Rising healthcare costs and outsourcing

The cost of health care in the US has risen steadily in recent years and some consulting firm projections indicate that this trend will continue. This has led to an increasing adoption of outsourcing by various hospitals and healthcare providers across the country. Information technology, medical transcription, medical billing, and medical coding outsourcing have increased in response to the need to reduce costs.

Healthcare costs are rising

On Sept. 15, New York-based consulting firm Towers Watson (NYSE:TW) forecast an 8.2% increase in employer health care costs for 2011. According to Ron Fontanetta, senior health care consultant at Towers Watson, “Employees today are adjusting to historical lower-than-average pay increases based on merit, while at the same time facing higher health care contributions, copays and deductibles. This combination could negatively impact many workers and exacerbate the growing affordability crisis.”

Meanwhile, Chicago-based company Hewitt Associates (NYSE:HEW) estimates it could be as high as 9%. In Chicago, the projection is even 12.4%. The figure is the highest in five years.

In a statement from Hewitt’s healthcare practice leader, Ken Sperling, said, “Employers continue to struggle to balance the significant healthcare needs of an aging workforce with the economic realities of a difficult business environment.”

The report attributes the increase to an aging workforce, coupled with rising technology costs and the health care reform bill.

Costs and outsourcing

There is no doubt that healthcare costs are rising and in response, healthcare providers and hospitals are scrambling to maximize revenues while minimizing costs to lower costs for consumers.

One example is Hendrick Medical Center, which signed a managed services and recruitment process outsourcing contract with AMN Healthcare Services (NYSE:AHS) on Sept. 7. Ralph Henderson, AMN president for Nursing and Allied divisions, said the contract would result in “lower billing rates and operating costs, reduced liability and limited insurance risk, and better adherence to clinical standards.”

Outsourcers, meanwhile, are expanding into healthcare to jump at the opportunity.

As MaryAnne Pace, co-founder of Health BluePrints company, stated, “Health care providers are seeking solutions to increase net cash flow, improve revenue cycle performance, improve operational efficiency and improve overall patient and physician satisfaction. ” The company was recently acquired by NCO Group, which has also released a new end-to-end Healthcare Revenue Cycle Management (RCM) solution along with the acquisition on September 13.

Another company moving into the healthcare industry is Tricom India (NSE:TRICOM), which is currently acquiring US healthcare provider GTESS Corporation. The news announced on September 14 came after Tricom India announced that it had recently been awarded a five-year contract by a US-based healthcare company for $10 million. Meanwhile, Conifer Health Solutions also announced an acquisition on September 28. The company acquires MediHealth Outsourcing to strengthen its position in healthcare outsourcing.

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Care numbers

As the trend of rising health care continues, healthcare providers and hospitals are trying to reduce costs, and right now outsourcing is one of the solutions they are turning to – an opportunity that outsourcers are taking advantage of. Healthcare, like any business, should be concerned about the numbers.