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The Future of Healthcare Eligibility Outsourcing

Siemens Medical Solutions is a finalist in the 2008 Outsourcing Excellence Award competition. Jim Way, vice president of managed services, started out as the outsourcing division's sixth employee. He explains how to structure healthy outsourcing relationships and what to do to avoid the "doom loop."

Q: Your company is an Outsourcing Excellence Award finalist. What are the secrets to a successful outsourcing relationship?
A: You have to set the proper expectations at the beginning. The buyer has to understand exactly what it's getting. One or two executives from the buyer side typically structure the deal with the service provider. The best way to make this work is to get everyone together and explain how management built this outsourcing relationship. Explain the service level agreements. Explain how everything is going to work.

If you don't do this, someone at the buyer may start complaining 90 days later. You have to set expectations if you are going to prevent this.

The other component is the relationship part. Both sides have to be at the table every time there's an issue. If not, you get into the doom loop. That happens when you start treating me as a vendor not a partner. If you treat me that way, then I will act that way. At Managed Services, we do everything to avoid the doom loop.

Instead, we want to build a partnership that requires a give and take. You know each side will fail every now and then. You have to push forward as partners. That's the only way to successfully complete a long-term contract.

Q: How has healthcare outsourcing changed since you entered the field in 1995?
A: Back then there was little competition in healthcare. You could do IT in house, or you could outsource to Siemens; there were not many other options. Since then a lot of capable competitors have entered the market.

Q: What's the cutting-edge trend in healthcare outsourcing today?
A: Various groups are combining forces to enter the outsourcing arena. ACS and Superior Consultant Holdings merged. CSC merged with First Consulting Group. Perot Systems just acquired JJWild. Each has a different strength that makes the combination a strong competitor.

Q: Have the outsourcing deals changed?
A: In the 1990s, deals were more strategic. In today's tough economic climate, healthcare outsourcing is more of a cost-cutting proposition. This focus has made it more difficult for service providers. We have to remain budget-neutral yet provide better services.

Q: How do you do that?
A: The only way to do that is by leveraging people, processes, and technology. For example, you don't need a database administrator in every site every single day. We can keep the cost down by having one database administrator handle several accounts.

We used to have an administrator at every site. Now we have one person who does the administrative work offsite for many accounts.

We manage our servers remotely. Our technology helps us anticipate problems before they happen.

We never forget it's our job to help our buyers meet their business metrics.

Q: How do value-added services help keep costs down?
A: We have been building our value-added services over the last three years. Our buyers don't have to pay a penny for them. We work on things that keep hospital CEOs and CIOs up all night. We find out what they are and then figure out how we as IT professionals can help them.

We have had some great successes.

For example, one of our team members is a telephony expert. One hospital routinely paid its phone bill every month. No one ever looked at it. Our expert went through 12 months of billing and found many discrepancies. He ended up saving the hospital $1 million a year. Now other hospitals are interested in this service.

In another case, we built certain applications that work with other products to save doctors time. We shared it across all our sites.

Q: What is the biggest challenge in healthcare outsourcing today?
A: There are no software standards. A hospital can be using 70 different systems. Yes 70! We as a service provider have to go in and support everything. It's difficult supporting disparate systems.

Another challenge is survivability. Many hospitals are struggling financially. To stay alive, they have to find someone bigger and healthier to buy them. Or they simply go out of business. We don't lose hospitals because they are unhappy with our services. We lose them because they can't survive alone.

Q: How long have you been in outsourcing?
A: 14 years. I had been a CIO for many years. Siemens hired me to be its first site executive in 1995; I worked at Pinnacle Health Systems. I was the sixth employee in Siemens's outsourcing division. Now we have 760 people.

I ran the site for three years before moving up to my now-current job of vice president of the division.

Q: Where did you grow up?
A: Havertown, Pennsylvania, just outside Philadelphia. I graduated from Indiana University of Pennsylvania. That confuses anyone who didn't grow up in Pennsylvania. The college is in Indiana, Pennsylvania. I received my MBA from Lebanon Valley College.

Q: Who was your mentor?
A: My father. He had a fantastic work ethic. He always said he never had trouble going to sleep at night because he knew he had been an honest and fair man that day. He held high ethics in the business world. I follow the same philosophy.

Q: What's your favorite movie?
A: "Glory." It's a great movie about leadership and diversity. It's interesting that a lot of things that needed to be addressed in the movie still need to be fixed. I love the fact that it's a true story.

Q: What's your favorite thing to do?
A: Be a full-time father. I have three children: 23, 20, and 17. They are finally fun to be with at their ages. And now they like to be with their mother and me.

Publish Date: May 2008

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Copyright © 2008 - Everest Partners, L.P.

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