The Fox And The Hen House

John Muir Healthcare in Walnut Creek, California, is an organization I have always admired. Blessed with great demographics in terms of the economic status of its community, they have progressed impressively when it comes to clinical services. It always helps in that regard to have great finances.

So I found it curious last week when John Muir made headlines in healthcare as it announced that it would be outsourcing non-clinical IT (why you separate that from clinical IT is puzzling), analytics, revenue cycle management, purchasing and claim management. The press release also said that ambulatory care coordination and utilization management for its physician network would be outsourced.

These activities will be assumed by Optum, a subsidiary of United Healthcare. Five hundred and forty  John Muir employees will  be offered positions with Optum. I am always suspicious of an organization  controlled by a health plan although Optum has claimed in the past that they build a wall between their activities on behalf of customers and their parent. Nevertheless, there is an element of the fox guarding the hen house.

I never had a satisfactory experience during my career in outsourcing integral services to outside firms. My experience was primarily with clinical services with a few non-clinical services as well. Promises that were made were not kept. Eventually, there was an unwinding process which was painful. In light of this, John Muir’s decision is breathtaking.

I wonder what the level of commitment will be by the outsourced staff as time goes by. Working within an organization is different than working outside the organization. If things go wrong, who will suffer the most, the organization which did the outsourcing or the organization assuming these activities as part of a contract? The more such contracts the outside organization has with other health care organizations, the less important the individual health care organization becomes. Optum clearly sees this is as a source of growth and profits.  There’s that fox again.

The services being outsourced are not as glamorous as clinical services but in their way very important to survival of the organization. If revenue cycle management (a fancy way of saying billing and collection) is not properly done, the very financial foundation of an organization is weakened. The same goes for the other functions. Restoring these functions internally would be a mammoth effort with extraordinary risks and expense should outsourcing fail.

I  expect that there are performance standards built into the agreement with Optum.  Again, though, which organization suffers the most if those standards are not met?  Call me old fashion (I have been called much worse) but this type of outsourcing which is on the verge of becoming trendy in healthcare does not seem worth whatever savings may result.

This is either a courageous, well thought out move by John Muir or a foolhardy action born of some unknown problem. Either way, John Muir will have many eyes on it as this outsourcing  progresses.

My advice:  keep your eyes on the fox.