Shared Services for Healthcare

Process for setting shared services center

Neeraj Sabhnani

The paper covers key dimensions for setting up shared services organization for healthcare. The document establishes the need for shared services in healthcare sector, which is followed by value proposition of shared services center. The document covers key drivers for shared services in healthcare and typical models for shared service centers. The paper also outlines key processes and tasks required for setting up shared services organization. This is followed by evolution of shared services organization across maturity phases.

Table of Contents
Need for shared services in Healthcare .................................................................................................... 2 Shared Services Concept and Value proposition ................................................................................... 2 Shared Services enable companies to .................................................................................................. 2 Drivers for Shared Services ................................................................................................................... 2 Shared services Models for Healthcare ................................................................................................ 3 Approach for setting up Shared services .................................................................................................. 5 Tasks for setting up shared services ..................................................................................................... 6 Key attributes for shared services ........................................................................................................ 7 Maturity phases for shared services: ........................................................................................................ 7 Contacts .................................................................................................................................................... 8

Table of Figures
Figure 1 Shared services model across multiple hospitals ........................................................................... 4 Figure 2 Shared services model across multiple divisions of hospital .......................................................... 5 1

Need for shared services in Healthcare

Healthcare is key and necessary priority for the civilization. Worldwide, health care expenditures total about $5 trillion annually, according to Swiss Re. Total health spending (both public and private) as a portion of GDP ranges from about 7 percent in countries such as Estonia to 17 percent in the US, according to the Organization for Economic Co-Operation and Development, For countries like UK and France cost of healthcare is around 10% of GDP

Globally healthcare costs are rising at very high rate which is higher than GDP growth rate. Cost of healthcare in US has risen by three times economic development rate in past two decades, for France and UK costs of healthcare has risen by twice the rate of their economic growth. Due to recession and intense cost pressures, hospitals are focusing on cost reduction. Obama administrations health care reform plan, which would reduce hospitals Medicare and Medicaid payments by $155 billion over 10 years would also encourage cost cutting measures. The rising cost of care, a shrinking revenue base, increasing marketplace scrutiny of administrative and overhead costs, and intense competition among both for-profit and nonprofit providers adds even more urgency to the cost-control imperative. In such a challenging marketplace, cost containment and efficiency are on top of providers executive agendas. Shared services model is one of the options to reduce the cost . Shared services has been helping other organizations to reduce costs, increase efficiency , improve service level.

Shared Services Concept and Value proposition

A single service organization to perform a variety of business support activities on behalf of multiple operating units. These shared processes are moved, both administratively and (usually) physically, out of the operating units and into a separately managed shared services organization (SSO).

Shared Services enable companies to Consolidate efforts for delivering the same services to different groups within an organization Lower administrative cost by leveraging economies of scale Adapt more flexible to growth and acquisitions Improve the service to the business

Drivers for Shared Services With high competition across sectors there is need for reducing cost, improving customer satisfaction, enabling simplification. Following are some of the drivers leading to shared services Improvement in cost to income ratio focus is on reduction in G&A costs like vendor costs, labor costs, system costs, facility costs.

Regulatory compliance there is a need for Increased data accuracy and reliability, Improved Governance Model, adopt more quickly to changing regulatory requirements, Better Risk Management Flexibility for growth and acquisitions Business is keen to focus on core competences, to reduce share of administrative work, to enable rapid post merger integration Enable global simplification-shared services can enable pool process know-how, help to drive global standardization and cross-border delivery, enable Consistent messaging for policies and inquiries Increase operational agility. Improve Customer Satisfaction there is lot of focus on customer centricity , to improve process quality, Perform benchmarking and continuous improvement, fulfillment of SLA.

Shared services Models for Healthcare Many health care systems, having grown through consolidation and acquisition, now comprise dozens of individual hospitals, making shared services much more attractive from an economies-of-scale perspective. A growing shift in operations and culture from local autonomy towards center-led coordination makes shared services more feasible from an organizational change standpoint. The urgent economic challenges facing providers today have created a burning platform that can help hospital leaders more easily garner internal buy-in for shared services even from stakeholders who may have resisted it in more bountiful times.

Shared services can be established for a group of hospitals enabling efficiencies of processes. Shared services can even be created for hospitals where each department work independently and have their own support functions. Hospital will benefit by consolidating support functions across different departments

Model 1
Hospital 1 Hospital 2 Hospital 3

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Financ e Billing HR

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Future state with Shared Services for all three hospitals

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Figure 1 Shared services model across multiple hospitals

Model 2
Healthcare Associates Radiology Associates Surgical Associates

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Pediatrics Associates

Oncology Associates

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Future state with Shared Services for all departments at hospital

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Figure 2 Shared services model across multiple divisions of hospital

Approach for setting up Shared services

Setting up of shared services requires alignment of strategy and execution .Once the organization has decided to setup shared services, steps given below will provide guidance in setting up shared services Align & Engage Leadership Build a coalition of leaders with a common vision and understanding that leads to united action Develop the Strategy & Vision Define organizational vision, change strategies & plans required to enable the intended business results Prepare & Equip the Workforce Move the workforce from current assignments and competencies to new assignments/competencies 5

Transition the Organization & Implement Assess organizational change impact driven by the solution and implement change plans Communicate with Stakeholders & Measure and Monitor Provide clear, timely messages to foster understanding, involvement and feedback; monitor & measure

Tasks for setting up shared services Align & Engage Leadership o Secure executive sponsorship, getting a common vision and sponsorship is very critical for success of any initiative including setting of shared services o Establish scope of services processes and business units, example of business process examples are Finance and accounting (or subcategories, such as AP or AR) , Legal, real
estate and tax, HR, Supply chain management, R&D, IT- application development, IT testing , IT infrastructure provisioning etc.

o Develop initial business case with both quantified (ROI) and qualitative benefits Develop Strategy Vision o Structure shared services model Decide on Single or multi-location Decide on geography location domestic, international, low wage location Plan for delivery models centralized, federated, virtual , hub and spoke model o Structure legal entity Prepare Workforce o Design Process Organization/People Technology o Define Service Level Agreements (SLA) expected of business processes ,IT processes o Align business units on SLAs o Pilot o Baseline Transition and Implement o Set up infrastructure o Develop HR processes for shared service center Competency identification Recruitment Training Retention o Redeployment of people arising from set-up of the SSC o Training to enable new roles o Contracting and legal support o Initial transition management (managing additional loads in the initial phase) 6

o Risk management Communicate Measure o Monitor the performance using MIS reporting / dashboards o Run shared services as independent business, monitor financial and operational performance o Ongoing controls improvement (including SOX compliance)

Key attributes for shared services Once definition scope and operating model for shared services center has been defined, the following core tenets must be in place: Service Definition Business process expected to be delivered through shared services is clearly articulated and documented. Process rationalization has been completed and service level is defined. Service Levels service levels for each process are documented, which includes identifying measures for success, the appropriate standards tiers, approvals, exceptions and escalation process. Scalability and Elasticity ability of scale up or down based on business volume, provide elasticity regarding time zone and language requirements as defined in the service-level agreement. Pricing mechanism Finalize on operating model for shared services center - profit center or cost center, on the basis of operating model cost identification, allocation and recovery will be structured. Governance and Management It is better to have governance and management with some centralized component, even though the physical provisioning of the business services may be virtual, centralized or some type of hybrid (i.e., a hub-and-spoke model) Marketing and Strategy The capability to manage, sell and market the shared services to internal and, if appropriate, external stakeholders.

Maturity phases for shared services:

Phases of maturity are: Transaction Centers Operational Excellence Centers of Excellence Multitenant Solution Transaction Centers : Center to aggregate business and IT processes. Operational Excellence- next stage in maturity of shared services, focus is to achieve consistency, quality and efficacy benefits. Centers of Excellence- this stage involves incorporating best practices related to people , process and technology to elevate the execution to world-class levels. This level involves extensive use of analytics to drive decision making

Multitenant Solution- The evolution from centers of excellence performing at best-in-class levels to some type of extended multitenant sourcing model, which often involves external client-facing options. This may include a joint venture model or a brand service sourcing option.

Contacts
Neeraj Sabhnani Enterprise Strategy, Microsoft Services neerajs@microsoft.com Neerajs2010@yahoo.com Mobile - +91-9885129078.