Case 3: Outsourcing of hospital services

Outsourcing of Hospital Services

Every business has to determine whether they should perform a service themselves inhouse or outsource that particular service to an outside vendor. Facility services and
managements are just two of the services that can be performed either in-house or outsourced to
a vendor. One of the key considerations in service outsourcing is assuring high service quality by
the vendor. These days increasingly firms are focusing on the quality benefits of outsourcing
rather than the cost benefits.

At first glance, it seems counterintuitive for a company to outsource highly-visible or

important services. Once you look at all the things a company must do to handle a service inhouse (and keep it running continuously), it becomes more evident why many companies choose
outsourcing versus operating a service in-house. If a service is provided in-house, a company
must:

I.

Locate a qualified employee

II.

Train the employee

III.

Pay employee wages and benefits

IV.

Provide the employee a physical workspace

Case 3: Outsourcing of hospital services

V.

Provide the required equipment and technology

With outsourcing, the company must only:

I.

Locate a reliable and high-quality vendor

II.

Pay the vendor for the services provided

1. In some instances the outsourced services occurs in a different location, while in others it
takes place inside the organization doing the outsourcing, as the food services did in this
case. What advantage were there in having the outsourced work performed within the
hospital? Suppose a different hospital outsourced it food service but decided not to have
work performed in- house. What might its relation be?

Some businesses choose to outsource parts of it business structure. With one definition of
outsourcing being the process of contracting a third party. Lets suppose that one organization,
such as a hospital wanted to outsource its food service, but has decided to have the food prepared
in house. The reason/advantages behind that would probably be the questions most people would
ask. Some advantages are the company employees may have a better understanding of the
industry, and their vested interests may mean they are more likely to make decisions in
accordance with the company's goals. Also, the hospital could have the same staff but saving on
health insurance, vacation pay and salaries. Having this food prepared in house, the company
could be paying rent to rent the space in house, which is bringing in more revenue each month.

Case 3: Outsourcing of hospital services

With a hospital, you want to have food available and different times and made to order. The
flexibility of time is important. If the food is made off site, it will probably be canteen food or
refrigerated food instead of a hot meal. When a person is not connected to something it does not
create loyalty. Somethings, need to be kept in house to reduce the possibility of law suits, etc.
Also if a patients diet changes, and everything is performed within the hospital, this helps reduce
errors being made. Even though most businesses/organizations try to be structured the same way
similar companies do, that isnt always the case. Now that we have seen why this hospital could
have decided to outsource their food service but still have the food prepared in house, let see why
another company could decide to outsource and have the food prepared outside as well.
Some companies choose this method because of their realization of cost savings or better
cost control over outsourcing its food and service. Companies usually outsource to a vendor that
specializes in a given function and performs that function more efficiently than the company
could, simply by virtue of transaction volume. Its rationale would be cost savings but there are
also risks. "An liability can be a tremendous risk if the products or services of other companies
cause harm to customers or the environment, as well as damage to an organization's
reputation.(Operations Management, tenth edition,)"Reputation can also be damaged if the
public discovers that a supplier operates with substandard working conditions." (Operations
Management, tenth edition) There could be many more reasons here, such as:
I.
II.

The Company functions on a continuous or ongoing basis rather than on any specific
single project.
It enables companies to focus on their core business function. Outsourcing takes care of
ancillary functions in part or in totality. This optimizes the company's growth based on its
core or specific business.

Case 3: Outsourcing of hospital services

III.

Reduces operating costs by focusing on major business area. This way, the capital funds
always remain available for the core business instead of being diverted to other

IV.

supporting portions of the business.

Outsourcing when taken off shore gives you access to world-class capabilities. You can
leverage global resource networks to support your business. It gives you another

V.

perspective or dimension to the existing business for more efficiency.

It fosters and sustains an exceptional safety culture, emphasizing training and employee
morale o Creates flexibility with the facilities to even provide support in times of industry

VI.
VII.

VIII.
IX.

uncertainty.
Speeds up work, shares innovations for best practices. You can maintain competitive edge
with new ideas.
Reduces risk and increases productivity.

Frees many resources for other purposes for enhancing or expanding your business in
other directions.
Companies can save 10-20% cost on an average with outsourcing.

Some hospitals do not want to deal with "Safety and Sanitation" issues on a daily basis.
With outsourcing this could reduce the cost of keeping equipment in properly order and also
reduce cost in training staff on a regular basis and also eliminate training new staff. Outsourcing
could cause the hospital, to only work with a smaller scale, thereby reducing cost and increase
savings through hiring less employees, benefits, etc.

Case 3: Outsourcing of hospital services

2. In the housekeeping situation, why not just forget about outsourcing, especially since the
hospital ended up rehiring its employee anyway?

Now that we understand why organizations outsource, why some can keep the outsourced
work performed with in and others do not, lets get a better understand of why some
organizations bring back the same workers to do these jobs and use the outsourced company to
provide the management? Even though they hired back the employees, I assume the purpose of
continuing the outsourcing with management only was because of their cost saving strategy. The
management would probably be handled more efficiently by an outside specialist. Also
outsourcing management could bring in new information of expertise that is beneficial to the
overall core competence of the hospital. We could see the company bringing back the old
employees because of the turnover rate. This was probably causing unexpected costs, maybe the
work wasn't been performed correctly, etc...Outsourcing the management was probably due to
the fact that they didn't have the manpower, or time to manage this staff. Sometimes it is better to
have an outside source that can bring in fresh ideas and recommend changes. Outsourcing the
manager position would probably make the employees feel detach because the manager is not
employed by the hospital. There is no connection there. Even though it could be saving the
hospital some money, look at what they have to pay to the employees. Outsourcing the manager
even though they do make more money would not save them as much if they were to outsource
the entire department

Case 3: Outsourcing of hospital services

3. For laundry service, what might have been the rationale for asking another hospital to
join it?
As we have all learned, outsourcing can be beneficial to most organizations and can be
more beneficial when you have another organization joining you. Some companies today such as
hospitals will ask another hospital to join them in outsourcing. I believe the rationale for asking
another hospital to join it was to eliminate distractions and force themselves to concentrate on
their core competencies. This can free the hospital from tedious and time-consuming tasks of the
laundry service so they can concentrate on the marketing and sales activities that are most
essential to the firm's long-term growth and prosperity. Obtaining an outsourcing partner really
sells focus. So, if the hospital brings in an outsourcing partner they can focus their energies on
sales, marketing, and all the other things that matter more. Asking another hospital to join in
could save both hospitals a lot of money that could be used in updating their medical equipment,
hiring more medical staff, etc. With this, only one hospital would have to deal with the laundry,
thereby sharing equal expenses it could save both hospitals money in the long run through one
hospital paying the other hospital for doing their laundry and the other hospital could dissolve
their laundry department all together. In most hospital, all contaminated laundry are placed in
special containers and sent to one State facility to handle it. Towels, sheets, etc. that are used
campus wide are sent also to one central location. This helps reduce contamination and also help
this particular facility to focus on reducing the risk of contamination. Patient's clothing are done
within the home unless it is contaminated, then it is placed in a contaminated container that has
been specified for these items and sent to the facility that is designed for this. This helps reduce
cost for the facility and also reduce widespread contamination.

Case 3: Outsourcing of hospital services

Conclusion:
Therefore in conclusion, it is needless to say, the decision to outsource any major
function is not one that should be taken lightly, and careful consideration of all major issues is
vital, if the transition is to be smooth and satisfactory to both parties

References:
Stevenson, W. (n.d.).Operations Management.10th (2009): McGraw-Hill Irwin