The Perils of OutsourcingThe March 2008 issue of Portfolio has a cautionary tale describing how outsourcing a core activity can detract seriously, even dangerously, from accomplishing an organization's mission.
The particular situation Katherine Eban reports on in "Your Hospital's Deadly Secret" is outsourcing a hospital's pharmacy to a pharmacy management company, generally one affiliated with a drug distribution company.
Not only is the outside pharmacy manager likely to have objectives misaligned with those of the hospital's medical staff, who are left with severely limited ability to monitor non-financial aspects of their outsourced pharmacy's performance, but also a hospital's switching every few years from one management company to another, in search of ever lower operating costs, creates further grave elements of risk to the quality of patient care.
Specifically, handoff from one management company to another introduces numerous opportunities for error and confusion about procedures. The concomitant turnover in personnel, exacerbated by excessively cost-focused management practices, means that the competence of pharmacy staff is, on average, lower than in pharmacies that are fully integrated into hospital operations. As Eban puts it in describing the hospital that is her main case study, "the pharmacy became a disengaged temp agency."
A further issue is that the all-important function of identifying and addressing opportunities for long-term quality improvement is given short shrift when pharmacy management is working on a contract that extends for as little as two years.
For me, one of the clearest indications of the fundamentally flawed nature of the outsourcing approach to the hospital pharmacy was the response of the Nevada State Board of Pharmacy to a medication error that led to an infant's death at the hospital in question. Among the corrective actions the board required was retraining of all the pharmacists involved in the incident. Given the high rate of staff turnover at outsourced pharmacies, keeping all personnel fully trained is a fairly hopeless proposition.