Tight margins and rising costs are pushing hospitals towards a potential outsourcing boom in 2024. Deloitte, a major consulting firm, predicts an increased focus on handing over non-core functions like revenue cycle management, billing, and even finance to external providers, both domestically and abroad.

Tina Wheeler, Deloitte's healthcare sector leader, highlights outsourcing as a key trend to watch. It's a "delicate dance," she says, as hospitals and insurers grapple with what they should handle themselves and what can be outsourced for cost savings.

While financial health has improved compared to a year ago, many hospitals still hover near break-even. Analysts anticipate modest improvement in 2024, but Fitch Ratings and S&P Global Ratings warn of continued constraints for non-profit hospitals.

Rising labor costs, higher interest rates, and general financial pressures fuel the outsourcing fire. Wheeler identifies back-office functions as major targets for cost-cutting, with a wide range of possibilities, from revenue cycle and billing to HR and supply chain.

Compared to other industries, healthcare has been slow to embrace outsourcing, but that's changing. Deloitte reports growing interest in offshoring back-office functions, potentially slashing costs in half for large health systems.

However, outsourcing can lead to loss of control, quality dips, and patient frustration, especially if functions like billing are mishandled. Additionally, job losses in communities heavily reliant on hospital employment can trigger public backlash.

Wheeler emphasizes the need for a balanced approach. As an example, she points to Kaiser Permanente's recent contract negotiations, where labor unions secured protections against outsourcing to prioritize patient care and local jobs.

The workforce shortage remains a critical issue, with 57% of healthcare executives citing it as a major strategic concern in 2024. Freeing up resources through outsourcing could allow hospitals to invest more in attracting and retaining vital clinical staff.

Deloitte identifies several other key healthcare trends to watch in the coming year, including:

• Increased collaboration between providers and payers: Shared goals and streamlined operations will be crucial in improving affordability and care outcomes.
• Focus on value-based care: Reimbursement models that reward quality and efficiency will gain momentum.
• Continued telehealth adoption: Convenience and accessibility will further drive the use of virtual care technologies.
• Personalized medicine: Data-driven insights will personalize treatment plans and preventive measures.

2024 promises to be a year of adaptation and innovation for the healthcare industry. Outsourcing, workforce challenges, and a shift towards value-based care will be some of the key themes to watch as hospitals and health systems navigate a changing landscape.