Outsourcing in Medicine; Lessons from Dialysis

• Roddy Carter

I had dinner with Brian last week. He was quick to order a drink and looked stressed. He told me that he had been asked to outsource all legal services for his company. I understood the importance of this venture and wondered if Mother Nature had some guiding principals to help us?

The basic concept of outsourcing is that the client organization (the one that procures the service) recognizes a superior value proposition in a service offered by an external vendor than in the same service being supplied by an internal group. Either, they are able to achieve higher quality service at the same (or lower) cost; or they achieve equivalent service at lower cost. To be a sustainable relationship, the vendor also needs to be able to extract sufficient value out of the relationship at acceptable cost.

Halfway through dinner I realized that I had two examples from Nature that would be interesting, perhaps informative for Brian. I remembered working in a hemodialysis unit as a young physician. In this article I discuss the principles we use in outsourcing kidney function to a machine. In the follow-up article I explore the quirky breeding habits of the cuckoo bird for additional guidance.

Hemodialysis is the process of removing waste and excess water from the blood in the presence of kidney failure. The outsourcing of renal function to an artificial kidney may be temporary in acute kidney failure, but is more often a long-term supportive measure. Our kidneys perform other functions such as the activation of Vitamin D and the hormonal stimulation of red blood cell formation. Unfortunately, dialysis does not perform these functions, so it does not completely compensate for failing kidneys. Our ability to outsource waste removal from the blood using diffusion across an artificial membrane and the removal of excess water through ultrafiltration is a life-saving intervention.

The hemodialysis machine detours blood that would normally be filtered through healthy kidneys, and runs it past an artificial filtration membrane. Waste material such as urea and creatinine pass down a concentration gradient from the patient’s blood (where their concentration is high) into the special fluid of the dialysis machine, effectively removing them from the body. The kidney must also regulate the concentration of potassium and phosphorous in the blood. Again the artificial kidney exchanges these solutes across the semi-permeable membrane. Dialysis also transfers bicarbonate into the blood to prevent the build up of acids in the blood, something the healthy kidney would normally do.

Perhaps this, albeit disproportionate, flow of chemicals flags the first principle of outsourcing? There must be a bidirectional trade in value between the client and vendor organizations. Even if the profit advantage is disproportionate, both organizations must benefit.

The second principle is that the vendor must supply a service as good as or better than the clients could provide for themselves. This is obvious in the dialysis example. The failing kidneys are no longer adequate to meet the filtration demands of the body. We employ the services of a specialized artificial organ with superior filtration competence. There are examples of organizations that seek outsourced services to augment or replace failing functions, but most outsourcing is driven rather by service and/or financial upsides. In the cases that a vendor supplements or replaces ailing internal services, the value advantage tips towards the vendor. Similar to our patients with renal failure, the client needs the vendor more than vice versa, and the vendor is incented by greater profitability.

As you can imagine, dialysis is a carefully monitored intervention. The parameters for controlling levels of waste are tightly determined by the client. We mandate that the vendor (the dialysis machine) works within physiological thresholds for urea, creatinine, potassium and the other solutes exchanged. Second, we mandate a highly sterile environment. We cannot afford to introduce infection into the client’s body through the intimate contact the machine has with his or her blood (which is channeled right back into the body). In organizational outsourcing, the client is responsible for setting standards, whether technical, financial or ethical.

The possibility of infection is clearly identified in dialysis. The care team screens routinely for early signs, and reacts quickly to predetermined triggers that suggest sepsis. Similarly, all outsourcing projects should have an appropriate risk analysis that includes risk detection and mitigation plans. Organizations may expose themselves to proprietary leaks and other security threats they wouldn’t have with employee-driven services. These need to be clearly identified and mitigated in the risk analysis.

Dialysis is sometimes performed as an interim strategy. This is the case in acute renal failure where we anticipate that the kidneys will recover sufficient function to resume their full responsibility. This is also true after a kidney transplant; the donor kidney takes back the outsourced responsibility. These hint at another important principle for outsourced services: the term of the strategic outsourcing decision must be clear, and if necessary an exit strategy must be planned.

Patients with renal failure understand the priority and urgency of their dialysis treatments. Dialysis units reciprocate with their dedicated, focused staff, accessible venues and convenient times. In a similar fashion, the client organization has to determine internal priority to the outsourced service. Especially with critical services it must allocate appropriate employees to mange the outsourcing and they must have enough time and resources to do so.

If you visit a hemodialysis unit, you will see a bank of artificial kidneys. Increasingly, the sterile components are disposable, but their basic machinery is reused every day with many different patients. This economy of scale is one of the key principles in outsourcing. Nobody would ever recommend that we routinely outsource our renal function, but the communal use of high tech equipment is far more cost effective than each patient requiring a dedicated artificial kidney. This efficiency is not restricted to acquisition costs, but to maintenance and enhancements too. Similarly, investments a vendor makes into training personnel or upgrading equipment is realized across multiple clients, distributing the financial risk.

Although imperfect, I hope that this analogy provides food for thought for anybody contemplating an outsourcing venture, and those engaged in an outsourcing interface either on the client or vendor side. Perhaps I have omitted the most important principle: bedside manner. A polite, empathetic caregiver and a smiling, grateful patient signal the importance of investing in the outsourcing relationship as kind, warm human beings!

Have fun,

Roddy

(Roddy Carter is an executive consultant who uses nature to provide analogues for human organizational structure and function. Through the BioSimilar Programs he helps organizations select and learn from a species or environment that closely resembles their own circumstances. This is a fun way to build and implement strategy and to enhance performance. Please reach out through the connect tab at Body-Corporate.org if you’d like to explore a BioSimilar Program in your organization.)

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