US Healthcare Reform and Shared Services

The ongoing and increasingly rancorous debate over healthcare reform in the US is clearly set to define at least the first part of President Obama’s time in office. While as yet the precise terms of the proposed reforms - let alone their success - have yet to be determined, it is obvious that their intentions are historically significant and that, if adopted, they would have a radical impact throughout the healthcare sector and far beyond. This potential impact has substantial implications for the shared services and outsourcing space both within healthcare and, longer-term, across every other sector, by virtue of the changes reform would precipitate in a range of areas including insurance provision and the nature of employee contributions and benefits.

It’s simply premature to give a full assessment of the specific ramifications of reform - or the failure to achieve it - but even at this comparatively early stage some of the potential consequences for shared services and outsourcing are beginning to coalesce. It’s hard to envisage, for example, any substantial increase in state spending on healthcare and the growth in related infrastructure which would follow, without assuming that shared services would form at least part of the solution: even without healthcare reform, of course, the move to a more streamlined and efficient government touted by President Obama both before and since his election will rely in no small part on an adoption of many of the principles which have seen shared services become such a pillar of both private- and public-sector service provision, and it would be near-incomprehensible were any new healthcare structure to be erected without recourse to similar means.

"In line with the Presidential mandate for a more efficient government, many believe that the opportunity for shared services within the Federal Government is promising," says Dave Adams of management consultants ScottMadden. "Given the value that shared services can deliver and solid examples of successful federal shared services organizations already in operation, the timing is right to pursue shared services as the government-wide model for delivery of mission support services."

Indeed, the expertise developed within shared services - both public and private - over the last two decades may well prove invaluable when applied to some of the more vexing organizational and process-related issues thrown up by healthcare reform on any significant scale. While reform presumably could be enacted without involving the shared services community, the question would inevitably arise: why? If the idea remains to "ask not what your country can do for you, but what you can do for your country", it seems almost self-evident that the US stands to benefit hugely from the invaluable experience of shared services leaders who have for years faced many of the same challenges - albeit on a smaller scale - that would stand in the way of imposing true reform onto a system which already sucks in such a vast portion of federal spending.

Linda Merritt, research director at NelsonHall, believes that the time has come for shared services heavy hitters to step up to the plate. "Major SS&O players have the opportunity to be seen as thought leaders and join the national debate. For example, the design of the new health records system should take into consideration all of the end-to-end processes and interfaces [that] will connect to it, including employer benefits administration, claims and billings, and compliance with regulation and legislation requirements and reporting. Healthcare providers’ cost of completing claims and payment processes requirements for every insurance carrier adds directly and significantly to the cost of healthcare through complexity and confusion.

"While other parts of the health care debate are higher profile," she adds, "the cost of excessive administrative complexity consumes billions of dollars that could be used to provide and expand health care. And who knows more about streamlining administrative processes to increase quality, functionality at a lower cost than leading SS&O providers?"

Such streamlining isn’t a mere "nice-to-have", but an absolutely essential part of any potential reform process. The violently polarizing nature of the debate thus far has demonstrated that this is a matter of the greatest significance both socially and politically: in Washington, President Obama has come down to earth with a bump and knows that pushing reform through Congress is going to be a task requiring every ounce of his political clout, and if he is to win this battle a major aspect of his strategy must be to demonstrate that state intervention into healthcare will be carried out as efficiently - as cost-efficiently - as possible. Every last penny will be protested by the more reactionary elements within Congress: the ability to prove that new state infrastructure will be developed along best-practice lines, and with excess fat trimmed to a microscopic level, could literally mean the difference between success and failure.

But of course it’s not just the government which could turn to shared services as part of any reform process: the private-sector organizations making up such a significant part of both current and future healthcare systems will also be affected to an extent that has yet to be clarified. While many such companies have already adopted shared services to some degree, the advantages of the shared services model when it comes to increasing flexibility and scalability will be hard to ignore for those that haven’t - and even early adopters might look to diversify the services provided by their existing SSOs as new challenges demand new solutions across organizations. This will, of course, create added costs in the short term.

"One significant impact to consider is the need to evaluate how changes in legislation, policies, and/or procedures will impact existing processes, systems and re-tooling of workforce knowledge/skills. If the rules of the game change (and assuming that insurance providers will continue to play a critical role in healthcare) then providers must stand ready to quickly adapt their operations to meet these challenges," explains Adams.

He continues: "Changes in the scope of work that shared services and/or outsource service providers have committed to providing to their customers will require investment in people, process and technology . Whether or not the cost of modifying operations to meet the new rules can be recovered through existing pricing mechanisms or service agreements is yet to be determined. The question of who pays will likely lead to interesting and challenging discussions between service providers and customers."

"Interesting and challenging", indeed, could be taken as a somewhat understated judgment on the entire reform environment. There are of course at least three groups for whom a third adjective pops up: "exciting", perhaps, or even "appetizing". Those three bodies are the consultants - who’ll undoubtedly be aiming for a tasty slice of the pie should any significant transformation to government architecture be called for; outsource providers, for similar reasons (although the landscape here is more complex); and shared services professionals.

The last group in particular stand to gain a great deal from any significant expansion of healthcare-related shared services, of course, for the simple reason that it would open up new employment possibilities at a time when the general trend has been towards job-cutting and rationalization even at quite senior levels. If it is indeed time as Linda Merritt suggests for shared services leaders to "join the national debate", the reward may well be measurable in terms of many new roles within new or expanded shared services organizations or within ancillary sectors such as training or advisory services.

Furthermore, if the more radical elements of the proposed reforms manage to make it into law, existing SSOs within every American organization will have to accommodate and react to new legislative requirements affecting areas like general HR, payroll and compliance. This would presumably open up new opportunities for employment and/or advancement as firms look to recruit experienced talent to help them through the transition. All told, the potential number of new shared services jobs from any reform of healthcare that goes beyond the merely cosmetic could run into the thousands at least (although many of these would of course be entry-level positions). As such the prospect of healthcare reform on any significant scale should be a mouth-watering one for the shared services community which - lest we forget - has taken a bit of a battering since the onset of the financial crisis.

For the service-provider community the potential advantages are less clear-cut in that the government’s position on outsourcing (especially offshore outsourcing) has yet to crystallize despite the increasingly anti-outsourcing rhetoric which occasionally crept into Barack Obama’s campaign rhetoric.

As Adams explains, "the Administration has recently sent some strong messages regarding the effectiveness of outsourcing and there is a movement in place within the Federal Government to bring existing outsourced work back in-house… although [it is] not completely off the table given that outsourcing remains a viable solution for driving much needed efficiencies and cost savings."

It’s unlikely that President Obama and his team would want to stir an already bubbling pot by trumpeting incessantly on about the potential benefits of outsourcing given the term’s negative connotations in the eyes of many in the electorate. However, outsourcing itself could be a handy weapon in the president’s armory against the more rabid opponents of reform in that it provides an opportunity to demonstrate that reform is not all about "big government" and taking control away from the private sector. It’s clearly too early to go too far down the line of such an argument; however it’s almost certain that despite his apparently anti-outsourcing stance on the campaign trail, President Obama will have to incorporate at least some outsourcing of services into his reform proposals (in many ways, indeed, outsourcing lies at the very heart of the planned reforms in the sense that the government will continue to outsource much of both delivery and insurance of healthcare to the private sector).

As a result, the major outsourcing providers are monitoring the situation in Washington extremely closely; whether or not US-based firms operating US-based delivery centers will have an advantage over their foreign-based competitors due to the political danger inherent in offshoring elements of such an already controversial policy remains to be seen, although some skeptics may believe that this should be taken as a given considering how important every congressional vote is to the overall success or failure of the mooted reforms.

Linda Merritt believes that allowing such political considerations to color the format and origin of service delivery within a reform package could prove counter-productive. "Well-meaning but misplaced restrictions could add in cost, just when the goal is to find ways to increase healthcare coverage at the lowest total cost to our economy. For example, tying government funding to restrictions on where work can be shored would impact the cost to design, develop and build the new technologies. The top candidates for design and development of such systems already use intelligent shoring to segment workflow by capability, capacity and cost globally," she says.

You might say - and you’d be perfectly correct - that all this is supposition, and that the real substance of healthcare reform has yet to reveal itself. That is indeed the case; however, it doesn’t take a great mind to see that efficiency and cost-savings lie at the very heart of the solution to the great American healthcare system, and that shared services (and outsourcing) are now a mainstream method of achieving exactly those two aims. As such it’s hard to imagine a future incarnation of healthcare that doesn’t utilize shared services at least in part - and of course the greater the scale of government involvement in healthcare and the more radical the transformation, the more likely it is that some of the potential consequences considered here will indeed play out. As President Obama said in his address to Congress earlier this month, he has come "not to fear the future, but to shape it": the shape of that future may yet be undecided, but it’s all but certain that shared services will play a significant role in shaping it.