The Impact of Outsourcing on Healthcare Business Performance

CAPSTONE PROJECT: HEALTHCARE OUTSOURCING
The Impact of Outsourcing on the
Healthcare Business Performance
2019

CAPSTONE PROJECT: HEALTHCARE OUTSOURCING1
Executive Summary
With advancements in science and technology along with dynamic changes in the needs of
customers and patients, healthcare organization at present are under multiple responsibilities
of ensuring deliverance of quality healthcare services, patient satisfaction and cost effective
approaches to healthcare services and products due to reduced funding sources. A key
strategy with which healthcare organizations manage these responsibilities is outsourcing –
the act of collaborating with another organization for the management of one or more of
services or products provided. While outsourcing provides excellent opportunities for quality
improvement and inclusion of diverse clinical practices, there remains huge risks in terms of
long term quality improvement, customer satisfaction and organizational assets.
Taking insights from the outsourcing relationship between Medtronic and Tareq Co., the
following capstone project will attempt to assess the impact of outsourcing on business
partnerships. Despite deliverance of quality medical equipment, Medtronic’s business
continues to be negatively impacted due to cultural diversity, adoption of Kuwaiti hiring and
training practices and lack of customer satisfaction across Tareq Co. across Kuwaiti
healthcare scenario. An adoption of a risk management and joint venture framework is
recommended so that both organizations can pool their resources, align their strategies, build
an environment of trust and cultural respect and collectively achievement customer and
patient satisfaction in Kuwait.

CAPSTONE PROJECT: HEALTHCARE OUTSOURCING2
Table of Contents
1. Introduction................................................................................................................2
1.1. Background.........................................................................................................3
1.2. Rationale.............................................................................................................4
1.3. Aims and Objectives...........................................................................................6
1.4. Research Assumptions........................................................................................8
2. Literature Review.......................................................................................................8
2.1. Advantages of Outsourcing in Healthcare Business Partnerships......................8
2.2. Disadvantages of Outsourcing in Healthcare Business Partnerships................11
2.3. Possible Strategies for Improved Outsourcing and Positive Healthcare Business
Partnerships..........................................................................................................................13
3. Main Findings and Discussion.................................................................................17
4. Conclusion and Recommendations..........................................................................25
References....................................................................................................................26

CAPSTONE PROJECT: HEALTHCARE OUTSOURCING3
1. Introduction
To ‘outsource’, implies the strategies with which an organization, acquires particular
services or goods, specific to its field of specialization, from an external sources, contractors
or suppliers. Outsourcing by an organization can occur across various locations and hence
may include both domestic and foreign contracting as well as processes of near-shoring or
off-shoring comprising of transference of organizational functions to locations or countries
within close of international proximity (Gurung and Prater 2017).
The healthcare organization also reverts to processes of outsourcing as a key strategy
for mitigating the increasing costs underlying provision of clinical goods and services. In
addition to being a cost effective strategy, outsourcing also enables an organization to direct
greater focus and resources to the fulfillment of some of its major foundational objectives
hence resulting in greater profits and consumer satisfaction (Wang et al. 2015). Hence, the
following capstone project will shed light on the impact and effectiveness of outsourcing on
the business performance of healthcare organizations. In addition, it will study the case of
Medtronic, and its impact of outsourcing in the healthcare sector in Kuwait, through the
Kuwaiti organization Tareq Co. as it is one of the oldest companies in Kuwait medical
market. Tareq Co. has long been involved in the supply of medical equipments, among other
products to the Kuwaiti local market. Since its inceptions in 1970, Tareq Co. has been keenly
desirous to greatly contribute to the upgrading of the medical sector, and other niches in the
Kuwait and the gulf regions (Tareq Co. 2019). A systematic review will be performed
comprising of a brief discussion on key studies exploring the possible business dynamics and
strategic models underlying the partnership between these two healthcare organizations. Two
organizations have been chosen since Medtronic represents the inventor, the producer and
supplier of the medical devices to Tareq Co. with the responsibility for introducing Medtronic

CAPSTONE PROJECT: HEALTHCARE OUTSOURCING4
products in Kuwait market and maintaining medical service through its umbrella as a Kuwaiti
company. This will be followed by thematic analysis where the key findings in alignment
with the research question will be discussed in the form of themes.
1.1. Background
Outsourcing is commonly used across healthcare organizations as a cost effective
strategy to reduce the high expenditures associated with the deliverance of certain clinical
products and services. Outsourcing across healthcare organizations comprises of an external
agent which takes responsibilities of management of a number of activities, as in some cases
the supplier could give the distributor the right to produce, to sell and to do maintenance for
its products or could be just a facilitator for the process without any interfere in business
cycle or customer relationships and it depends on the nature of the services or products
delivered by the concerned organization , clinical, hospitality and business departments
(Beaulieu et al. 2018). Considering that such as an association enables the external
organization to deliver specifically upon any one or limited group of goods and services, such
specialization of service dissemination remains not only cost effective for the external agent
but also allows the same to address such services with improved quality as compared to the
healthcare organization who is already required to provide a wide range of clinical activities
(Paltriccia and Tiacci 2016).
Additionally, it has also been evidenced that upon outsourcing certain clinical services
which are not primary to the healthcare organization, the organization in question gains an
opportunity to address its remaining activities with greater amount of resources, confidence,
precision and quality resulting in improved customer satisfaction (Reddy et al. 2017).
Further, outsourcing also allows the healthcare organization to incorporate diverse practices
and strategies of clinical services which also contributes to improved healthcare quality and
achievement of positive outcomes in the patients (Mohiuddin et al. 2017). Hence, the aim of

CAPSTONE PROJECT: HEALTHCARE OUTSOURCING5
this report is to explore the impact of such outsourcing in the businesses of the healthcare
organizations in question, with a key emphasis on the outsourcing business partnership
between Medtronic and Tareq Co. and the deliverance of healthcare services in Kuwait. The
business relationship between Medtronic and Tareq Co. is being operated through a full
distributor model which enables Tareq Co. to hire employees representing Medtronic inside
Kuwait to sell its products through participating in Kuwaiti local tenders as Tareq Co. is the
exclusive distributor among Kuwait for Medtronic
1.2. Rationale
While strategies of outsourcing can administer positive impact on the business
performance between two healthcare organizations, there may also be negative effects on the
same, due to factors such as, an already turbulent healthcare scenario associated with poor
health outcomes, deliverance of inadequate patient care services and customer dissatisfaction
(Arisi-Nwugballa 2016). Such a situation can occur in terms of the business performance and
outsourcing partnership between Medtronic and Tareq Co. in a dynamic Kuwaiti healthcare
scenario.
Medtronic is a globally renowned name in the development and deliverance of
technology in the clinical field. The origins of this organization date back to the year 1949,
where it was established as Earl Bakken and Palmer Hermundslie, his brother-in-law, as a
store engaging in the retailing and repairing of medical equipment. At present, the
organization is functioning across more than 150 nations on a global scale with partnerships
across distributors hailing from diverse backgrounds. Hence, the organization must adhere to
culturally competent practices where it must comply with the laws of trade specific to the
concerned nation for business (Medtronic, 2019).

CAPSTONE PROJECT: HEALTHCARE OUTSOURCING6
Medtronic’s primary headquarters are located in the United States and hence covered
by the laws specific to the US. The same laws are also extended across the countries where
Medtronic extends its outsourcing businesses and hence, may cause conflicts of interest in
terms of business partnerships. The total revenue of Medtronic is more than 30 billion dollars,
with a total of four units of business: the Diabetes Group, the Minimally Invasive Therapies
Group, the Cardiac and Vascular Group and the Restorative Therapies Group (Medtronic,
2019).
The heart of Medtronic’s functions lie in the manufacturing and development of
therapeutic devises and medical equipment for the treatment of a wide range of chronic health
conditions, like Parkinson’s disease, heart failure, Down’s syndrome, urinary incontinence,
chronic pain, obesity, diabetes and spinal disorders (Medtronic, 2019).
One of the key strategies of Medtronic, included the extension of their services to
international countries especially in the Gulf area as part of its outsourcing activities and
enhancement of business partnerships (Medtronic, 2019).
This capstone project will focus specifically upon the outsourcing business
partnership of Medtronic during the time it expanded its healthcare activities in Kuwait, with
the aid of the Kuwaiti healthcare organization, the Tareq Co. Such a partnership of
outsourcing resulted in Tareq Co. gaining accessibility to a wide variety of assets and
resources of Medtronic along with the right for representation of Medtronic across local and
national level healthcare scenario considering that Tareq Co. is a registered healthcare
company in Kuwait. Despite the immense advantages posed by this outsourcing strategy, a
range of conflicts persisted which comprised of cultural incompetence between the two
organizations, issues pertaining to loyalty and conflicts in terms of authority to take
decisions. Additionally, it must be remembered that the business of healthcare in Kuwait is

CAPSTONE PROJECT: HEALTHCARE OUTSOURCING7
undergoing dynamic and extensive expansion. Further, as a result of deliverance of
inadequate and poor quality healthcare services, in addition to negatively impacting the
businesses of both the healthcare organizations, the same would also result in increases
dissatisfaction and negative health outcomes among patients (Kaplan et al. 2018).
At present, there are limited research on the effectiveness of this business partnership
between Medtronic and Tareq Co. in improving the deliverance of quality healthcare services
especially amidst, a scenario where the key distributor possessed a cultures, beliefs and
organizational policies diverse from the outsourced country in question. Such a research
proves to be interesting, unique, comprehensive and relevant to the present scenario of a
bureaucratic system where often the needs of the patient remain unmet amidst the pressures
to fulfill organizations objectives and policies (Mamah, 2016). Hence a key rationale for
performing this research is to enhance the current limited literature on exploration of such
diverse business partnerships across diverse ethnic cultural background. Further the rationale
of this research also lies in its relevance to future improvement of the existing quality of
healthcare services delivered globally in general and in Kuwait in particular. Indeed, business
partnerships in healthcare can often be tumultuous and difficult to manage; since patients and
the lives of numerous citizens lie at the receiving end of possible negative repercussions.
Healthcare organizations, both the outsourced as well as the outsourcer must aim to adhere
internationally accredited standards of healthcare which also formed a key component in this
capstone project (Maher et al. 2016).
1.3. Aims and Objectives
Hence, taking insights from the above, the aim of this capstone project is ‘to explore
the impact of outsourcing, on the business performance of healthcare organizations, with
special emphasis on the outsourcing impact of Medtronic on the Kuwaiti healthcare
organization, Tareq Co.’