The High Stakes of Outsourcing in Health Care

Outsourcing in health care has become increasingly common as health system administrators seek to enhance profitability and efficiency while maintaining clinical excellence. When clinical services are outsourced, however, the outsourcing organization relinquishes control over its most important service value: high-quality patient care. Farming out work to an external service provider can have many unintended results, including inconsistencies in standards of care; harmful medical errors; declines in patient and employee satisfaction; and damage to clinicians’ morale and income, and to the health organization’s culture, reputation, and long-term financial performance. Research on outsourcing in the areas of emergency medicine, radiology, laboratory services, and environmental services provides concerning evidence of potentially large downsides when outsourcing is driven by short-term cost concerns or is planned without diligently considering all of the ramifications of not keeping key clinical and nonclinical services in-house. To better equip health system leaders for decision-making about outsourcing, we examine this body of literature, identify common pitfalls of outsourcing in specific clinical and nonclinical health services and scenarios, explore alternatives to outsourcing, and consider how outsourcing (when necessary) can be done in a strategic manner that does not compromise the values of the organization and its commitment to patients.