Is outsourcing more essential than ever?

In June, iGov and Serco partnered up to conduct the ‘Efficiency Challenges in the NHS’ report. The related survey revealed that the majority of directors, department heads and managers working within NHS organisations believe that outsourcing and shared services will make an important contribution to the success of the NHS over the next five years.

This positive perception of outsourcing from those at the top of the NHS is a stark contrast to that held by people generally in the UK. National Outsourcing Association (NOA) research has revealed that 80 per cent of the UK public do not think outsourcing helps UK PLC; 22 per cent claim to actively dislike the outsourcing industry, while only 19 per cent believe outsourcing can help the UK reduce its deficit. Outsourcing has long had an image problem, especially where the NHS is concerned. So why is it that NHS directors and managers recognise outsourcing’s value, but the UK public doesn’t?

It’s important to look at where each group is getting its information from. Unfortunately, in the case of Joe Public, that’s the media, where the UK outsourcing industry is constantly misrepresented. Only high profile outsourcing failures make headlines – particularly those concerning the public sector. Meanwhile, the vast majority of successful outsourcing contracts, which deliver our country with valuable cost savings and efficiency gains, get little-to-no coverage.

The facts on outsourcing
Let’s put the facts straight. Outsourcing is currently the second largest aggregate employer in the UK, responsible for over three million jobs. In its simplest form, outsourcing is the use of third party specialists to deliver a particular business function or process over a sustained period. It is not to be confused with privatisation (yet it is in the media all too frequently). When a government body outsources an operation, it usually maintains full control and accountability for that service, while privatisation takes ownership away from the government. Furthermore, outsourcing is not to be confused with offshoring – many companies set up facilities of their own offshore, while plenty of outsourcing takes place here in the UK.

The use of specialists makes eminent sense today, just as it did when the division of labour was introduced as a theory thousands of years ago. These specialists are experts in their fields and in addition to bringing process efficiencies – brought about through process excellence and technology investments – service providers today also bring productivity improvements and further innovations.

Today, public sector bodies, including the NHS, need to be able to act in a 24-hour global environment and outsourcing helps them do just that. And it’s a misconception that outsourcing necessarily involves sacrificing quality in order to cut costs. There’s no doubt that, in this modern world of mass communication and social media, organisations pay a high price for delivering substandard services. That’s why so much emphasis is placed on the need of ‘more for less’ – the best outsourcing partnerships involve a delicate balance of improved services and reduced costs.

David Cameron knows this better than anyone. The coalition government spent a whopping £120 billion on outsourced public services during its five-year term, almost double what was spent by Labour previously. Government departments nationwide are using outsourcing to deliver services on time within decreasing budgets, often to a higher standard. Yet even the government isn’t vocal in its support of UK outsourcing – Whitehall would usually rather castigate the industry in order to save ministerial skins rather than publicly admit the overwhelming good outsourcing does for our country. With both the media and the government desperate to be disappointed by outsourcing, it’s hardly a surprise that the UK public has such little affection for the industry.

NHS outsourcing case studies
In contrast, those working in the NHS who actually manage contracts see the statistics concerning outsourcing on a daily basis. They are fully aware of its true value and how fundamental outsourcing is to keeping the NHS going. From Thatcher through to Cameron, the UK’s health service has become increasingly reliant on private sector support. Today, the Centre for Health and Public Interest estimates that the provision of clinical services by the private sector to the NHS is now worth £20 billion a year, one-fifth of the overall healthcare budget.

So where is all that money going, and is it providing value? Here are a select few from the wide array of successful NHS outsourcing and shared services case studies that the NOA has come across over the past few years.

Let’s start with NHS Shared Business Services, the ‘integrated single financial environment’ launched 10 years ago now used by 40 per cent of NHS providers and 100 per cent of commissioning groups.

Establishing the organisation was a huge transition, where over 6,000 users had to become quickly accustomed to a brand new system. The project was rolled out across as many NHS organisations as possible, in order to bring the greatest possible benefit to the British taxpayer – which it did. Savings of over £224 million were achieved over the course of nine years, smashing the original target set. NHS Shared Business Services was a worthy winner of ‘Shared Services Centre of the Year’ at the NOA Awards 2014.

The outsourcing of back office functions such as record management is also vital to the NHS. Prior to 2009, Worcestershire NHS Trust had 60 records management staff – based across three hospitals and one overcrowded library – using 10 different legacy systems, responding to thousands of requests with deadlines they couldn’t possibly meet. Responses were delayed, putting patients at risk, with one to two per cent of all records going missing entirely.

Enter Xerox, the service provider Worcestershire chose to outsource the operation to. Within two years, Xerox completely transformed the Trust’s record management functions. Documents were digitised, increasing reliability and efficiency, while the staff involved received better training and were better incentivised. And, to top it all, £2 million in savings is expected over the course of the following 10 years. John Thornbury, Worcestershire’s director of ICT, put it best when he said: “Important as this team is to patient care, we could never have focused on them the way Xerox has.”

And there’s Mid Essex Hospital Services NHS Trust, who achieved savings of 28 per cent, along with a vastly improved orthopaedics operation, by outsourcing specialist clinical procurement to INVERTO. Under INVERTO’s supervision, procedures were broken down and rebuilt from the foundations upward, streamlining processes and eliminating inefficiencies. Within the first three months of the outsourcing partnership £300,000 has been saved, without changing any of the suppliers or products used by the Trust.

Lessons for the NHS to live by
A 2014 report compiled by six different NHS bodies has found that the NHS budget will face an annual £30 billion shortfall by the end of the next parliament if practices do not improve. Additionally, our health service faces further jeopardy thanks to the UK’s slowing economy and an ageing population demanding evermore healthcare services. Not to mention the fact that further Conservative cuts seem to lie around every corner. So who, or rather what, is going to save our NHS?

You guessed it – outsourcing. But there’s more to it than that. The NHS is in dire need of more outsourcing contracts like the aforementioned: collaborative, well-planned and properly executed. With Capita recently signing a £1 billion megadeal to provide the health service with administrative support, and more contracts of a similar nature expected over the coming years, it is vital that the NHS takes the following lessons to heart if it is going to maximise the success of its outsourcing.

Firstly, to follow outsourcing best practice. That means not outsourcing a problem and expecting it to magically disappear without further input. The NHS needs to collaborate fully with its service providers, sharing business objectives and taking the time to nurture and maintain every relationship.

Secondly, take full advantage of new technologies. The NHS has a flawed track record when it comes to integrating new technologies with its operations; service providers can help here. Robotic process automation and artificial intelligence are just two new prospects that stand to change the face of modern outsourcing. The NHS could be transformed too, provided it partners with the right best-of-breed suppliers.

Additionally, to learn from the private sector. Outsourcing is a dynamic, evolving industry, meaning those working in it need to constantly hone their skills. The government should follow in the footsteps of the private sector and provide NHS contract managers with the extensive outsourcing training they deserve, and support that training with incentives, qualifications and accreditation. Doing so will greatly improve the vocational happiness of those individuals and, in turn, have a positive impact on their outsourcing.
In early 2016 the NOA will host an event that will focus on the latest public sector outsourcing trends, where the future of outsourcing in the NHS will be extensively covered. If you are interested in learning more about the event, please do get in touch.

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