Consider the Source

Helping the Healthcare Sector Through Sweeping Change

By: Paul Reynolds, Director and Chief Research Officer, TPI Momentum

Payers, providers, and equipment manufacturers in the U.S. healthcare sector have reacted differently to legislative changes over the last year. Many of the challenges & opportunities facing these groups are the same. According to TPI’s latest Momentum Market Trends & Insights Report focused on Vertical Industries, the Healthcare Equipment & Services market has grown every year – with the exception of 2008 – since 1994. With market penetration reaching 36 percent in 2009 and continuing, service providers have a tremendous opportunity to engage one of the smallest vertical markets (19^th out of the 27 verticals TPI tracks).

The combination of high demand for services with patients who cannot fully pay for services has led companies in the industry to rigorously manage costs, innovate, and develop business agility to remain viable. The landmark passage of healthcare reform will without question be a turning point; not only for how care is administered when 32 million previously uninsured enter the system, but to how businesses offer services for profit. While its effects on the system will not be fully understood for years to come, it is clear that transformational change and innovation are now imperative.

Nearly three fourths of companies have BPO contracts (much more than the broader market) for document management, HRO, and industry-specific solutions. IT outsourcing will be the more popular solution set sought by healthcare organizations going forward.

• Providers, though reluctant to adopt outsourcing, continue to use it mostly for IT and some highly specific clinical and healthcare delivery functions.
• Payers are seeking transformation solutions to prepare for changes they know are on the way, creating new sourcing opportunities for financial, customer contact, and HR functions.
• Medical device makers continue looking for ways to reduce costs, since hospitals have long been reducing or deferring equipment spending. A fresh look at how outsourcing can help may lead them to offshore application development & maintenance (ADM) work as well as infrastructure.

In some areas, there is reluctance to act due to political uncertainty and a weak economy. Service providers will benefit by offering these organizations their vision for how outsourcing can provide innovation.

 

Technorati Tags: healthcare,outsourcing,TPI Momentum,hospitals,insurers,medical device makers

Smart Sourcing to Lower Costs and Achieve Greater Efficiency & Productivity in Pharmaceuticals

By: Nigel Walker, Partner & Managing Director, Energy & Life Sciences Services, TPI

The pharmaceutical industry has not seen a lot of new molecular entities (NMEs) in recent years and, as patent expirations are rapidly approaching for many blockbuster drugs, there is a real concern about the imminent revenue drop among the majors. This has caused pharmaceutical companies to scale back its R&D spending. This, in turn, is accelerating a review by the major pharmaceutical companies of their internal cost structures - especially head office shared service activities such as IT, HR, Finance and Accounting (F&A), Procurement, and Real Estate.

Sourcing is turning out to be a major consideration and a viable option for cost reduction, efficiency improvements, and increased productivity. Our statistics show that decent savings can and have been achieved at pharmaceutical companies via this alternative with potential savings in the range of 8-27% - depending upon the area analyzed. TPI is often hired to help quantify those potential savings using our Mark-to-Market service. With this service, we compare internal cost structures of company service operations not to their peers, but to the sourcing alternatives or the service provider community. We are able to do this because TPI has been involved in a large number of transactions, thus allowing us to make accurate judgments on the reviews and enabling major sourcing strategy decisions to be made with confidence. We have also performed Mark-to-Market on in-flight contracts and offered advice on whether the company has current market based pricing.

Other pharmaceutical companies have utilized TPI’s “Fairness Opinion” whereby they have often struck a deal with a service provider in a sole-source situation and asked for our opinion as to whether the Terms and Conditions, Pricing, and Service Levels are equal to what they could have achieved in a competitively bid transaction.

As the major pharmaceutical companies continue to feel the pinch from blockbuster drugs reaching the end of their patents, senior management must be prepared to implement strategies that will put these companies in a position to grow.

Technorati Tags: TPI,Pharmaceutical companies,sourcing

Seek Privacy, Security and Auditing Capabilities in Your Service Provider

By Jim Kane, Director, CIO Services

In this second post on preparing your healthcare organization for cloud computing, I will address how healthcare businesses subject to HIPAA should carefully select a service provider with the capabilities to address HIPAA Privacy, Security, and Audit as well as provide secure, scalable, low cost IT infrastructure.

HIPAA’s Privacy Rule requires that individuals’ health information are properly protected by covered entities, meaning that patients’ “protected health information” (PHI) cannot be transmitted over open networks or downloaded to public or remote computers without encryption. Encrypting data in the cloud include standards for the encryption of all PHI in transmission (“in-flight”) and in storage (“at-rest”). The same data encryption mechanisms used in a traditional computing environment, such as a local server or a managed hosting server, can also be used in a virtual cloud computing environment as well as a complete firewall solution.

The Security Rule requires covered entities to put in place detailed administrative, physical and technical safeguards - such as access controls, data encryption, and back-up and audit controls - to protect electronic PHI. While data flowing to and from the cloud should be safeguarded with encryption, data that comes in contact with administrators or third-party partners may require different control mechanisms. To help you comply with HIPAA’s Security Rule, policies and processes regarding data and how to implement authentication, access, and audit controls must be in place to reduce the risk of a compromise from outside. HIPAA’s security safeguards also require:

1. In-depth auditing capabilities,
2. Data back-up procedures, and
3. Disaster recovery mechanisms.

Service providers must be able to address these requirements. In designing a HIPAA-compliant system, you should put auditing capabilities in place to allow security analysts to drill down into detailed activity logs or reports to see who had access, what data was accessed, etc… This data should be tracked, logged, and stored in a central location for extended periods of time in case of an audit.

A major goal of HIPAA is to assure patients that their health information is properly protected while allowing the flow of information needed to provide and promote high quality healthcare for the public's health and well being. The development of a business-focused cloud computing strategy, internal corporate data policies and an accompanying transformation roadmap can lead to the successful implementation of HIPAA applications and infrastructure in the cloud computing environment.

Technorati Tags: TPI,cloud computing,HIPAA,service providers

Preparing your organization for HIPAA-compliant Cloud Computing

By: Jim Kane, Director, CIO Services

and

David McCament, Director, Healthcare/Payer Provider

 

Healthcare providers have an opportunity to take advantage of new, advanced technology in cloud computing.  Given the heavy industry regulation, it is important for health professionals to determine if cloud computing can provide them a secure, reliable, scalable, and inexpensive computing platform that can be used to facilitate healthcare customers’ HIPAA-compliant applications and data. HIPAA, which protects the privacy and security of certain health information, is a national standard that all healthcare providers need to be compliant with to secure “protected health information” (PHI).

Some key steps to preparing your organization for the cloud include the following:

1. Rationalizing, simplifying, standardizing and reducing your organization’s application portfolio
2. Implementing virtualization technologies at all levels to create a portable environment ready for the cloud
3. Developing a cloud computing strategy to help identify business value drivers, service impact, and service capability
4. Creating a corporate risk profile for cloud computing adoption
5. Deciding where to place healthcare applications and data taking into account characteristics such as business importance, data sensitivity, processing security, and regulatory constraints
6. Develop business case and determine the transformational roadmap to being the process of moving healthcare data to the cloud

As the “Great Healthcare Debate” continues the acceptance of cloud computing solutions – even in privacy and security-focused industries – is gaining traction. If implemented properly, the cloud provides a computing platform that can be used to facilitate a growing healthcare customers’ HIPAA-compliant industry and healthcare applications. In my next post I will address how healthcare businesses subject to HIPAA should carefully select a service provider with the capabilities to address HIPAA Privacy, Security, and Audit as well as provide secure, scalable, low cost IT infrastructure.

Technorati Tags: cloud computing,healthcare,HIPAA

4th Quarter Global Index Signals Gradual Recovery for the Outsourcing Industry

By Mark Mayo, Partner & President,  TPI Global Operations, TPI

 

Today I am happy to report that fourth-quarter contract values have signaled the beginning of a gradual recovery in the outsourcing industry. Contract values are up 47 percent – its highest value in 18 months. After the market reached its bottom in the first half of 2009, the second half clearly showed positive momentum as businesses became more confident about making strategic decisions in this economic environment. The main factors driving the market’s upswing in the broader market were:

 

Strong IT outsourcing (ITO) demand. Activity in this area dominated the broader market for the entire year with total contract values (TCV) up 54 percent from the previous quarter.

The Europe, the Middle East and Africa (EMEA) region was significantly impacted by a number of large deals in the fourth quarter, delivering its best quarterly performance since the second quarter of 2008. The UK – like the U.S. – has seen its TCV steadily decline over the last five years due to the maturity of both markets, but other markets in the region are maintaining decent performance levels.

A resurgence in mega deals and mega-relationships was a positive sign that contributed to the market turn with fourth-quarter total contract values at their highest in six quarters.

It is also important to note that financial services, manufacturing and telecom & media  -

industry sectors that have traditionally driven the outsourcing market - all showed a strong second-half upturn in total contract value. These sectors have traditionally driven the outsourcing market so a continuing positive curve for all three will be crucial for new growth in the market.

With companies growing more confident and the market stabilizing, we expect to see growth in 2010.

Check out the full Q4 TPI Index presentation at:

http://www.slideshare.net/TPIIndex/4q09-tpi-index-presentation-final?from=share_email

 

Keeping Your Healthcare Sourcing Strategy Moving Forward (with Confidence!) During Turbulent Times

By: David J. McCament, Director, Healthcare Payer / Provider, TPI

Today’s global economic conditions are unprecedented for decision makers in healthcare. For example, every part of the United States healthcare business model is undergoing significant and unpredictable change; and we’re not even close to the finished model. 

Despite these turbulent times, healthcare payers and providers who are embarking on or are in the middle of major strategic business projects are wondering how to align their sourcing strategies amid this constant, multidirectional change. 

There is no time like the present for healthcare payers and providers to capitalize on chaos to improve operations and prepare for the new healthcare environment. Here are the TPI Top 5 actions you can take in the near term to drive contractual flexibility, increase speed of value realization and maximize the value derived from your sourcing relationships.

1. Reduce the number of key service providers and then increase leverage with those that survive your vetting process.

2. Renegotiate current contracts to reflect the changing environment. Consider the future benefit streams of your contracts and “pull them forward” contractually to realize their value sooner. Seek to consolidate multiple contracts with the same service provider to improve leverage across business units.

3. Now is the time to establish (or fine tune) rigorous Service Management & Governance oversight processes to ensure maximum value realization from your current contracts.

4. Look outside the traditional healthcare market for sourcing ideas and executable models. Examples of other industries that have proven track records in sourcing include banking and financial services, manufacturing and telecommunications, all of which have been successfully sourcing non-core functions for decades.

5. Establish an enterprise-wide sourcing advisory council to document and propagate your organization’s sourcing philosophy. For example, consider the bigger picture of sourcing as not just “outsourcing,” but as the application of resources form every potential source to solve your business challenges.

Now is the time to re-assess your sourcing strategy and re-evaluate your current sourcing relationships. Reset the performance bar, define/refine what innovation means to your firm and make sure to measure service providers’ execution of their contractual obligations.

TPI’s experts can help healthcare organizations produce an objective assessment of your current sourcing strategy and develop a roadmap for your future strategy with objective, risk-balanced, and forward-oriented solutions for maximizing value during these turbulent times.  

Take charge; set direction. Contact David K. McCament, Director, Healthcare Payer / Provider, TPI, to learn more.