.
  • Cost reduction is the primary driver. Today however, drivers are often more strategic and focus on carrying out core value-adding activities in-house where an organisation can utilise its own core competencies.4
  • Outsourcing in clinical areas is currently the least outsourced areas, but is expected to increase in the near future.

Almost 50% hospitals in U.S. hire contract management firms to manage their emergency departments6. In the U.S, most small hospitals are outsourcing imaging services such as CT and MRI due to the demand of latest imaging technology by physicians and their patients and the lack of funds to set up such a facility. In New Hampshire,trailers carrying MRI and Lithotripsy machines travel the countryside and park in hospitals needing this facility6.

Outsourcing Serves Various Purposes:

  • Improves organizational focus thus allowing organizations to focus on the core of their business, while leaving routine, support tasks to qualified vendors. The need is to identify core (service) processes and business (support) services.
  • Frees resources for other purposes.
  • Reduces operational costs by cutting fixed costs, due to the economy of scale of the vendor, which is passed on to the buyer, while variable costs cannot always be controlled. Cost to the hospital is a fixed monthly cost, instead of a huge initial investment with regular maintenance costs.13
  • Overcomes labour union problems such as absenteeism and strikes, owing to commitment by vendors who are driven by profit making as their goal.
  • Ensures delivery of quality products and services, since service providers are experts in their fields.
  • Availability of latest technology, even though it maybe expensive, in the situation of lack of initial capital investment.
  • Builds good relationship based on gain-sharing i.e. both the buyer (hospital) and the vendor (service provider) share financially in the value created through the relationship e.g. vendor may receive a share of the savings it generates for its clients.

The above findings are corroborated by the conclusions of the 1998 Outsourcing World summit, Florida and Data and Analysis from the 2001 Outsourcing world Summit, California, where the top reasons for outsourcing by executives were found to be reduction of operating costs, focus on core-competencies, improvement in quality and speed to market.

In India, various hospitals like AIIMS,New Delhi, Sir Ganga Ram Hospital, New Delhi, Hardikar Hospital Pune, KLES Hospital Belgaum have outsourced certain non-core activities with an improvement in qualtiy14.

Observations

The study has been conducted from three perspectives: patients', physicians' and hospital administrators' perspective. The findings are mentioned below:

Table 1: Patients' Perspective

S..No Factors AIIMS Hospital ESI Hospital
1. Occupation Self employed (66%) Pvt. Com. Employee (55%)
2. Payment of charges of CT Scan by self (88%) ESI and self (55%)
3. Refd. by physician from Govt. hosp Pvt. and govt. hosp
4. Reason for choosing this CT Scan Centre Being treated in same hosp Refd by treating Dr
5. Receiving prior appointment Yes (94%) Yes (83%)
6. Appointment as per convenience No (775) Yes (90%)
7. Waiting period between taking appointment and date for scan >10 days (72%) None (100%)
8. Waiting time on day of scan >3 hrs (50%) Upto 1 hr (66%)
9. Physical facilities at CT Scan Centre Adequate (72%) Excellent (75%)
10. Attitude of staff towards patients Polite and sympathetic (50%) Polite and sympathetic (92%)
11. Provision of dye/consumables by Self (100%) By hosp. (100%)
12. Top 3 reasons for choosing a CT Centre 1. Economcial (38%)
2. Timely (27%)
3. Comfort and Convenience
(16%)
1. Reputation (58%)
2. Timely (25%)
3. Comfort and Convenience
(16%)

The data has indicated that patients in AIIMS are from lower middle class and bear expenses for treatment by themselves, without any reimbursement facilities. ESI patients are also from lower middle class but treatment expenses are borne by ESI. Patients in AIIMS have a waiting time of more than 10 days for getting routine CT Scans done. About 50% of the patients have to wait for more than 3 hrs for their turn on the day of investigation itself A perusal of appointment books have shown the current waiting time for routine OPD cases in AIIMS to be between 5-6 weeks. The physical facilities such as sitting arrangements, fans, drinking water etc. were found adequate by 72% and inadequate by 27% patients due to the large number of patients attending the CT. The staff was found to be sympathetic and helpful only by 50% of respondents whereas they were found to have an indifferent attitude by 44% of respondents. Patients themselves purchase the dye and other consumables. Most patients have suggested that the waiting time be reduced in order to enhance their convenience. On the other hand, in the outsourced CT Scan facility by ESI, patients do not have to wait for even one day between getting appointment and actual investigation itself, as reported by 100% of respondents. The CT Scan service provider has a comfortable waiting area and upto one hr of waiting by 66% of patients and upto 2 hrs waiting by 25% patients on the day of investigation, as against an average of 3 hours waiting in AIIMS patients. The staff is cooperative and helpful as in the case of AIIMS. All consumables are provided by the hospital itself thereby avoiding inconvenience to the patient.

The present study has indicated that all physicians in both organisations opine that the optimum time for receiving a report for a routine CT Scan should be 1-3 days. There is a long waiting time for routine CT Scan in AIIMS and 97% physicians in AIIMS said that there was a more than 10 days delay, which has a deleterious affect on treatment and outcome

Table 2: Physician's Perspective

S..No Factors AIIMS Hospital ESI Hospital
1. CT done from In-house Outsource
9. Delay affecting tmt of em. Yes (46%) Yes (100%)
10. Optimum time to get CT report in routine cases 1-3 days (100%) 1-3 days (100%)
11. Satisfaction with quality of films Yes (86%) Yes (100%)
12. Satisfaction with quality of reporting Yes (86%) Yes (100%)
13. Can routine CT be outsourced? Yes (80%) Yes (100%)
14. Acceptabilityof outsourced CT Scan in routine cases Yes (87%) Yes (72%)
15. Top 3 criteria for outsourcing 1. Quality of films, promptness 1. Quality of films
    2. Reputation, cost 2. Quality of reporting,
reputation
    3. Quality of reporting 3. Promptness

Of disease (87%) However in ESI, 100% physicians are of the opinion that routine CT Scan for OPD patients is done in time, and delay was never more than 10 days. Satisfaction of physicians with quality of CT films and CT reporting was 86% in AIIMS whereas it was 100% on both counts in ESI. There was reasonable acceptability of an outsourced CT Scan in routine cases for diagnostic purposes by ESI and AIIMS physicians. In AIIMS, the most frequent cause of ordering CT Scan was neurological/neurosurgical whereas in ESI it is surgical. The top criteria for outsourcing routine CT Scan was almost similar among ESI and AIIMS clinicians was judged on quality of film, promptness, reputation, quality of reporting and lastly cost. Both groups are reasonably satisfied with all features of the CT scan facility whether in-house or outsourced, except promptness, which was found lacking in AIIMS. A large majority of physicians of both organisations have said that emergency cases requiring CT scan should not be outsourced. Since ESI Hospitals do not have the department of neurology/neurosurgery, and all such cases are referred out for further management.

The primary factor concerning hospital administrators is cost. The cost for a plain CT head in ESI is Rs. 700 as compared to Rs. 1226 in AIIMS15. (value inflation adjusted for 2001). The other factors concerning hospital administrators are equipment downtime and strikes by various categories of personnel, which lead to stagnation of services. In the last 1 year, the CT Scan machine of AIIMS has remained out of order for 12 days leading to stagnation of patient appointments. The service provider of ESI hospital has also faced a similar problem of equipment downtime for about 4 times in the lst 1 year, but the provider has not let this cause stagnation of patient appointments by getting the CT Scan of ESI patients from another reputed CT Scan service provider at its own expense. Strikes by doctors and karamcharis OF AIIMS for 6 days in the last 1-year also caused a backlog of appointments. However ESI patients for CT Scan are immune to such problems, since service provider is a private organisation and strikes are non-existent.

Table 3: Hospital Adminstrators Perspective

S..No Factors AIIMS Hospital ESI Hospital
1. Cost per unit CT head (plain) Rs. 1226/-15 Rs. 700/-
2. Physical faciliteis at CT Centre Adequate (72%) Excellent (55%)
3. Waiting time for routine CT Scan 10 days to 5 weeks Upto 2 days
4. Equipment downtime logged in last 1 year 12 days 24 days
5. E.D causing backlog of patient appointments Yes None
6. Loss of CT man-hours due to strikes
various categories of personnel last 1 year
48 hrs None
7. Appointment backlogs due to strikes Yes No

Discussion

Whether or not investigations like CT Scan can be outsourced depends on the variables on which the desirability of the investigation rests. In the case of CT Scan, the rating of important variables for routine CT Scan as per physicians at AIIMS are, quality of films and promptness of investigation. Other criteria are reputation/dependability and cost followed by quality of reporting, which are echoed by ESI physicians. There is reasonable clinical acceptability of outsourced CT Scan for diagnostic purposes in both groups of physicians. From the physicians' perspective, the optimum time to receive CT scan report is 1-3 days, which is current status in ESI patients. However, in AIIMS routine cases have a waiting time from 10 days to 5 weeks leading to a deleterious affect on treatment/outcome of disease. The single most glaring feature of AIIMS CT Scan Centre is its excessively long waiting time. Most patients attending AIIMS CT Scan belong to the lower middle class economic strata and have no access to any kind of reimbursement, hence AIIMS CT Centre fulfils their need for quality healthcare at minimal cost, despite having to face the inconvenience of a long waiting time between getting appointment and on the day of investigation itself. Economy is hence the commonest reason for patients getting CT done at AIIMS as is shown below in a comparison of costs an charges of CT Scan in various hospitals of Delhi.

Comparative Costs of AIIMS,
ESI and Corporate Hospitals' CT Centres

  Unit cost
at AIIMS
Unit cost
at ESI
General Ward
charges at Aiims
Average Charges
at corporate Hospitals in Delhi
CT Head Plain 1266 700 200 1608
CT Head (CE) 1472 1300 800 2858
CT Plain Body 2498 2450 750 3917
CT Body (CE) 2989 3050 1550 5803
(Value in Rupees, Inflation Adjusted for the Year - 2001)

On the other hand, patients attending the ESI external service provider's CT Centre, majority were private company employees covered by ESI scheme and expenditure was borne by ESI. 27% were government employees covered under CGHS etc. on those from upper middle class economy strata. Private hospital physicians referred 50% patients. All patients were investigated the same day with maximum waiting period of 2 hours. The top criteria for choosing a CT Scan Centre for this group of respondents (patients) was reputation of having good quality service (58%) followed by timely service (25%) and convenience was the third preference. In comparison, the top three criteria for selection of CT Centre by respondents (patients) in AIIMS CT Centre was economy (38%) followed by timely service (27%) and lastly convenience (16%).

From the point of view hospital administrator, the unit cost of plain CT Head in AIIMS is Rs. 1226/- as against Rs. 700/- in ESI, which is 43% more than the unit cost to the ESI. Despite the large volume of work as compared to ESI, the cost is unacceptably high. AIIMS CT Centre also faces the problem of equipment downtime, during which the patient load is shifted to then CN Centre CT Scan, which has its own quota of patients, creating further backlogs of patients' appointments. Although external service provider for ESI also faces the problem of equipment downtime, it gets CTs done from another reputed centre at its own expense, as it is a clause in the contract agreement, thereby causing no backlog of patient appointments.

Conclusion

It is better to outsource CT Scan facility for routine OPD cases in a general hospital. It is beneficial to patients in terms of lesser waiting time, more convenience and hospitality. For the physician, due to the clinical acceptability of outsourced CT Scan films and reporting, it means timely investigation conducive to treatment. For the hospital administrators it means lesser cost, freedom from equipment downtime, labour problems and services at one's own terms and conditions ESI hospital, being a general hospital, the primary aim is patient care. CT Scan facility is hence a non-core activity and is justifiably outsourced. However, in a hospital like Aiims where teaching and research is a core-competency and imaging services are part of the teaching curriculum, and hence, the CT Scan facility cannot be outsourced. Partial outsourcing may considered in the case of routine CT Scan in AIIMS with an external service provider having terms and conditions beneficial to the mandate of the hospital. This maybe able to clear the backlog of patients' appointment without investing in another CT Scan, achieve better patient and physician satisfaction, and cost less without labour problems and equipment downtime hurdles.

References

  1. Faulhaber Thomas A, The Business Forum: Outsourcing Services
  2. Corbett Michael F and Associates, Welcome to Outsourcing, www.firmbuilder.com
  3. Prahalad CK and Hamel Gary; "The Core Competence of the Corporation; Harvard Business Review, May-June 1990
  4. Griffiths Dave, The Theory and Practice of Outsourcing, Kudos Information Ltd., England
  5. Corbett Michael F and Associates, The Toronto Hospital: A Case Study, www.firmbuilder.com
  6. Surpin Jo and Weideman Geri, Outsourcing in Healthcare: The administrator's Guide, American Hospita lAssociation, USA, pg 5
  7. Taking the Pulse of Outsourcing-Data and Analysis from 2001 Outsourcing World summit, California
  8. Doug Stephen J, Ritter Ronals C et al, Has Outsourcing Gone Too Far? The Journal of All India management Association, April 2002
  9. Corbett Michael F and Associates, Outsourcing is Positioned to Explode in Asia, 1999 Asia Outsourcing Summit
  10. Galloro V, Hospital Execs Bullish on Outsourcing, Modern Healthcare, September 2001
  11. VHA Inc., How America's Leading Healthcare Executives Source Their Operations and Why, www.firmbuilder.com
  12. Surpin Jo and Weideman Geri, Outsourcing in Healthcare: The Administrator's Guide, American Hospital Association, USA, pg 7
  13. Gupta Shakti and Kant Sunil, Outsourcing: A Strategic Essential in Healthcare Institutions, Journal of Medimedia Asia, Hongkong
  14. Soumya V, Outsourcing: Saves Bother At a Price, Express Healthcare Management, October 16-31, 2001, pg 19
  15. Gupta Romesh, Cost Analysis of the Department of Radiodiagnosis in AIIMS, New Delhi, (Thesis, Unpublished 1990

* Resident Administrator, Dept. of Hospital Administration, AIIMS, New Delhi.
** Prof. and HOD, Dept. of Hospital Administration, AIIMS, New Delhi.
*** Asst. Prof., Dept. of Hospital Administration, AIIMS, New Delhi.

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