A handful of health systems are exploring new revenue streams by selling back-office functions, like IT support, revenue cycle management or scheduling, as services to other providers, a healthcare consultant said.
Tyler Giesting, director of healthcare M&A at West Monroe, noted that ongoing financial headwinds, such as insufficient reimbursement and the rising cost of labor, are pushing health systems to find new sources of revenue beyond traditional cost-cutting methods like job cuts, service line closures and outsourcing.
This approach to boosting revenue really only works for large health systems that can deliver back-office functions in-house — with the scale, expertise and infrastructure to do so at a high level, Giesting explained. While the trend is still uncommon, he said interest is growing.
“We’re seeing some systems that are saying, ‘Okay, we know that we might be able to take this to some of the community or regional or smaller hospitals that are looking for a partner.’ And I think there’s a value proposition in keeping with a system in your region or just another health system that understands your patient population in a way that perhaps a large, outsourced aggregator or a [managed services provider] might not because they’re another degree removed,” Giesting stated.
For example, a large health system might leverage its centralized call center to manage patient calls on behalf of a network of affiliated hospitals. A large system might also sell its IT services to organizations using similar EHR setups, Giesting remarked.
For the health system that is selling its services, the perks include more revenue, the potential to use excess capacity and the possibility to build closer relationships with partner systems, he said.
He added that there is also some risk, as this new offering could potentially distract a provider from its core operations.
“If you over-focus, you could potentially put other things at risk. So it’s probably a ‘crawl, walk, run’ approach that I think these groups are going to take if they decide to do it. They’re not going to sign up for more than they think they can take, and they’re going to be very careful with who they engage with and how much they take on. But if you can control for some of those variables and limit the risk, there’s a definite reason to consider these types of approaches,” Giesting declared.
As for the health system that is buying the services, this provider gains access to specialized expertise, greater familiarity with their EHR configuration and perhaps more personalized service than what it would get from a large, impersonal vendor, he explained.
This “as-a-service” model is still quite nascent, but Giesting thinks it could become an increasingly attractive strategy for health systems looking to turn their operational expertise into a competitive — and profitable — advantage.
Photo: Krongkaew, Getty Images
