I’m thrilled to sit down with Faisal Zain, a renowned healthcare expert with deep expertise in medical technology and innovation. With years of experience in the manufacturing of medical devices for diagnostics and treatment, Faisal brings a unique perspective to the evolving landscape of healthcare management. Today, we’re diving into an emerging trend where health systems are flipping the traditional outsourcing model and instead selling their own back-office services to other providers. Our conversation explores the motivations behind this shift, the benefits and challenges it presents, and the future potential of this innovative revenue strategy for health systems of all sizes.
What sparked the idea for some health systems to start selling their back-office services to other providers, and how do financial pressures play into this decision?
The inspiration largely comes from the intense financial pressures health systems face today, like low reimbursement rates and escalating labor costs. These challenges have forced many organizations to think beyond conventional cost-cutting measures such as layoffs or service line closures. Selling back-office services offers a way to generate new revenue streams without sacrificing core operations. It’s a proactive approach—turning internal capabilities into a marketable asset rather than just trimming expenses.
Why do you think larger health systems are better positioned to adopt this model compared to smaller ones?
Larger health systems typically have the scale, expertise, and infrastructure necessary to deliver these services effectively. They’ve already invested in robust systems for things like IT support or revenue cycle management to handle their own operations, so extending those capabilities to others is a natural next step. Smaller systems, on the other hand, often lack the resources or bandwidth to develop such high-level functions in-house, making it harder for them to compete in this space.
Can you share some examples of the specific back-office functions health systems are starting to offer as services?
Absolutely. We’re seeing services like centralized call center management, where a large system handles patient scheduling and inquiries for smaller hospitals. Other examples include revenue cycle management, which involves billing and collections, and IT support tailored to specific electronic health record (EHR) platforms. These are functions that larger systems have refined over time and can now package as a service for others who may struggle to manage them independently.
How does selling these services create financial and operational benefits for the health systems providing them?
Financially, it’s a game-changer because it opens up a new revenue stream that doesn’t depend on patient volume or reimbursement rates. Operationally, it allows systems to make better use of excess capacity—think of underutilized staff or technology resources that can now generate income. Beyond that, it fosters stronger partnerships with regional or community hospitals, creating a network of collaboration that can benefit everyone involved.
From the perspective of smaller health systems or hospitals buying these services, what unique advantages do they gain by partnering with a larger provider?
Smaller systems often get a more tailored experience when working with a regional health system compared to a massive third-party vendor. A larger health system is more likely to understand their specific patient population or EHR setup, which makes the service feel more personalized. It’s also often more cost-effective than building those capabilities from scratch or dealing with a one-size-fits-all solution from an external provider.
What are some of the risks or challenges health systems might face when they decide to sell their services, and how can they navigate those?
One major risk is the potential distraction from their primary mission of patient care. If a health system overcommits to selling services, it might strain internal resources or shift focus away from quality and outcomes. To manage this, they need a phased approach—starting small, carefully selecting partners, and setting clear limits on how much they take on. It’s about balancing innovation with their core responsibilities to avoid overextending themselves.
Looking ahead, what is your forecast for the future of this ‘as-a-service’ model in healthcare, and how might it evolve over the next few years?
I believe this model has significant potential to grow as health systems continue to seek creative ways to address financial challenges. Over the next few years, we could see more systems adopting this approach, especially as technology makes it easier to scale and standardize services. It might even evolve into a competitive advantage, where operational expertise becomes a key differentiator. However, success will depend on how well systems can balance this new revenue stream with their fundamental role in delivering care. I think we’re just at the beginning of seeing how transformative this could be.
