Operation Cost Saving: Outsourcing medical services to reduce expenses

  • Anonna Dutt & Aishwarya Iyer, Hindustan Times
  • Updated: Feb 21, 2016 13:08 IST
Services at the Centre for Sight are outsourced by Fortis Escorts and BLK hospitals in Delhi. (Saumya Khandelwal/HT photo)

The trend of outsourcing medical services to stand-alone specialists is on the rise among super-speciality hospitals. “By outsourcing, hospitals — especially those that provide tertiary care can free up resources that can be used in their core areas, like we did,” says Dr Kousar Ali Shah, chief operating officer at BLK Super Speciality hospital, Delhi.

It has outsourced its eye-care, dental care, radiology, and radiation oncology departments, which brings down the operation cost by 20% to 25%. “Outsourcing is essentially like buying expertise, it helps the hospital provide expert care almost immediately, which would not be possible if we set up a department of our own.”

Mahajan Imagings runs its centres at Sir Ganga Ram, BLK and Fortis Hospitals. (Saumya Khandelwal/HT photo)

In Mumbai, Nanavati and Global hospitals have outsourced laboratory services from Metropolis India. “It is convenient for a hospital to outsource lab services as it reduces its workload, and is easier to conduct rare and expensive procedures such as DNA and tumour tests,” says Dr Nilesh Shah, group president of scientific services and operations at Metropolis. “The rare tests especially require latest machinery and facilities, which we own, but are lacking in some hospitals.”

Focus on quality care

In Delhi, The Centre for Sight runs the ophthalmology unit at the Fortis Escorts and BLK Super Speciality hospitals. “We specialise in eye-care procedures and follow a hub-and-spokes model,” says Dr Mahipal Sachdeva, chairman and medical director, The Centre for Sight. It has 51 centres across 30 cities, including ophthalmology departments in four. “The clinics at hospitals are the spokes that provide almost 80% of services, and the main centre with high-end customised equipment is the hub.”

In this model, the hospitals do not need to invest in technology or specialists, says Dr Sachdeva, who offers a food analogy to explain the model. “It’s like getting a Le Cordon Bleu (a leading hospitality management institute) chef bring in his expertise, equipment and ingredients to cook up a meal at a fast-food restaurant.”

“We bring in a lot of volume to make the entire process affordable,” says Shah of Metropolis. It has 2,200 labs in Mumbai alone. “When we operate on such a large scale, we get the materials at subsidised rates, which helps us run a sustainable model.”

Diagnostic edge

Outsourcing is particularly helpful in cost-intensive diagnostic processes such as PET-CT, CT scan and MRI.

“In the era of super speciality care, it is not possible for a hospital to run all the departments by itself. For instance, the cost of setting up a radiology department is as high as Rs 15 crore to 20 crore,” says Dr Harsh Mahajan, director, Mahajan Imaging, which has six centres including Sir Ganga Ram, Fortis Vasant Kunj and BLK hospitals in Delhi. It is easier for specialised centres to adopt newer technology than a hospital as it’s difficult for a hospital to invest a big amount for a single department for a short duration.

Moreover, for some new hospitals it is difficult to invest large amounts into pathological and radiological facilities, says Dr Rina Shah, chief pathologist of Metropolis lab at Global Hospital.

Right from collecting blood samples to testing it and dispatching the reports, Metropolis does it all for the four-year-old hospital. Run inside the hospital premises, Metropolis also manages molecular diagnostics, surgical pathology and hematology centres. “With a lab right there, the hospital saves time on investigating the cases and can focus on the patients’ conditions and demands,” adds Rina.

Dialysis is another service that is frequently outsourced. The Delhi-based Deep Chand Dialysis Centre provides dialysis units and also an entire nephrology department to different hospitals such as the National Heart Institute and Kalra Hospital, in the capital.

Some like Apollo hospital outsource their lab tests within their chain. “Most of our clinical services are provided in-house, including 90% to 95% diagnostic tests,” says Neeraj Garg, CEO of Apollo diagnostics. “Smaller centres outsource specialised tests to bigger Apollo centres.” Only a few foetal, genetic or cancer marker tests, which are not done routinely have been outsourced to standalone labs like Lal Path Labs in Delhi.

The only shortfall of the model is that the centre’s success is dependent on how well the hospital does. “The expected volumes and the required high quality of service are an integral part of the contract. If the hospital doesn’t make money, we could run into losses as the equipment is very expensive,” says Dr Mahajan.

Agrees Dr Sachdeva: “The partners have to be chosen after due diligence because bad choices can affect your brand.”

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