Comparing Outsourced vs. Insourced Lab Courier Services

July/August 2021 - Vol.10 No. 7 - Page #14
Category: Laboratory Outreach

In today’s competitive health care environment, it is no secret that hospitals and other health care providers are constantly looking for ways to lower expenses. According to a recent Black Book survey,1 the average hospital will need to reduce its costs by 24 percent by 2022, just to break even. Many hospital cost structures have become unsustainable and, as a result, nearly every provider is at least considering outsourcing some part of their operations.2 However, for many hospitals, building and maintaining certain logistical operations in house can make more sense in the long run, particularly when the hospital is looking to outreach for help in expanding their service menu.

Laboratory managers know that a laboratory outreach program can benefit the hospital in several ways, including increasing revenues, filling unused capacity, and solidifying relationships with physician and patient communities. Building rapport with physicians and the community ultimately brings economic value to the hospital. Yet to service this market, it may be necessary to modify current systems and processes and develop new solutions. When looking for efficiencies, the areas prime for development or modification include logistics, service center operations, client/customer services, physician/provider connectivity, billing, marketing, sales, and finance reporting. Touching on all of these, the development of efficient customer-related services is a key to reaping the benefits of outreach.3

Take Advantage of Front-Facing Exposure

Those laboratory managers with experience in outreach logistics are well aware of the need for reliable courier services to collect and deliver specimens, samples, and supplies, and that the overall effectiveness of the service is more than the sum of those parts. These couriers are the outward “face” of the laboratory and most likely see and interact with the laboratory’s outreach clients far more often than an institution’s outreach sales representatives. Thus, gaining and maintaining open communication with your couriers can be an advantage.

Acting as eyes and ears for the laboratory, they can help provide valuable feedback on the operations of your service clients, how your services are being received, and whether they are utilizing competing services. Furthermore, as your couriers ultimately represent you to your clients, it is important to reasonably assure yourself that your couriers are professional and courteous and are versed in the needs of your clients.

Find the Right Combination

Many hospitals and health systems have identified the benefits of hospital laboratory outreach programs as demonstrated by the steady growth in such operations. As hospitals have grown and merged, the expansion and optimization of a courier network becomes a strategic necessity. To address this, there are three primary options for courier logistics:

  • Maintain a 100%, laboratory-owned courier and logistics service, using the laboratory or institution’s employees, company cars, and other assets (eg, temperature-controlled containers, bar code scanning hardware, attendant software, etc).
  • Outsource 100% of the courier and logistics service via contract with an independent service company wherein the company employs the couriers and manages the performance of the logistics network for the laboratory customer.
  • Operate a hybrid model utilizing a mix of internal and external couriers and logistics employees. Depending on the maturity of the outreach program, lab/institution employees may perform the bulk of courier services for a small amount of established lab customers, with supplemental outside courier/logistics services added for selected routes or as clients are added in new regions.4

Obviously, if the laboratory or institution decides to run a complete in-house courier and logistics operation, the onus for its success falls to the laboratory or institution. Although volume and resources may enable such an operation for some institutions, many more will likely benefit from an outsourced or hybrid model, particularly if the lab is new to outreach.

Furthermore, there are great arguments to be made for outsourcing. A laboratory’s core competency, after all, is diagnostics. By outsourcing non-core functions, laboratories can, in theory, reduce costs while improving service levels. However, as with any outsourced operation, this comes with risks, and as health care providers now consider outsourcing a wide range of operations, it is essential to understand the liabilities, and remaining needs, in order to determine whether the benefits outweigh the challenges.

Pros and Cons of Outsourcing

Deciding to outsource demands a thorough outsourcing analysis, and from a business aspect, this is often viewed as a make-or-buy decision. However, many institutions that apply a make-or-buy analysis see it as “either/or,” when in fact, the decision to insource versus outsource an operation rarely comes down to yes or no. Although each approach offers advantages, a catch-22 has emerged for health care institutions that want to drive innovation and create a competitive advantage, yet still want to outsource a particular activity. Many hospitals using conventional arrangements are finding that their outsourced service providers are meeting contractual obligations and service levels, but they are not driving innovation and efficiencies at a desirable pace.5

As with most larger scale decisions in the laboratory, determining whether or how much of a courier service to outsource should entail a pre-planned pros and cons list. The following are a few elements to consider when making this decision:

Benefits of Outsourcing

  • Enables technical staff to focus on operations that push their skill sets (ie, core competencies)
  • Potential reduction in overall transport expenses
  • Transfer of risk and liabilities related to courier services
  • Access to additional services and technologies (eg, GPS mapping, logistics analysis software, bar code tracking, etc)

Potential Drawbacks of Outsourcing

  • Limited (or no) control over courier personal (ie, the face of your outreach program)
  • Varying degrees of customization to service provider needs
  • Impact of the Cost of Poor Quality (COPQ)
  • Greater overall expense once all downstream costs are accounted for

Given the potential customer service advantages that maintaining in-house courier services allows, some institutions may deem control over the front-facing aspect of outreach to be a considerable benefit. However, a savvy outreach manager will make this decision based on a thorough return-on-investment (ROI) analysis just as stringent as the process of bidding for an outsourced courier service. As such, consider some the various costs related to a hypothetical in-house courier service:

  • Vehicles and related insurance/liability, maintenance, fuel
  • Licensing and registration fees
  • Communication hardware and service fees
  • Parking and parking tickets
  • Driver wages
  • Potential overtime costs
  • Driver and support health care costs
  • Worker’s compensation coverage
  • Payroll taxes (eg, FICA, federal and state unemployment taxes)
  • Dispatcher and fleet manager expenses

While assembling such an operation in house may seem daunting, keep in mind that the outsourced service has the same or similar costs and passes those costs on to the client fees charged. That said, established medical courier service providers are likely to drive down those costs via economies of scale.

Regardless, there are a few common billing models for courier services to likewise consider, including flat fee, charge per mile, and charge per pickup, with each having its own pros and cons. Many medical courier providers will tout their services as being far superior to what you can accomplish on your own, yet there are a growing number of tools now available to enable an outreach service to establish their own courier service on the same level of service as existing service vendors. Some of these tools include:

  • Courier routing software
  • Specimen tracking software
  • Customer service and relationship management software
  • Dispatching systems and software

Conclusion

Regardless of whether you ultimately provide courier services in-house or chose to outsource to a medical courier company, a thorough ROI analysis should be completed prior to making a decision that could have unanticipated downstream costs. These include soft costs, as well as the potential for loss of control of the service and the face of your laboratory. Outreach laboratory services continue to be of growing benefit to hospitals and health systems of all sizes, and a robust, dependable, and professional courier, logistics, and transportation system is essential to the ongoing success of outreach.


References

  1. Black Book Research. By 2022, average hospital costs must be reduced by 24% to breakeven and outsourcing may be the solution says Black Book. PR Newswire. Accessed 7/7/21. prnewswire.com/news-releases/by-2022-average-hospital-costs-must-be-reduced-by-24-to-breakeven-and-outsourcing-may-be-the-solution-says-black-book-300643743.html
  2. Lagasse J. Hospital costs should be cut 24 percent by 2022 to break even, outsourcing may help, survey says. May 8, 2018; Healthcare Finance News. Accessed 6/17/21. healthcarefinancenews.com/news/hospital-costs-should-be-cut-24-percent-2022-break-even-outsourcing-may-help-survey-says
  3. Anderson V. Hospital laboratory outreach: benefits and planning. Clin Lab Med. 2007;27(4):791-805, vi. Accessed 6/17/21. sciencedirect.com/science/article/pii/S027227120700087X
  4. Terry M. Clinical pathology laboratories beef up courier and logistics services to deliver more value to client physicians. Apr 6, 2012. Dark Daily. Accessed 6/17/21. darkdaily.com/clinical-pathology-laboratories-beef-up-courier-and-logistics-services-to-deliver-more-value-to-client-physicians-40612/
  5. Vitasek K. Outsourcing is not make versus buy: It’s a continuum. Outsource Magazine, 27(Spring); 2012. Accessed 6/17/21. futureofsourcing.com/outsourcing-is-not-make-versus-buy-it-is-a-continuum

Michael J. Hiltunen, MBA, MT(ASCP), CLC(AMT), is president of MedStar Consultants and the executive director of the GreatLakes Laboratory Network. A certified laboratory consultant and sales coach with over 30 years’ experience working in a variety of hospital laboratory settings, Michael has held positions ranging from medical technologist to outreach client sales rep, through outreach client services manager and laboratory director. MedStar Consultants service clinical laboratories that wish to leverage outreach services to maximize revenue.

 

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