Abstract

Hospitals across Canada continue to face many complex operational challenges. Most, if not all hospitals across Canada are struggling with the challenge of balancing increasing service and quality expectations with diminishing resource capacity. Some have the additional burden of meeting these expectations in areas of extreme population growth. In an attempt to meet these operating pressures ongoing investments in infrastructure, technology, processes and people necessary to enable hospitals to effectively meet these challenges have often been sacrificed or delayed, making the task today even more daunting. Many hospital executives and Boards have come to the realization that the sustainability of their organization depends on how well they focus their scarce resources and talent on their core business. As a result, hospitals are now seeking innovative ways, through collaboration and partnerships, to address the funding and service challenges they face.

Outsourcing of non-core, non-clinical support service functions is a solution that many hospitals have examined and implemented over the past several years. Most often however this has occurred one support service with one service provider at a time and not as a fully integrated support services solution.

In 2008 York Central Hospital (YCH) implemented Sodexo’s integrated Comprehensive Support Service Solution (CSS) model for all its support service functions (refer to Appendix 1). In doing so YCH achieved significant improvements in patient and staff satisfaction rates, increased retail food revenues and substantial cost savings through improved operational efficiency from process improvement and leveraging investments in technology (refer to Appendix 2).

When put into action, outsourcing is a challenging exercise in relationship dynamics and performance management. However, it is clear that maintaining healthy relationships, clear lines of communication and disciplined performance management processes are the key factors that influence the success of outsourcing partnerships.

Introduction

Across both private and public sector industries, the strategic decision to outsource non-core processes and services is now common place. Globally, outsourcing continues to grow and gain in popularity year on year as organizations come to understand the competitive advantage and organizational benefits associated with outsourcing. From its roots, outsourcing has grown to become a powerful, viable and respected service industry, so pervasive throughout the global economy that it is difficult to place a dollar value on the services that organizations outsource.

Implementing a Comprehensive Support Service Solution (CSS) at a Major Community Hospital in Ontario, Canada: Lessons Learned

As the complexity of managing our health care system increases there is consensus throughout the literature that organizations will increase their reliance on outside service providers and that the range of the outsourced services provided to organizations will expand to fill the service, technology and skills gaps present in the current model.

However, this pervasiveness of outsourcing combined with the large number of providers competing for this business potentially will increase the risk of diminishing the quality and effectiveness of outsourcing if the client’s goals and expectations are unclear at the outset and the transition is not well planned, implemented and managed.

Conceptually, the underlying theory of outsourcing remains simple. By definition, outsourcing represents the transfer of services and risk, which are traditionally performed internally, to a third-party service provider. Successfully executing outsourcing strategies is a complex initiative spanning from the initial planning of outsourcing goals to contract management techniques.
The initial decision to move from an in-house service to an outsourcing provider is a major decision for any organization. By focusing “time, effort and capital on value-creating activities that yield a competitive advantage,” organizations can enhance overall performance and security over the long term (Hunter and Cooksey, 2004).

Background

YCH) is a large, full-service community hospital serving a population of over 400,000 in one of the fastest growing regions of Ontario. The hospital operates 472 beds on its main site plus six off-site clinic locations.

Faced with ongoing operational challenges, extreme growth pressure and the need to undertake an ambitious program of renewal and redevelopment at the hospital, YCH leaders embarked upon an organizational wide “capacity building” exercise for the purpose of refreshing its strategic plan and to identify and prioritize the strategic initiatives or enablers that would lead to improved patient and financial outcomes for the hospital. One of these strategic initiatives was to investigate the feasibility and benefits of outsourcing all of its support services functions.

YCH was no stranger to outsourcing and was well aware of the potential benefits. Since the mid 1990s, the hospital has been a leader among Ontario hospitals with respect to the number and range of services provided through external partnerships. Besides having, soon to expire, outsourced contracts for its retail food, plant operations and maintenance YCH had established service partnerships for coding and abstracting of patient charts, IT support, linen and laundry services, and was one of the first to provide rehabilitation services through a third-party service partner. It also was investigating the outsourcing of its data center, supply chain and accounts payable functions. Based on these experiences YCH had come to recognize the value of looking outside their own organization to secure the skills and expertise necessary to provide efficient and quality services to support the delivery of its core clinical services.

Issues

Given this background, the hospital sought a solution that would clearly support the attainment of both patient care and financial outcomes identified in its strategic plan and do so in a manner that created a compassionate, hospitality culture, and provided access to new technologies and capital to help finance its redevelopment program. There needed to be a well defined business case and link to advancing the hospital’s strategic goals which meant the successful outsource vendor needed be a partner not a just a supplier in helping the hospital achieve its strategic goals.

YCH Outsourcing Scope

To begin its investigation of outsource options the hospital had to first identify the support services it would consider to be outsourced and why. First, the hospital quantified the scope and cost of each of its support services. Both direct and indirect costs (e.g. space, loss in revenues, etc.) were calculated as well as scope of the service offered, who received it and when. Later in the process this information would serve as an important reference point for evaluating vendor proposals from a service and cost perspective.
To determine which services might be considered for outsourcing the hospital evaluated the anticipated benefits and risks of maintaining the status quo for each service against a potential outsourced solution. It was assumed that some services may not have been suitable for outsourcing at this time. For example, the service is currently being provided at or better than average peer benchmark performance and cost indicators or the current outsourcing contracts extended well into the future. Services where the anticipated benefits from outsourcing were perceived to be high and the risks low were identified as candidates for outsourcing. Alternatively, where the perceived benefits where low and the risks high these services were excluded from this list. For purpose of this exercise the benefits and risks the hospital considered were both financial and non-financial, including transition issues, space utilization, technical and leadership competencies, redevelopment and capital considerations.

As a result of this preparatory work the Hospital determined it would seek proposals on outsourcing solutions for all its support services, with the exception of bio-medical engineering.

YCH Objectives

There are many objectives that motivate organizations to outsource services. They may be looking to reduce costs, improve quality and/or service, redeploy internal resources or focus on their core business.

The motivation for YCH to pursue an integrated approach to outsourcing goes beyond financial. While, it is sometimes possible to achieve short-term financial savings by frequently opening up contracts to the market, these savings can come at the expense of quality and increased administrative effort related to procurement and contract management. Given the pressing demand of a major hospital redevelopment and other clinical and operating priorities the streamlined leadership team at YCH was finding it increasing more difficult to manage multiple service departments or vendor contracts and relationships. The prospect of a single integrated support service provider was not only appealing for these reasons but provided the potential for operational synergies (e.g. cross supervision) that could not be easily achieved in a multiple vendor model.

Before soliciting proposals through a formal Request for Solution process the hospital established the following objectives by which it would evaluate provider solutions:

  1. Be accountable for outcomes on the balanced scorecard and the NRC Picker report.
  2. Engage YCH support service employees in understanding the balanced scorecard initiatives to include an accountability commitment.
  3. Execute best practices to ensure available and timely service while remaining flexible & responsive to YCH growth & capacity building initiative.
  4. Develop a skilled workforce through an integrated training program.
  5. Instill a compassionate care hospitality culture that places the patient and customer first in the delivery of program services to support YCH Capacity Building initiatives.
  6. Upgrade the retail service program, which will contribute to an increase in staff, patient, and customer satisfaction.
  7. Provide year over year savings, through a long-term commitment, with an access to capital to deliver innovative and value added solutions.

YCH Market Review & Selection Criteria

To initiate the selection process the hospital issued a comprehensive Request for Solution (RFS) to prequalified vendors. An experienced consultant was retained by the hospital to support the review and selection process. The consultant prepared a draft RFS with input from all end users and key stakeholders which was approved by the hospital’s Executive lead for the project prior to being issued. All pertinent strategic, operational, performance and financial data/information about the hospital and the in-scope services was appended to the RFS to ensure all potential vendors had a clear understanding of the outcomes the hospital hoped to achieve from outsourcing these services and that they had sufficient information to develop a robust and viable solution.

A Selection Committee was established to evaluate the proposals and advise the Executive Lead on the selection of the preferred vendor. The Committee was chaired by the Executive Lead and comprised of management representatives from each of the in-scope services considered for outsourcing. Given the potential for a conflict of interest from the department managers the consultant, as an ex-officio member of the Committee, was present all meetings to facilitate the dialogue and decision-making process.

The Committee conducted a mandatory bidders’ meeting prior to the proposal submission date to respond to bidder questions and provide additional information. In addition, a one-day site visit was scheduled for each potential vendor to tour the premises, meet with key staff and to assess first hand the current state of the hospital’s support service operations, technology and processes. Bidder proposals were evaluated against weighted selection decision criteria established by the Committee and a short list of potential vendors was identified.

The short-listed candidates were then invited back to make presentations to the Selection Committee and members of the Hospital’s Executive Team. Half the meeting was allocated to a Q&A session where the vendor and hospital representatives engaged in discussion about their recommended solution and how it would contribute to the hospital strategic goals. Implementation and change management issues were also explored with each vendor. Each presentation was scored on several criteria ranging from the vendor’s experience, comprehensiveness and sustainability of the solution, their implementation plan, value adds, and of course, cost and revenue potential. The Committee conducted site visits to each of the short-listed vendors and conducted thorough reference checks on the quality of relationship, service and performance of each vendor.

Once the preferred vendor was selected a preliminary, detailed business case was prepared based on the vendor’s submission. This served as the basis for the hospital’s contract negotiation with the vendor. Once the contract negotiations were finalized revisions to the business case were made to ensure the final contract terms and proposed solution remained financially viability and that the hospital’s service and quality goals would be achieved with the required contractual safeguards for both the hospital and the vendor incorporated. With a positive business case, a recommendation to proceed with the preferred vendor was presented to the Hospital’s Board for approval for a long-term contract with renewal options based on the achievement of specific performance milestones.

YCH & Sodexo: The Model

From its review process, YCH chose to implement Sodexo’s integrated CSS model. With the exception of laundry and bio-medical engineering all support services at the hospital which included environmental services, patient and retail food services, plant operations, maintenance, patient transport, materials management and security were consolidated and managed by a Sodexo General Manager who reports directly to the Vice President of Finance.

Implementation

One of the key decision criteria for selecting the YCH’s outsource partner was the proven experience in the implementation of the integrated support model. Sodexo brought a well defined and disciplined project management philosophy and a skilled project manager and discipline specialists to implement the model at YCH.

From the outset both parties recognized this was first and foremost a change management project. As a result, sound change management principles and engagement strategies were deployed to support the implementation of new processes and technology throughout the hospital. A Steering Committee comprised of senior leaders of both organizations, a Project Manager and the new GM was established to oversee all phases of the implementation.

For the first several months the Committee met biweekly to review progress against the implementation plan and address any unforeseen barriers and where necessary reach consensus on what changes in the plan were required.

Equally important to the success of the implementation was the fact that separate objectives and targets for the implementation phase were established in recognition that the agreed upon performance outcomes expected from the fully implemented integrated service could only be achieved once the implementation had been successfully completed. Both parties understood the pitfalls of expecting performance outcomes too early in the relationship before process and technology changes had been fully implemented and tested and the associated practice changes accepted by the hospital.

Management Transition Strategy

With the exception of the retail food operation where the staff were not hospital employees, the hospital had initially thought that it would retain the employment relationship with all employees, including its management and supervisory staff employed in these services. The hospital felt that in doing so it would retain the managerial talent in the organization, avoid potential severance costs and encourage the managers to support the outsourcing initiative by eliminating the fear that they would lose their jobs.

While sincere in its objectives, it became apparent to the hospital that in practice it was creating a dual reporting relationship that would make it difficult for the partnership to achieve it intended objectives. In the end it was decided to transfer the entire management function of all the outsourced services to Sodexo. This necessitated the creation of a management transition strategy. The HR leadership from the Hospital and Sodexo established a set of guiding principles for the management transition and communication plan which were endorsed by the Steering Committee. Every hospital manager and supervisor, within scope, was offered employment with Sodexo in a comparable position and with comparable compensation to what they enjoyed with the hospital. As well, an agreement was reached by the hospital and Sodexo on who bore severance costs if and when they occurred.

Monitoring Performance – Balanced Score Card & Service Level Agreements

From the outset both YCH and Sodexo were committed to measuring performance and demonstrating value to their respective stakeholders. Service Level Agreements (SLA’s) were developed jointly by Sodexo and the YCH management at the end of the first year of the partnership and became effective following the implementation phase of the project. The SLA’s defined the accountabilities both the Hospital and Sodexo had for achievement of defined outcomes. Fundamental to the development of these SLA is a partnership philosophy that goes beyond traditional client/contractor relationships. The Sodexo/YCH partnership is characterized by a Charter defined by mutual trust, honesty and respect, clearly defined roles and accountabilities, accurate and timely reporting of performance results and a shared recognition that the partnership operates in a complex and constantly changing environment that requires an ongoing commitment to communication, innovation, creativity and flexibility on the part of both parties.

As such these SLA’s are not static and are constantly reviewed in the context of a changing environment and conditions which, at times, necessitates a redefining of the mutual commitments.

Successful monitoring of departmental performance required the identification and agreement of Key Performance Indicators (KPI’s) by the Steering Committee and then establishing the means and structures for the collection and timely reporting of these KPI’s to various stakeholders.

A detailed scorecard of performance indicators – enabled through technology – that contains specific indicators of productivity and efficiency, along with specific performance thresholds was developed. Many of these indicators are subsequently rolled up to reporting structures in higher levels of the organization, including to the Board of Directors.

Of key benefit to YCH is the fact that not only are these operational metrics well integrated into its corporate accountability framework, the new technologies and systems that have been implemented have the ability to capture data that has not been previously available. For example, YCH is now able to track and report on indicators such as:

  • Average Environmental Services response time
  • Average inpatient room turnaround time following discharge
  • Average transaction / cheque amount in the Café
  • Percent of patient transport times less than 30 minutes
  • Completion time for facility work orders

These indicators are regularly rolled up to senior management and can provide feedback on the factors believed to impact patient and staff satisfaction on a more timely basis than the previous survey process allowed.

Outcomes

In the final analysis, the true success of any initiative is measured by critically evaluating the outcomes that are actually achieved against those that were expected. Simply put, has the Sodexo’s CSS model achieved the intended objectives initially established by YCH? Both parties agree that it has. In some instances results have exceeded expected targets but have taken longer than expected to achieve given the magnitude of the change initiative. In other instances additional value opportunities have been identified and created as the partnership relationship matures.

In January 2010 YCH was surveyed for accreditation by the CCHSA. The accreditors reviewed the hospital’s support services processes and interviewed numerous staff to assess the quality and sustainability of outcomes in the support services areas.
As a result of the changes implemented by Sodexo and YCH through the CSS framework it was the best accreditation of the support services areas in YCH’s 47 year history. Comments such as “impressive quality initiatives have been put in place”’ and “attention paid to measures of success” and as it relates to facilities “a very robust preventative maintenance program is in place” were received.

Accountability

In partnering with Sodexo YCH sought improvement on several fronts. In overseeing almost 9% of YCH operating budget and managing over 340 staff and 40 external contracts from other service providers Sodexo and YCH have accomplished a great deal. Early in the partnership much of what was accomplished can be classified as “enablers” – systems, tools, process, training, technology etc. which when successfully implemented will enable the organization to achieve its ultimate and desired customer and financial outcomes. These enablers create the conditions for success. To often partnerships of this sort fall short of what is expected because of client organization’s need to deliver bottom line results before creating the necessary conditions for success.

The YCH/Sodexo partnership recognized this and took a systematic and disciplined approach defining clear lines of accountability. The hospital’s already well-established accountability framework was used by the partnership. The model is unique from the perspective that it established a clear cause and effect relationship between implementing a “leveraged action” (e.g. introducing technology around bed discharges) and a desired measureable outcome (e.g. improved patient wait times). Once the majority of enablers were implemented a detailed system of Service Level Agreements and quality and performance indicators were developed by the parties and put in place. These indicators are demonstrating that the Integrated Support Services model is meeting and in some instances exceeding its intended objectives.

Available and Timely Services

One of the key outcomes the Hospital was seeking from the partnership was available and timely delivery of its support services. Significant improvements were made in all services with the introduction of best practices and technology. Practices and technology the hospital acknowledges it could not have introduced on its own. For example a new Service Response Centre is now operational with state-of-the-art call centre management software and detailed tracking and reporting systems. The Centre facilitates more responsive customer service and provides timely and accurate data to end-users. In the transport of people and materials much of the improvement was enabled by the introduction of system and process improvements supported by technology.

The creation of the central call centre and these system changes allowed for the development of a predictive model for porter requirements which reduced cost and improved the average transport time of patient and materials pick up and delivery times to a point where targets were consistently being met. This improvement also contributed to significant increases in patient and department customer satisfaction.

Skilled Workforce

None of the improvements the partnership wanted to introduce would have been possible without a competent and experienced leadership team and a dedicated front line staff committed to the change. The partnership recognized it required a skilled and competent workforce to implement and sustain the required changes. To begin, Sodexo installed an experienced transition leader as GM and a Project Manager to oversee the start up and implementation of the new systems, processes and technology. To support necessary practice change Sodexo introduced a comprehensive customer care orientation program which all exiting and new employees completed. It was particularly important for the existing employees who had well established work routines that were going to be disrupted. Change in practice was required at the user end as well with the introduction of the Call Centre, requisition systems and tracking technologies. To address this all end users (e.g. Department Assistants, Supervisors and Managers) were provided training during the start up and testing phases of all new processes. Feedback from the end users was actively solicited by Sodexo and where required changes to the process were incorporated.

Hospitality Culture

Working extensively in the hospitality service sector, Sodexo brought a strong customer service and a welcoming culture and philosophy to the partnership. Hospitals are not always best-positioned to make the necessary investments in training for their support staff and YCH was no exception. While YCH did an excellent job of making patients their focus, with a particular emphasis on safety and quality, customer service training and development was often overlooked or ineffective. The hospital had introduced ad hoc customer service training programs in the past with little lasting impact. As a result the hospital sought to introduce a sustainable compassionate care, hospitality culture throughout the organization as part of its Capacity Building initiative and recognized that customer service was an important enabler to achieving its customer and financial outcomes. As a result of this shared understanding, all support services staff participated in a customer service training and scripting program, which was developed jointly by Sodexo and the Hospital‘s OD leadership. In addition, the YCH Human Resources staff worked with Sodexo and developed role specific competencies for all support service positions. Sourcing, screening and hiring of all new support service staff were to these specifications.

Customer Satisfaction

The motivation for YCH to pursue an integrated approach to outsourcing went beyond the financial considerations. As part of its overall corporate strategy the hospital had patient, staff and customer satisfaction outcomes it sought to achieve. Specific satisfaction indicators and targets were established with Sodexo for the support services areas. These are reported monthly to the Steering Committee, senior management and the Board along with the other KPI’s established for the partnership. In measuring and reporting satisfaction rates the partnership is able to assess if the vision they share for an integrated, high performing support services is palpable to the people it impacts most – the providers of the service and those who use it. Early results indicate the CSS is on the right track. For example, in 2009 the Support Services Employee Satisfaction Survey results showed over 80% of the staff is happy with their jobs, this after experiencing significant change in their leadership, job routines etc. Other indicators of satisfaction and acceptance of the CSS model are also positive:

  • Implementation of an exterior building improvement plan has improved patient customer satisfaction by 20%
  • Average transports performance are consistently above target contributing to both significant improvement in patient / department customer satisfaction
  • The new Central Bistro (Starbucks, Booster Juice, Induction cooking, Grill, Deli, Salad Bar, Pizza Pizza, and Tim Horton’s, separate location) has increased customer satisfaction rates by 30%
  • The introduction of the an online catering order system has improved customer satisfaction by 20% while reducing food costs by 11%
  • New service equipment to LTC program improved food quality audits by 100% and have reduced maintenance costs by 10%

Financial Performance

Of course, as with most health care organizations the hospital sought to achieve year over year improved financial performance through its partnership with Sodexo. As the quality initiative showed us when you focus on the process improvement the financial improvements become a natural by-product and are often more sustainable. By taking a disciplined and inclusive project management approach to process improvement through the implementation of the CSS the partnership has been able to achieve all its financial targets to date. Here are some examples of what has been achieved:

  • The “Especially For You” patient food program will be implemented July 10, 2010 and in trials has increased patient food satisfaction by 30% and reduced overall food costs
  • Implementation of improved linen utilization processes resulting in a 10% reduction in linen expense
  • Improved efficiency of work order completion by 70% and reduced staffing costs by $60,000
  • Through Sodexo, the YCH/Sodexo partnership has entered into a partnership arrangement with VIP Energy for energy resource management and reporting resulting in a $1.4M budgeted savings.
  • Average # of work orders per day increased by 20% without increasing staffing
  • A reduction of 11% in acute patient meal day costs
  • Through process change reduced Security Patient Watch costs by 60% or $35,000
  • Significant investments have already been made by Sodexo in capital, technology, and training, including the TTi suite, Especially for You patient food program, Facility Centre, and Service Response Centre

Access to Capital

Organizations that focus on their core business are most likely to be at the cutting edge when it comes to new technology and leading practices in their clinical areas. Unfortunately when capital funds are scarce clinical capital investments more often than not trump capital investments in the support services areas and YCH was no exception. YCH was in the midst of a significant redevelopment program for which there is strong competition for limited financial resources. Both its retail and patient food services required upgrades and refurbishment, particularly its café, which located at the main entrance of the hospital serves patients, staff and visitors. Investment in these areas had been deferred for several years due to limited capital. The hospital was well aware that having deferred these investments production efficiencies, customer satisfaction rates, the hospital overall image and sales revenue were being compromised. By partnering with Sodexo not only did YCH gain access to professional food production staff and processes, higher quality, healthier food products, including national brands, it also gained access to capital for much needed investment in these areas.

A fully renovated café space with state of the art production has dramatically improved food quality and client satisfaction. The increased seating capacity and expanded menu has increased sales revenue beyond target improving the ROI. Investments in the patient food production area have improved production resulting in lower costs per patient meal day and significant improvements in patient satisfaction.

Further Investments in the physical plant and a new Service Response Centre were also made and have improved productivity and contributed significant cost savings to the hospital. All of these investments would likely have been delayed or deferred indefinitely had the hospital not gained access to this funding and thereby delaying the gains in operational efficiency, customer satisfaction and cost savings.

Conclusion

For a partnership to be successful it must by definition mutually benefit both parties. For the partnership to realize its most powerful and lasting results there must be a mutual sharing of the risks and rewards by the partners. It will also need to evolve and be able to adapt if it is to survive in the complexities of the health care environment.

Hospitals risk losing sight of the value proposition of outsourcing when there are many contracts to manage. Opportunities are lost and synergies are not captured. Real value is delivered to both parties by becoming each other’s strategic ally.

Many of the objectives YCH hoped to achieve through its partnership with Sodexo have been accomplished or are well on there way to being accomplished. By implementing the CSS model with Sodexo, YCH has been able to move from eight vendors to one, with a single point of contact at the executive level. This has greatly streamlined the administrative aspects of outsourcing and has allowed the YCH leadership to focus on charting the hospital’s strategic directions, confident it is receiving high value, high quality support services at a lower competitive cost.

However, these objectives would not have been achieved without the right partnership, the right tools, processes, talent and expertise. When put into action, outsourcing strategies are a challenging exercise in relationship dynamics and performance management and it is clear from the YCH case that maintaining healthy relationships, clear lines of communication and disciplined performance management processes are the keys to a successful outsourcing partnership.

In a traditional hospital operating structure, many of the services that comprise the CSS model are managed separately in their own silos with their own incentives and drivers for success. This can result in missed opportunities to leverage each other to create additional value. Often individual support services can find themselves with misaligned priorities through a lack of communication, overlaps and gaps in responsibility. These challenges (or miss opportunities) can be exacerbated in organizations that outsource only one of these potentially integrated support services. In the integrated model, the co-dependencies and incentives are all aligned to create an environment where everyone is functioning cohesively to provide a better support services program, in-turn driving better clinical and operational efficiency.

The YCH experience to date has proven it is significantly more beneficial to provide its support services in the CSS model. The model has delivered consistently greater efficiency, improved productivity, enhanced end-user and patient satisfaction and superior reliability.

Both YCH and Sodexo continue to critically evaluate their accomplishments and the environment in which they operate and are committed to evolving their relationship to the mutual long term benefit of both parties.

Appendix 1: Outsourced Functions by Service Area in Sodexo’s CSS Model at YCH

Appendix 2: YCH/Sodexo Partnership Outcomes Achieved to Date

About the Author

Jo-Anne Marr, (A) CEO, York Central Hospital; Richard Tam, Vice President, Finance & Support Services/Risk Management, York Central Hospital; Stephen Simms, Senior Vice President, Healthcare Division, SODEXO Canada; Feria Bacchus, Vice President, Healthcare Division, SODEXO Canada