The lack of resources has led some hospitals to consider outsourcing all or part of their facilities management departments. Companies such as ServiceMaster (Downers Grove, IL) and Sodexho Marriott (Avon, CT) have stepped in to offer their services, saying they can save hospitals money while providing better technical skills and improved infrastructure.

In-house engineers remain skeptical, saying that outsourcing can create more problems than it solves. They wonder which hospital personnel will be watching the outsourced personnel to ensure facilities are maintained properly. They question whether outsourced personnel will cut corners in order to show short-term profits. They also worry about whose interests the outsourced personnel have at heart – their for-profit employer’s or the hospital’s.

All good questions. Too bad there are no easy answers.

What Happened?

Many point to the Balanced Budget Act (BBA) of 1997 as the problem. The BBA cut Medicare spending for America’s hospitals by more than $70 billion over five years – a 10.5% reduction. Medicare spending for inpatient services was reduced by $41 billion, and outpatient services were cut by almost 15%. Some hospitals lost much more. Payments to hospital-based home health agencies were reduced by $5.5 billion. There are plenty of these grim statistics, but the bottom line is that hospitals were hit in the pocketbook. The BBA also coincided with a total upheaval in the world of medical insurance, with private insurance plans and HMOs now deciding which type of care their customers will receive and how much it will cost. Both issues have sent the health care industry into a tailspin.

“With the Balanced Budget Act, the Medicare and Medicaid money just isn’t there right now,” says George Player, director of engineering, Brigham and Women’s Hospital (Boston). “When we’re only getting sixty cents on a dollar for some of the reimbursements, it makes a bigger challenge for us.” Player notes that his 700-bed, non-profit, teaching hospital has definitely seen some reductions in its workforce. At the same time, the facility has expanded, including the addition of several off-site clinics. “Medical technology is also evolving, and we’ve really had an increase in MRIs and other types of equipment. So we have fewer people but a large increase in equipment and technology.”

Player comes to the equation with an interesting background. He was part of the outsource group that managed his hospital’s facilities management department. After two years in that position, he decided to bring the management of the department back in-house. Now he is very firm in his belief that outsourcing would not benefit his facility. At least not now.

“We have a good retention of staff, and they really bring a good knowledge to the department. When there’s an emergency, the response is very direct to the problem. We can usually correct the problem in a very short period of time. It’s a smooth operation, so I wouldn’t consider outsourcing at this time.” However, Player adds that these days he sometimes feels like a financial analyst first and an engineer second. “The financial situation has made us more aware of our costs and opportunities to save money.” As such, there may come a day when he receives pressure “from above” to outsource. He says he’d look to see if there were any true benefits, but it’s not the direction in which he’d like to see his department move. One engineer, who serves as a director of facility systems for a New England hospital that refused to be identified in this story, says his engineering department has been reduced by about 50% over the last few years. “Everything has become more complex,” says Engineer X. “You now need to have a person who can really assimilate both the administrative as well as the departmental needs, and be able to prioritize like they’ve never had to before because of the lack of resources that everybody is dealing with. No matter whom you’re talking to or where you go, you’re going to hear that. So you make the best of what you have, and you set a new level of priorities.”

Outsourcing Being Considered

Susan McLaughlin, former director of safety and compliance with the American Society for Healthcare Engineering (ASHE) and current president of SBM Consulting (Barrington, IL), says that with fewer resources, more and more hospitals are having to consider outsourcing. “Hospitals now have to look at every dollar. There are a number of companies out there that can provide a variety of functions within the hospital. That certainly includes facilities engineering, clinical engineering, and equipment maintenance. Often times the hospital is making decisions based on what they perceive to be the most cost-effective way of getting the function done.”

Engineer X agrees, saying that outsourcing touches all facilities. He’s very careful, though, about what he outsources, especially after he inherited the “carnage” left by an outside contractor in the housekeeping department when he arrived at the hospital. “There was nothing left to that department. It was a very typical situation of what happens when things are wholly outsourced,” he says.

Engineer X believes that when a service contractor serves two masters – the hospital and the contractor’s employer – he cannot have the best interests of the hospital at heart. “His paycheck is being signed by an entity not of the institution. That splits the dedication of the individual. We’ve seen a lot of that in the industry, where what is good for the institution is not necessarily good for that individual contractor.” And while many bean counters may look at “turning over the keys” to an outside service firm as a way to save money, Engineer X says unless there is close scrutiny of the operation, the decision can come back to haunt you. “The theory behind outsourcing sounds very good. But that outside contractor wants to look good for a short while, so he’s going to defer maintenance for four or five years. He’s a gun for hire. He’ll be transferred in two or three years, and he’s going to put off that roof that needs replacing. He’s going to gamble. But the time will come when it’s time to pay the piper.”

Outsourcing Opportunities

“All health care is under some financial constraints right now. I think hospitals see their infrastructure management as being an opportunity to help with some of the financial savings that they can get in their facility. So they look to outsourcing to try and help with that. Initially, that would be their reason for outsourcing,” says Shoener.

But then the facility sees that a company like Sodexho Marriott can bring a lot of technical skills to the table, says Shoener, as well as a lot of depth to the organization. “We’re also the ones who really stay up to date on all the compliance issues and can really add a lot of value from a technical perspective and a compliance perspective to their organization — in addition to the financial issues.”

Lane Pierce, director of plant operations with ServiceMaster, agrees with Shoener, saying that a company like his brings standardized programs to reduce liability and code compliance issues. “We also bring a wealth of knowledge regarding organizational structure, manpower distribution, and other operational profiles that allow for efficient operations and effective support function.”

Whether or not outsourcing works also depends on the quality of the individuals being hired. McLaughlin says there are a number of ASHE members who work for companies like Sodexho Marriott and ServiceMaster, and they’re all incredibly proud of the work they do. “I don’t think you can say that just because Bob works for a hospital that he does his job better than Jim who works for an outsource group,” she says.

When an outsource company like Sodexho Marriott comes into a hospital, though, there are going to be those who resent it. People are often afraid that in an outsource situation, they might lose their jobs. And there is always fear of the unknown. Shoener admits that it is often the leadership of the organization that is happy to see him come in, because there is obviously a situation in which they need either financial or technical help.

“However, when the front line worker sees us – the engineers, who are probably the people who do not like change the most – they don’t like it. But after a while they start seeing the benefits of what we can provide to them, and we get things done that maybe weren’t able to get done before. But there’s no doubt that there’s usually resistance from the front line,” says Shoener.

When Sodexho Marriott takes over the facilities management of a hospital, the only change it really insists on is placing its own director or manager of the services in the hospital. Only that person usually reports directly to the company and comes onto its payroll. The rest of the staff usually stays where it is, depending, of course, on individual competencies. “When we come in, we do a complete assessment of the skills of the people who work there, so we may end up redistributing the workload. But we don’t come in and fire everybody – that’s just not what we do,” says Shoener.

ServiceMaster operates in a similar fashion – most relationships with its 300-plus health care customers are structured with the production workforce on the customer’s payroll, reporting to a ServiceMaster director or manager. Although Pierce does note that recently there has been a stronger effort by the health care industry to move more of the production workforce to the contractor’s payroll. “It makes up a minority of our business, but it is growing,” says Pierce.

Whether or not a hospital can save money by outsourcing to a company like Sodexho Marriott or ServiceMaster really depends on the hospital itself. If it’s running a tight ship and really paying attention to where every dollar goes, there may not be much of a savings that can be realized by outsourcing. Shoener says that before they even agree to take on a department in a hospital, they go in and do a financial analysis. “We will show that no matter what the fee is for us that we are going to create enough savings that our fee will be covered by that savings, plus there will be additional savings to the facility. If we cannot do that, then we do not belong there.”

Pierce adds that there was once a time when a company like ServiceMaster could serve any hospital. “In recent years, we’ve had to walk away from some hospitals because the staff has been cut so deeply that essential operations are at risk. That’s too bad. We cannot help them without investment, and the customers can’t help themselves because of financial limitations.”

New Opportunities Exist

Player agrees, noting that in the near term, chief engineers and/or facility managers will be working a lot closer to hospital administration. In addition, he believes that there will be supplementary training available to staff members in order to make them more well-rounded. “We’re always trying to do cross-training and have multiskilled people, so they’re not one-dimensional.” That’s a good opportunity for existing staff to branch out even further and acquire new skills that they may not have had the opportunity to learn previously.

There are also opportunities with outsource firms. Shoener notes that a hospital environment is rather small, while Sodexho Marriott can provide myriad opportunities for talented people. “If there’s somebody who’s doing a great job in one hospital and aspires to become a manager at some point in their life, they may be stymied from doing that at a particular hospital, because there’s no growth. But within Sodexho Marriott, there are opportunities for growth for everyone.”

Change is always scary, but by looking for the silver lining, hospital engineers will probably do better in furthering their careers, while also improving the quality of the hospital environment. ES