Outsourcing in Russian Healthcare

This assignment examines the phenomenon of outsourcing within the Russian healthcare system. It delves into various aspects, including the driving forces behind outsourcing decisions, its effects on service quality, patient satisfaction, and the overall healthcare landscape. Ethical dilemmas and moral distress arising from outsourcing practices are also scrutinized. The analysis draws upon a range of academic sources, reports, and online publications to provide a comprehensive understanding of this complex issue.

HEALTH CARE

Table of Contents
Abstract............................................................................................................................................1
Introduction......................................................................................................................................2
Literature Review.............................................................................................................................3
Existing Practices...................................................................................................................5
Disclaimer...............................................................................................................................5
Barriers for implementation.............................................................................................................9
Legal Limitations....................................................................................................................9
Ethics..............................................................................................................................................12
Methods..........................................................................................................................................12
Results ...........................................................................................................................................13
Discussion......................................................................................................................................13
Limitation and Further Analysis....................................................................................................14
Conclusion.....................................................................................................................................15
REFERENCES..............................................................................................................................17

1 Abstract
● Background
The utility of outsourcing in health care services has been a highly debatable topic in the
last few decades for a lot of reasons, however, this practice seem to be not adopted within
post-Soviet region, or adopted in negative manner (Asafyev, 2016).
The research aims to review existing literature on outsourcing of non-core services in
hospital environment towards the private sector, in order to learn what kinds of practices
could be taken into account for more efficient management of resources within healthcare
system of the given region. Another objective is to highlight zones of possible interest
such as human resource, accounting, leasing of equipments etc within hospital budget of
a given region and compare outcomes of two parts of this research for possible
intervention methods to be chosen and proposed.
● Methods
Analysis of the legal and financial background of Russian health care system was
conducted for establishment of limitations within the chosen setting. Furthermore,
research of existing literature regarding outsourcing of non-core services was performed
and a list of possible practices for adoption was created. Practices which were chosen as
acceptable were applied to a previous year’s budget, that is 2016 of a single hospital for
visualization of a possible profit for a hospital.
● Results
Chosen practices work within areas of Human Resources, Cleaning Services,
Informational Technologies, Maintenance, Food Services, Audit, Laundry and Security.
During analysis of literature, most of these practices shown mixed outcomes or indirect
confounding by different drivers. However, while being applied to a hospital budget most
of them have shown an increase in hospital’s profit without a loss of quality of services.
● Conclusion
While being an effective tool in many countries, outsourcing of non-core services of the
hospital seems to be almost not developed in the Russian region at all. Usage of most
1

common and effective practices on a model shows a raise in efficiency of a hospital.
However, a further research and empirical research is required for further discussion.
● Keywords
Non-Core Services, Hospital, Outsourcing, Russian Healthcare Study
Introduction
After the end of Soviet Union in
1991, all of former Soviet republics had to deal with development of completely new system of
governance. That included establishment of health care systems. Due to complexity of this
objective, the short time frame of the transition, and existing legal, administrative and resource
bases, all countries built their health care system on system that existed in the Soviet Union
(USAID, 2010). While being most obvious and appropriate decision, it denied the main concept
of capitalism and markets– competition. The decision was logical as it was difficult to keep the
old health care centres functioning. It rose the requirement of developing new health care centres
which can be functioned through new rules and regulations. All the health care services,
including non-core services, were offered by government controlled structures such as health
care ministries and locally authorized hospitals etc. Non-core health services include applying
the principles of organizational development such as planning, development and implementation
which helps in fulfilling the objective of health care services. . In return, lack of competition
caused inefficient spread of resources and poor quality of services, along with lack of budgeting
in most of the cases (Hartmut and Egger, 2003.). This research will concentrate its efforts on
Russian Federation as an example of a post-soviet healthcare system due to lack of time and
resources. These services do not contribute directly to the services given to the patient but it acts
as a tool that can make those services easily adaptable and comfortable such as car parking,
infrastructure etc. The research will provide reliable and authenticated results through working
upon non-core services that are provided in health care centers after abolition of Soviet Union
(WHO, 1998).
Post-Soviet Healthcare systems require serious reforming toward competitive
performance, which prove resource and time costly. Unfortunately, the planned budget for next
2

financial year (2017) in Russia puts healthcare (2.2%) sector below military spending (17.2%),
andthe legal system (7.7%). (Ministry Of Finance of Russian Federation, 2016)
In this particular area conditions any cost-effective change in performance of health care
units around the country might prove worthy of adoption. In the present scenario, conditions of
private sector business are on competitive level towards the most developed countries and it is
but only logical to use this as advantage for improvement of the public health care sphere.
Worldwide practice shows that outsourcing of secondary or non-core services might be
used for a better cost efficiency of a medical facility (some references). An evaluation of most
common practices will be conducted within this research along with evaluation of each one.
The present study set out to evaluate existing practices in outsourcing for possible usage
within setting of hospital in Russian Federation with respect to laws, political conditions and
financial situation within the country. In order to perform this function, a list of barriers was
previously developed and each of possible outsourcing spheres were evaluated. After being
qualitatively evaluated for adoption, practices which were positively evaluated would be applied
to a real hospital budget for a further quantitative evaluation of possible outcomes of adoption.
Hence, the main aim of the project is to review existing literature on outsourcing of non-
core services in hospital environment to the private sector. It will help in developing adequate
knowledge regarding what kinds of practices could be taken into account for more efficient
management of resources within health care system of the given region.
The objectives for the present study on health care systems can be framed in the
following manner:
● To highlight zones of possible interest for outsourcing within hospital budget of a given
region
● To compare outcomes of this research for possible intervention methods which can be
further chosen and proposed.
Literature Review
According to Bob Reiss, a major outsourcing specialist figure, outsourcing enables
companies and organizations to purchase a specific product or service from an outside party in
lieu of performing those functions thyself (R.L., 1997). While having extensive use in multiple
industries, outsourcing can be a “double-edged sword”, if it is not managed properly. Reiss
3

implies that outsourcing managers are required to monitor the benefits of the third party services
and economically evaluate the feasibility of certain outsourcing ventures (Reiss, 2015).
The decreasing trade barriers stimulate outsourcing to Central and Eastern Europe and the
former Soviet Union, which in turn, significantly shifts relative employment in favor of high‐
skilled labour. (Hartmut Egger, 2003). In order to achieve efficient outsourcing, health care
executives have to understand that outsourcing is for short-term cost reduction and it does not
yield much economic benefit for long-term. Some of its benefits include, increased quality of
secondary health care services, and creative solutions. As a result, organizations can expand their
own knowledge and physical investment capabilities by using the facilities and program funds of
the vendor. The organization also benefits from access to the latest technology without the
substantial yet prohibitive, investment otherwise required. (Reiss, 1999)
As pointed out by Velma Roberts in the Journal of Health care Management, outsourcing
greatly assists organizations in adapting to the change in environment. Change may bring
creative ideas, however, sometimes it may also bring instability, such as potential job loss and
job vulnerability due to the changing needs of the organisation. “Reassuring employees affected
by outsourcing that the change is not a reflection of their individual performance and changing
their perceptions of outsourcing is essential.” (Allen, 2000).
While the benefits of outsourcing are expertly exploited by many entrepreneurs, not all of
them can clearly observe the benefits. There are various examples of the health care centers
where outsourcing is poorly monitored; the organizational leaders may fail to engage in a
beneficial outsourcing relationship with an outside party because the outsourcing company is
ultimately held accountable for results. Management must strategically monitor all vendors.
Monitoring vendors means ensuring goal value and value congruence. This means that managers
must ensure that the vendors, outsourcing company's incentive structures, and value systems are
competitive enough to deal with the issues of the business (R.L., 1997)
Outsourcing relieves the entrepreneur from his or her knowledge deficiencies by shifting
this responsibility to the supplier. This allows the entrepreneur to adapt more efficiently to the
changing environment in their industry. (Roberts, 2001) Turning to the origin of outsourcing, it
appeared in the US in the 80s, and then got popular in many countries of Europe. In the post-
Soviet space, technology appeared to be developed in the second half of the 90s (B, 1999).
However, many scientists and experts in the field of labor relations argue that this mechanism
4

does not carry in itself anything new, since the origins of outsourcing can be traced back to mid
years of 20th century. A vivid experience in the use of "outsourcing" technologies was in the days
of the Great Depression at giant Ford and General Motors plants. It took Henry Ford just 12
years to build a car giant with a turnover of 125,000 cars a year from a tiny office. (Bykadorov,
2006). The main advantage of taking the health care services from outside is that it will help the
management in focusing on core activities of the health care center. They can focus on getting
right kind of doctors and provide effective health care services to them. However, the major
disadvantage of outsourcing non core health care services is that the entity who have been
outsourced may not understand the needs of the center in the manner the management itself can
understand.
Existing Practices
Disclaimer
A brief discussion of different existing practices have been made to understand the requirement
of non core requirement of health care services. The content tends to highlight the most common
outsourcing spheres described in a scientific literature. This decision is based on the definition of
term “outsourcing” itself, because anything can be outsourced, even the whole facility, not just
its parts (McCarthey, 2011)
1. Human Resources (Brown, 2012)
HR services are highly important in health care sphere, because of specificity of services
and level of personal and overall responsibilities taken by each member of hospital staff (Davies,
2010). So it is worth mentioning that certain HR activities are not to be considered as a potential
outsourcing subject (Vahit Yigit, 2007). Within the HR section of a hospital 3 groups of
activities can be separated.
 The first refers to general employment of working personnel, the assessment of
candidates’ skill and drug testing. Out of these set of activities, only selection of possible
candidates seems to be ineffective and inapplicable due to its complexity and specificity
of expertise required for decision making (Allen, 2000).
 Second stands for training of employees. Within the orientation process, it is very
unlikely if it is not possible to recruit someone from outside of the hospital to actually
give specific information about it. However, process of training and evaluation of
potential training areas has a very high potential of being outsourced to a private
5

company. Furthermore, planning within training area and performance appraisal has
some limited potential to be developed in the professionals (Bykadorov, 2006).
 Last group of activities represents compensation actions within the facility. It can be
further separated on pay compensation and benefits in the form of outsourcing fees.
Administration of both of these actions gives a broad range of outsourcing opportunities
(Larisa Popovich, 2011).
Out of all represented hospital activities within non-core Human Resources, only few
have strong potential of outsourcing. However, even though there is space for redirection of
hospital duties to private sector, none of represented jobs is broad enough for outsourcing to be
cost effective, as it does not exclude necessity of hospital’s own HR section.
HR activity HR sub Activity Reason for Outsourcing
Strategic Cost Expertise
Staffi ng
Recruitment Depends Depends Yes
Selection No No Depends
Skill And Ability Testing Yes Yes Yes
Drug Testing Yes Yes Yes
Training
Orientation No No No
Training Needs Assesment and Evaluation Yes Yes Yes
On the Job Training Depends Depends Depends
Performance Appraisal
Design No No Yes
Administration No No Yes
Planning No` Yes Yes
Compensation
Pay
Design No No Yes
Administration Yes Yes Yes
Benefits
Design No No Yes
Administration Yes Yes Yes
Table 1 (Brown, 2012)
Given table represents possible opportunities for outsourcing within HR section of hospital.
According to Vahit Yigit (2007), human resource plays an important role in the hospital
as it becomes necessary for the hospital to employee right kind of doctors in the organization so
that best possible services can be extended to the patients. Further, human resource is responsible
6

to negotiate their compensation, provide them proper training and make them aware about the
administration of the hospital. In order to focus on core activities of the hospital, the
management can outsource this function from other companies which are basically made to
provide human resource management services. However, as per the views of Van Deursen,
Buchanan and Duff (2013), the service when outsourced may not prove to be fruitful as it may be
costly to take these services and organization may not be able to generate that much return. The
company who have been hired to perform the job may not be aware of the norms of the hospital.
Further, It may get difficult for it to understand the requirement of the hospital based on which
recruitment is to be made. Increased cost and decreased quality of services make them restrict the
outsourcing part of human resourcing. Other problems include, leakage of private information,
loss of control, reliance on other company etc.
2. Cleaning Services (Veronica Toffolutti, 2017)
Another non-core activity which can be outsourced towards private organization is
cleaning services. However, unlike HR section, there is a big discussion about appropriateness of
such decision. Main reason is the importance of sanitation within the hospital environment. A
good example of the discussion, is article by (Veronica Toffolutti, 2017), representing a
significant increase in incidence of MRSA in UK hospitals, that decided to outsource the
cleaning services. However, article also mentions that the cost effectiveness and amount of saved
resources increased after outsourcing this services to a private company. Given the previously
discussed limitations within legal system, it is very unlikely that any member of the hospital
management would decide to risk health conditions of patients for a certain amount of savings.
Furthermore, (Davies, 2010) criticize this practice because in many cases it has shown poor
results along with poor overseeing within the area of implementation. Author raises a problem of
actual switch in contractor and legal punishment for the low quality of services provided. It is
very hard to describe how clean the floor was and set any benchmark for it. This raises the
dilemma of necessity of outsourcing. On one hand, it surely saves a lot of money, leaving more
space for hospital to develop, but on the other hand it is ascertained that the quality of services is
falling down significantly. Hence, it is important to provide quality cleaning services in the
hospital as the major importance lies in providing healthy environment to the patients. However,
there is a requirement for the health-care centers to opt for right kind of contractor that can give
quality services to the hospital keeping all the important factors in mind.
7

Cleaning is an important aspect of any hospital. It is necessary for every hospital to
maintain the cleanliness in the environment as the patient who visits the hospital lacks immunity.
Improper health and hygiene can bring them in contact with the other diseases as well.
Appropriate cleaning instruments are required in order to effectively perform this process.
Outsourcing cleaning services can help in reducing the burden of considering all the important
factor. Further, employing appropriate type of people for doing such job is also a difficult task.
Hence, it becomes easy to outsource the function in order to provide quality services to the
hospital.
However, in contrast to this, outsourcing such services can add up to the cost of the
hospital. It can also add up to the hidden cost as well for the organization which may not prove to
be fruitful. The services of the outsourced company may also decline if adequate profit is not
earned by it. They may not use quality products to perform the cleaning swervices. There may be
threat to the confidentiality of the hospital. Leakage of the clientele information may lead the
company into losses.
3. Information Services (Daniel P Lorence, 2004)
According to (Daniel P Lorence, 2004), Health care Information Management is very
different from any other type of information management as it is restricted by specificity of the
sphere. However, day by day services of Health care Information manager are not a necessity, so
they can be outsourced. However, there is not enough evidence to proclaim, that all the
information management that can be done by a worker of a private company, due to privacy
policy and legal obligations. However, such duties as transcription, microfilming and
information release can be performed via outsourcing methods and the incidence of such
behavior is very high in United States. However, this practice can also be described as a segment
of IT section. Within that section, a research conducted in United Stated by (Manachemi N,
2007), describes any outsourcing within IT sphere of Hospital as something which lacks in
correlation with hospital financial efficiency in terms of profits, revenue or expenses. However,
even while there might be a discussion about efficiency of this practice in terms of financial
profit, it is certainly very reliable and helpful in terms of planning and strategy development for
any hospital. The conclusion from the article analysis is that, the practice of outsourcing IT
services from the company will further help in concentrating on core activities of the hospital.
8

Further, experts can be hired to perform this function further leading to efficiency and
effectiveness in work. However, he activity may not prove to be cost effective to every hospital.
It is the crucial aspect of any business and one of the most important tool to manage
clientele data. The benefit is obvious as it helps in making them updated about latest offers going
on in the hospital such as, free health check ups, discounted blood tests etc. It helps in employing
the organization which has expertise in this field and can perform this function effectively
without any hassle and barrier. The resources require performing this function may not be
available with the hospital and can be gathered by the outsourced entity.
However, the main issue related to outsourcing the information technology is that some
IT functions may not be outsourced as the main goal of the organization that is privacy may get
hampered. The overall control get lost if the information technology function is outsourced as all
the important data is required to be handed over to that company. Poor quality of work
performed by the entity can affect the whole existing unction of the hospital as any mistake
performed may not have any impact on the entity which have been outsourced. Some of the
hidden cost are also involved in this function such as, to and fro traveling from hospital to
organization with the aim to gather data can add up to the existing cost. Further, electricity
charges, maintenance of computers used etc.
4. Medical Equipment Leasing and Rent
Within the context of existing rapidly growing market boosted by high level of
technological progress in medical equipment is very expensive to own. Whether hospital decides
to let go the most innovative technologies or to sacrifice some of limited funds to have the
advantage of exclusive services brought by the most advantageous technologies, both methods
are ineffective in their own way. Growing average age of population increases the amount of
required screenings and expensive procedures as amount of chronically non-communicable
diseases is growing. According to the law of market economy, higher demand must create a
higher level of supply. However, this is not exactly the case with expensive medical equipment
as it is not a minor investment for a hospital or a health care system. The possible solution of this
problem is leasing or rent of medical gear, which is currently too expensive for health care
provider. The main advantages related to it are lowered burden, higher satisfaction of customers
and decreased maintenance costs. However, this practice puts certain limits on hospital, since, as
per the contract, it is usually obliged to use equipment manufactured by a single provider and use
9

it for a certain amount of time (Global Industry Analytics, 2017). Leasing out appropriate
material will help in reducing the cost involved further contributing to generating higher profits.
Hence, the practice will prove to be beneficial for health care center.
The overall cost involved in purchasing the medical equipment is quite high. It is difficult
for a small hospital to purchase these instruments at its very initial stage. Further, the instruments
are required to be present in the organization as diagnosis is the important part of treatment in the
hospitals. Further, there is constant up gradation in the prevailing technology. When the asset is
once purchased it is difficult to purchase the new up graded one as it arrives in the market.
Leasing is a less costly method through which the hospital can collect all the important
instruments in the campus without spending much on the instruments. The hospital can anytime
break the lease agreement can opt for upgraded technology. It makes the hospital to spend less
on medical equipment.
There are various incentives attached to leasing and renting of the medical instruments.
The ownership of the asset is not transferred and hence, if it goes out of order then the owner is
left responsible for it. There is a flexibility in the payments on of the lease and rent as it can be
pad monthly, once in three months, once in six months, once in a year as per the contract on
which lessor and lessee have agreed.
5. Logistics and Transportation
Any hospital receives a lot of deliveries and disposes massive amounts of waste on a
daily basis. It includes medical supplies, common usage goods, such as tissues, gloves, robes,
washing liquids, office supplies and many others. Such a large supply of goods requires a large
delivery and logistic units. Instead of hiring personnel, buying or leasing vehicles, scheduling
logistics, it might be smart to outsource those activities to a professional company which
specializes on this type of actions. However, to hire a third party company that will fulfill such a
contract, it has to follow numerous standards and have to possess a specific type of machinery as
well (USAID, 2010).
Furthermore, outsourcing of Bio-Medical Ware is also belongs in this section, but it is
more complicated than activities described above, as it is represented by Jindal (2013) as the
service provider supposed to be certified by government, in both their procedures and their
equipment and also unlike other practices in this section. It is an obligation to maintain this
process at its daily routine. In other words, there can be no pause between the change of
10

suppliers or contract re-arrangements. Bio medical ware includes the instruments that are used in
providing health care services to the patients. These instruments are used in palpitations,
operation and monitoring Blood pressure. Common instrument of bio medical are, blood
pressure monitoring machine, surgical instruments used in surgery such as blade knife, scissors
etc.'
The hospital requires necessities to perform its daily functions. Some of the products
includes, doctor's robes used in operation, gloves, tissues etc. These are to be disposed of after
being used for one patient and hence requirement is to be fulfilled in bulk. The material required
is important to be rendered time to time as without the availability of its basic functions of the
hospital cannot be performed. Further, focusing on giving up this responsibility to the particular
group of people in the hospital is one option available to hospital management. However, the
function can also be outsourced where the supplies can directly be transferred to the hospital
time to time. For instance, once in a week or whenever required. It will reduce the burden from
the employees that they have to perform certain activity daily.
However, the main issue attached in getting the function performed from outsourced
company is that it will add up to the cost of transportation to the hospital. Further, any mistake
committed by the entity in stock counting may create hindrance in performing the basic functions
of the organization. Hence, it would be better for the hospital if the function is not outsourced
and the activity is performed by the hospital itself so that possibility of mistakes can be removed.
6. Accounting
Financial management is one of the key spheres of hospital’s success. And while hospital
management is a very specific activity which requires highly educated professionals, financial
plays a major role in it and is responsible for common accounting. It is a common practice
worldwide to outsource accounting for higher cost-efficiency, burden shifting and decreasing the
involved risks. However, research by Ruhanita and Malaeh (2010) shows, that negative side of
this process is a lack of management, poor feedback and limited cooperation between the
employer and its employee.
Hence, it can be interpreted from the section that apart from health care services that
plays an important role delivering the best to the patients. Smooth conduction of these types of
non core activities plays important role in development of the hospital. The main of all is renting
o leasing the medical equipment as it helps in providing better services to the patients and
11

diseases can easily be diagnosed through this activity. Accounting activity helps in analyzing the
amount of profit the health care organization is earning and further investment in the hospital can
be made based on the reflection of books of accounts. Facility to transport the patient from one
ward to another or from a smaller hospital to a larger one also plays an important role in
functioning the hospital as well. Hence, these activities plays vital role in the functioning of the
hospital.
Accounting is considered as the most important and tedious function of any organization.
The entity have to hire specialist to perform this functions. Outsourcing may prove to be helpful
for the hospital as it can in saving time further giving more reliable accounts as it must
maintained by the experts. It can prove to be convenient for the organization as data can be
shared through cloud with the outsourcing company in order to get the accounts completed right
on time. Further, any changes in the reporting of the accounts is very well known to these types f
company and the same can be implemented in hospital's books of accounts as well.
However, the main disadvantage to outsourcing this practice is that there is less control of
the books of accounts of the hospital which can increase the probability of fraudulent activities.
Further, disclosing financial information can also reveal private information about the
organization which can be used in unethical practices as well. Hence, adoption of this activity
may not prove to be viable for the company. As per the security rules and regulation issued by
the government, the information and their disease data can not be shared by anyone. Outsourcing
is the breach of this law as well.
Barriers for implementation
Legal Limitations
Outsourcing of secondary services that are not directly bound to medical treatment of the
patients, is a popular trend worldwide. It which allows hospitals to use their capital to improve
medical service quality by allocating some of their internal resources to support services, that
could be alternatively replaced by a specialized body corporate outside of the hospital
infrastructure. It would offer better quality of the aforementioned secondary service at an
affordable price (Chang, Chen and Lan, 2013). Certain limitations and boundaries exist
regarding the availability of outsourcing potential in the health care industry.
On the territory of Russian Federation several law-bound limitations are in place in order
to monitor and control the extent, to which hospitals outsource their infrastructure. In Russia,
12

medical services are bound to be financed in accordance with the model of Compulsory
Healthcare Insurance (CHI). However, the administrative expenses of most of the outsourced
services, being delivered by the third party companies are financed from the budget. In result, the
hospital management would be reluctant to engage in the contract to receive a secondary service
via outsourcing in some cases, where administrative expenses are high. This limitation could be
overcomed by expanding the range of expenses covered by the compulsory medical insurance
fund (Bloom, Propper and Van Reenen, 2015). At the current state of the law, however, this
financing limitation is going to hold. Nevertheless, in a number of regions this problem is
partially solved. Thus, the territorial program of state guarantees for providing free medical care
to citizens of the Russian Federation in St. Petersburg. It is fixed annually that the norms of
financial expenditures per unit of the volume of medical care provided within the territorial
program of compulsory medical insurance take into account administrative costs. In addition, it
is pointed out that, when complying with the financial expenditure requirements per unit,
medical assistance provided within the territorial CHI program. Further, other expenses may also
be included in the cost of medical care at the expense of CHI funds including the administrative
expenses (Drummond and et.al., 2015).
Another limitation is Outsourcing often involves a fairly substantial initial investment by
the outsourcing company - an organization that takes over the functions transferred by the
medical institution. These investments may include renovation of premises, modernization of
communications and equipment of the kitchen unit, purchase of harvesting equipment, etc. The
payback of such investments is calculated for a relatively long period of activity of the
outsourcing entity within the walls of this medical institution. Therefore, the requirement of
legislation in the sphere of the state (municipal) order, which presupposes the annual holding of
competitive procedures for selecting an organization that will deal with this type of services,
drastically reduces the number of potential outsourcing enterprises, leads to an increase in the
price of the supply (Antheunis, Tates and Nieboer, 2013). This issue is frequent and actual due to
the limited availability of CHI fund. Among the subjective reasons, restraining the introduction
of outsourcing at the level of the institutions themselves, is, first of all, fear:
- Fear of losing control over a particular area of activity. For many managers, the desire
for total control is typical and the emergence of a sphere where its influence is limited, it
may not suit;
13

- Fear of non-fulfillment of obligations or improper performance by the outsourcing
company . Unfortunately, the current domestic practice is full of examples of bad faith on
contractor's part (in this case – outsourcing company);
- Fear of entrusting to outsiders’ commercial secrets, just information that would not like
to advertise;
- Fear of reorganization, possibly related to the dismissal of some employees;
- Mere fear of change may be typical of most of the involved people (Shortliffe and
Cimino, 2013.).
As for the legal basis for outsourcing, the concept of "outsourcing" in Russian legislation
is absent, as per the normative documents of the Ministry of Health and Social Development of
Russia. Nevertheless, according to section 421 of the Civil Code, citizens and legal entities are
free to engage in the contract. At the same time, the parties can conclude both a contract that is
provided for by law or other legal acts, as well as a contract containing elements of various
treaties provided for by law or other legal acts (mixed agreement).
Contracts for the transfer of some of the functions of a third-party organization are in
most cases a classic contract (Chapter 37 of the Civil Code of the Russian Federation) or a
contract for provision of paid services (Chapter 39 of the Civil Code of the Russian Federation),
depending on what exactly (works or services) is the subject of the contract. In this respect, they
practically do not differ in any way from other treaties regulated by the above-mentioned heads
of the Civil Code of the Russian Federation (Basu and et.al., 2012). So, under the contract of
paid rendering of services, the performer undertakes to render services (perform certain actions
or carry out certain activities) according to the instructions of the customer, who is obliged to
pay for these services (S779 of the Civil Code of the Russian Federation).
There are two components of health care outsourcing:
- Directly in the field of medical activity;
- In the sphere of services that support the life of the institution.
The possibility and expediency of outsourcing is directly in the sphere of medical activity
are determined. First of all, by the specialization of the institution, its place in the hierarchical
health care system (Grol and et.al, 2013). At the same time, it should be noted that the
performance of laboratory and other studies, treatment procedures in specialized institutions or
institutions of a higher hierarchical level in general cannot be considered as outsourcing. With
14

respect to the services that support the life of the institution, there are a number of legal
boundaries, which restrict some use of outsourcing in certain areas, such as HR management
(Holloway and Galvin, 2016).
Ethics
This research project does not include any primary data collection or live human
participants, except for its author. Ethical approval is irrelevant as per the nature of this project.
However, a declaration of this research adheres to the ethical review process of The University
of Queensland and the National Statement on Ethical Conduct in Human Research will be
included.
Methods
Given the nature of this particular project, its objectives and topic are framed in a
narrative approach to conduct the study. A process of conduction of a given research was
carefully performed according to guidelines provided by Padgett (2012) .
Sources:
For identification of possible sources of information a set of different electronic databases
was used. That search included library website of University of Queensland, Higher School of
Economics (Moscow and London), and chosen databases were PubMed(750), Embase(529),
Scopus(661) and for a broader and more economical representation of the topic, ABI/INFORM
collection was used (tag “outsourcing history” and “major concepts of outsourcing” were used to
identify the most citied articles regarding outsourcing for a clearer understanding of the
described process). However, first search was conducted via tag “hospital outsourcing”, and it
has given a massive amount of literature to reduce the volumes to adequate numbers. A second
search was conducted over given findings via “non-core” tag. This resulted in PubMed (10),
Embase(6), Scopus(12). Out of those articles, 5 were presented in all 3 databases. This result did
not contribute enough information for a conduction of a decent literature review, so tag “non-
core” was substituted on “secondary services” which resulted in PubMed(4), Scopus(9),
Embase(5). Out of given articles, 3 were duplicated. This resulted in overall 33 articles.
Furthermore, searches for “Outsourcing in Health care” and “Hospital Outsourcing” were
conducted. The most cited articles with the most relevant dates were chosen, due to massive
amount of scientific papers being shown via those tags (more than 1000 per each database).
Articles chosen, by the methods above were carefully read through the full text. Due to small
15

number of relevant literature, exclusions were limited to description of the same issues and
overall relevancy. Search regarding Russian federation was mostly limited to Legal Documents,
as country is accessed based on set of limitations for all described outsourcing practices.
Results
Practices described in this paper are very common worldwide and are not exclusive to the
country where they were described with scientific literature. However, the spread of given
practices is not universal and there are certain countries where this is barely developed or may
not developed at all. Furthermore, most of these types of outsourcing are connected with health
care ethical dilemma, also known as the moral pressure of choice between the most cost-
effective managerial decisions and the morally correct decisions which are unprofitable for
medical facility (Sofia Kalvemark, 2004). So such practices as Human Resources, Cleaning and
Medical Equipment Leasing might be considered as ethically inappropriate, especially in the
given region.
Discussion
In accordance with the above review made, it can be stated that there are different type of
aspects that has to be covered within hospitals so that they are able to deliver high quality
services to patients. Ultimate aim of any business to make sure that they gain maximum profit
(Bloom, Propper and Van Reenen, 2015). For this process it is important that all the needs and
requirement of the customers can be identified and appropriate steps are taken to develop
positive perception. With time there are many changes that has taken place in which hospitals
have aimed at understanding the health related issues that are faced by people and proper steps
are taken to deliver high quality services. According to Al-Borie and Sheikh Damanhouri, (2013)
care providers need to have healthy interaction with patients so that they are able to develop
strong relationship with patients. Apart from this, majority of the part is also played by the type
of services that are delivered within the hospitals. In this context, it includes tools and
equipment’s that needs to be updated or new should be used so that better quality of services can
be used. There are different type of change that has taken place in respect with the technology
(Zarei, Daneshkohan and Arab, 2015). However, it is identified that care providers fail to provide
proper quality of services and this is because of lack of understanding for the making use of the
tools and equipment’s. Even if management contribute effectively towards transforming the
16

technology, it is also important to make sure that they provide care providers with proper training
so that they are able to make use of them in effective manner.
As per Chang, Chen and Lan, (2013) when any type of activities are developed, then it
required to have proper budget to be developed so that all the set of development that has to be
made can be carried out in effective manner. It requires to have proper planning to be made in
which all the operations that are set can be attained. Among all these activities it requires to have
proper support of the care providers and it is important that management get to know the areas in
which development is to be made (Sabry, 2014). When the type of perception that is carried out
by them is not effective, then it affects to business. Within the hospital, it requires to proper
support so that all the activities that are planned can be undertaken effectively and efficiently.
Bloom, Propper and Van Reenen, (2015) stated that patients prefer to get services that is
comfortable and one in which they are able to get adequate services to be enacted positively.
Further, there are other areas like cleanliness that are also considered. There are many health
related issues that negatively affect patients. In this context, when management of the hospital do
not take care of the cleanliness, then there are cases in which patients face other health issues. It
is important to make sure that proper steps to be taken by the management so that high quality
services can be delivered. Further, it requires to have proper analysis made in which all the
services that are delivered at the hospitals are properly maintained. Further, it requires to have
proper security for the patients so that they feel safe and secure. There are certain set of policies
that has to be maintained in which patients are provided with security (Zarei, Daneshkohan and
Arab, 2015). When patients feel that they are not safe and the services that they get is not proper,
then they develop negative perception within their mind. Further, the experience that they have
received will also be shared due to which other will also develop similar perception.
Chang, Chen and Lan, (2013) stated that there are different type of issues or problems
that are faced by care providers. In this process proper monitoring to be made in which the
performance are analyzed. When the problems that are faced by them are considered, then it
becomes favorable enough to take up appropriate steps that can be taken with the help of which
the issues that are faced by solved.
The outsourced elements not only help in conducting the business in effective way, but is
also helpful in focusing on key aspects of the business. However, there are certain limitations
that is attached to the issue. The main problem with it is that it increases the cost of the hospital
17

and the output ratio is quite lower than that of input required to avail those services. Hence,
according to the suggestion of the literature it can be analysed that the outsourced elements may
not prove to be beneficial for the health care environment as profits arose through it does not
indicate profits (Sofia Kalvemark, 2004). Comparing the fact to the literature it can be
recommended to the hospital in the given region that it must not invest in outsourcing activities.
Different activities to outsourcing have been discussed which includes, cleaning services
as it is an important part with respect to the hygiene perspective. There is less immunity in the
patients visiting to the hospital with the aim to get treated of the diseases. Less cleaning in the
hospital campus can attract them towards various communicable diseases. Hence, it is
recommended to outsource the cleaning services so that campus can remain clean and tidy
(Veronica Toffolutti, 2017). However, in contrast to this, it may prove to be expensive for the
hospital based on the views extended by literature review. The reason of not investing in it is that
as per the views of Davis (2010), there are various contracts where contractor was hired to opt
for cleaning services which did not prove to fruitful as low quality of services were provided by
the outsourced company. It ultimately added to the cost of the hospital. Hence, it rose the
dilemma that whether the hospital must opt for outsourced cleaning services or not.
Another important service to be discussed in human resource services. The outsourced
human resource contractor have ability to make better decisions. The responsibility to each staff
member in the health care is high which lead to requirement of people who can recruit
competitive people in the organization (R.L.,1997). There are three important function of HR
services which includes, general employment of work personnel, training of employees. It takes
care of basic functions of the hospital which is drug testing, abilities and skills to treat the patient
etc. The activity may be fruitful as it can help the hospital to recruit competitive employees in the
hospital which can further help in attaining the main objectives as well. However, the literature
review suggests that only few hospitals have the potential to outsource this function as the
services are expensive and can not be afforded by every hospital in the given region. Hence, the
activity may not prove to be cost effective for the organization (Sabry, 2014).
Information technology is the other practice that can be outsourced by the hospital which
can be utilized in micro filming, transcription and information release. However, there is lack of
evidence to the fact that if the hospital is eligible to disclose private data of the clients or not.
Moreover, the objective is not aligned to the financial efficiency, that is, turnover of the
18

company. Hence, the outsourcing activity with respect to information technology may not prove
to be beneficial for the hospital (USAID, 2010). Therefore, based on the suggestion of the
literature review, this activity may not be adopted by hospitals in the given region.
Another important practice discussed in the literature review is with respect to medical
equipment leasing and rent. There is a constant up gradation in the technology where the demand
to the hospital arises with regard to upgrading their technology as well. The cost of medical
instruments and equipment is quite high. Renting them or taking them on lease can help in
reducing the cost of investment (Zarei, Daneshkohan and Arab, 2015). However, the literature
review suggest that there are various disadvantages to the practice such as it is time bounded and
the way that equipment is used. Further, the management of the hospital is also bound to the
contract as well. In contrast to the views of literature review, it may prove to be advantageous
and cost effective for the hospital to opt for rented or leased medical requirements (Rivard and
Aubert, 2015).
Another practice discussed in the literature review is accounting, where the process is
outsourced by the hospital. It helps in decreasing the risk of error, the burden of conducting an
activity can be shifted further able to concentrate on key functions of the hospital (Veronica
Toffolutti, 2017). However, there are some contractors who lacks management and poor review
of books of accounts is done from their side which increases the risk of the hospital. Hence,
activity is not recommended to the hospital of the given region.
Limitation and Further Analysis
This research only analyzes Russian federation as the strongest economy of a post-soviet
sector due to lack of time and resources for further evaluation. Only most common practices of
outsourcing were chosen for evaluation as others are very specified and rooted to location of
their implementation. Furthermore, a deeper modeling of outcomes of implementation is
required for better understanding of effectiveness of recommendation. This could be done by risk
evaluation and statistical analysis of group of hospital within the current setting.
Conclusion
Based on the above report, it can be concluded that there are various services that are
required by the hospital in order to deliver the best to the patients. These are the non core health
care services. The main aim of the research is to review the existing literature with respect to non
core services in the hospital environment towards the private sector. The objective is to find out
19

what sort of practices can be taken into account in order to operate most efficient use of the
available resources within the health care sector (Kongstvedt, 2012). Another objective was to
highlight the zones of possible interest within the hospital budget. It will help the researcher to
give out possible solution with respect to the intervention plan to be adopted in the hospital.
Researcher has used the secondary research method in order to study the topic thoroughly
and draw out a reliable conclusion based on it. Hence, the opinions of various authors have been
read through books, journals, blog posts another online sources. A list of possible practices was
able to be drawn through this method out of which the best possible can be recommended. The
possible practices were then applied to the budget of last year of the hospital is order to deliver
estimated profits for the next year to it. It gave the visualization of possible profits of the
hospital.
The third chapter of the research mentioned by the researcher is literature were the
opinions of different authors are combined together. Further, the topic has been critically
analysed based on the topic being indicated in the objectives of the research. From the research
being conducted it can be inferred that non core activities plays equally important role same as
that of core activities in the health care department. It further focused on different existing
practices of non core activities in hospitals (Rivard and Aubert, 2015). Human resource
management which ensures that competitive health care professionals are hired which can further
help in fulfilling the requirements of the hospital and the patients as well. The activity can
outsources so that the process is conducted in sequential manner. There are various reasons of
outsourcing which have been argued such as recruitment, skills and ability testing, drug testing.
Further, training and compensation details are also discussed by them.
Another practice discovered is cleaning services as it is considered as an important aspect
of the health care services. Moreover, information technology also plays an important role which
can also be outsourced. It includes, micro filming, transcription and information release. Medical
equipment are also taken on rent or lease as they are costly enough to buy them permanently.
Hence, in order to meet the demand of proper diagnosis from the side of the patient, this will act
as an added benefit to the hospital (Low and Chen, 2012). Legal limitations are also discussed to
concrete the understanding of laws related to outsourcing in health care.
The researcher have derived the results from the research conducted. From which it can
be concluded that, the practices discussed in the literature review can be barely adopted as these
20

are not commonly used in certain countries. Further, the common dilemma in health care is
taking cost effective managerial decisions which if proved to be unprofitable for the hospital can
result in heavy losses. Hence, the outsourcing practices such as cleaning, accounting, HR
services etc can be considered as unethical in the health care departments of given region.
However, there are few limitations that have been discussed by the researcher in the
study. The main limitation faced by the scholar is lack of time and finance. Further, the setting of
the research may not be applicable to every hospital leaving a loophole in the research being
conducted. On the study have proved to be effective and applicable to the chosen reason without
any difficulty (Langabeer II and Helton, 2015).
From the research, an overall conclusion can be drawn that, the hospital do not have
appropriate budget that can be used in outsourcing some activities for the hospital. Further, the
given aim of the research which was to review existing literature on outsourcing of non-core
services in hospital environment towards the private sector with an objective to o learn what
kinds of practices could be taken into account for more efficient management of resources within
health care system of the given region (Van Deursen, Buchanan and Duff, 2013). Further, with
another objective that to highlight zones of possible interest within hospital budget of a given
region and compare outcomes of two parts of this research for possible intervention methods to
be chosen and proposed.
21

REFERENCES
Books and Journals
Al-Borie, H. M. and Sheikh Damanhouri, A. M., 2013. Patients' satisfaction of service quality in
Saudi hospitals: a SERVQUAL analysis. International journal of health care quality
assurance, 26(1), pp.20-30.
Allen, S., 2000. Outsourcing Services: The Contract Is Just the Beginning. Business Horizons,
2(43), pp. 25-39.
Antheunis, M. L., Tates, K. and Nieboer, T. E., 2013. Patients’ and health professionals’ use of
social media in health care: motives, barriers and expectations. Patient education and
counseling. 92(3). pp.426-431.
B, Q. J., 1999. Strategic Outsourcing: Leverage Knowledge Capabilities. Sloan Management
Review, 4(40), pp. 9-21.
Basu, S. and et.al., 2012. Comparative performance of private and public healthcare systems in
low-and middle-income countries: a systematic review. PLoS medicine. 9(6).
p.e1001244.
Bloom, N., Propper, C. and Van Reenen, J., 2015. The impact of competition on management
quality: evidence from public hospitals. The Review of Economic Studies, 82(2), pp.457-
489.
Brown, M. P. F. R. L., 2012. Human Resource Outsourcing in Health Care: Strategic, Cost, and
Technical Considerations. Southeren Business Review, pp. 51-60.
Bykadorov, S., 2006. Theoretical basics and evolution of outsourcing development. Journal Of
Economic THeory, Issue 3, pp. 77-91.
Chang, C. S., Chen, S. Y. and Lan, Y. T., 2013. Service quality, trust, and patient satisfaction in
interpersonal-based medical service encounters. BMC health services research, 13(1),
p.22.
Daniel P Lorence, A. S., 2004. Healthcare Information Systems Outsourcing. International
Journal of Information Management, 2(24), pp. 131-145.
Davies, 2010. Fragmented management, hospital contract cleaning and infection control. Policy
& Politics, Issue 3, pp. 445-463.
Drummond, M. F. and et.al., 2015. Methods for the economic evaluation of health care
programmes. Oxford university press.
22

Federal Law 323, about Healthcare, 21.11.2011. Federal Law 323, about Healthcare. Moscow:
s.n.
Global Industry Analytics, 2017. The Global Medical Equipment Rental and Leasing Market,
s.l.: Global Industry Analytics.
Grol, R., Wensing, M., Eccles, M. and Davis, D. eds., 2013.Improving patient care: the
implementation of change in health care. John Wiley & Sons.
Hartmut Egger, P. E., 2003. Outsourcing and skill‐specific employment in a small economy:
Austria after the fall of the Iron Curtain. Oxford Economic Papers, 4(55), pp. 625-643.
Holloway, I. and Galvin, K., 2016. Qualitative research in nursing and healthcare. John Wiley
& Sons.
Jindal A K, G. A. G. V. S. M. A., 2013. Biomedical Waste Disposal: A System analysys.
Medical Journal Armed Forces India, 4(69), pp. 351-356.
Kongstvedt, P. R., 2012. Essentials of managed health care. Jones & Bartlett Publishers.
Langabeer II, J. R. and Helton, J., 2015. Health care operations management. Jones & Bartlett
Publishers.
Larisa Popovich, E. P. S. S. E. R. A. V. B. M., 2011. Russian Federation Health System Review.
Health Systems in Transition, 7(13).
Low, C. and Chen, Y. H., 2012. Criteria for the evaluation of a cloud-based hospital information
system outsourcing provider.Journal of medical systems. 36(6). pp.3543-3553.
Manachemi N, B. J. S. R. B. D. R., 2007. To outsource or not to outsource: Examining the
effects of outsourcing IT functions on financial performance in hospitals. Health Care
Management Rev, 1(32), pp. 46-54.
Marcoz Antonio Feruzzi, M. N. E. S. P., 2011. Reasons for outsourcing services in medium and
large companies. Brazilian Business Review, 4(8), pp. 44-66.
McCarthey, I., 2011. The impact of outsourcing on the transaction costs and boundaries of
manufacturing. International Journal Of Production Economics, 1(88), pp. 61-71.
Ministry Of Fincance of Russian Federation, 2016. 2017 Budget, Moscow: s.n.
Padgett, D., 2012. Qualitative and mixed methods in public health. London, Los Angeles, Calif:
SAGE.
R.L., S., 1997. Business Outsourcing Model More But Less Thrilled With Results. Computer
World, Issue 14.
23

Reiss, B., 2015. Outsourcing. Agency Sales, 45(5), pp. 36-40.
Rivard, S. and Aubert, B. A., 2015. Information technology outsourcing. Routledge.
Roberts, 2001. Managing strategic outsourcing in the healthcare industry. Journal of Healthcare
Management, 46(4), pp. 239-49.
Ruhanita Malaeh, A. A. N. H., 2010. Accounting outsourcing turnback: process and issues.
Strategic Outsourcing: An International Journal, 3(3), pp. 226-245.
Sabry, A., 2014. Factors critical to the success of Six-Sigma quality program and their influence
on performance indicators in some of Lebanese hospitals. Arab Economic and Business
Journal, 9(2), pp.93-114.
Shortliffe, E. H. and Cimino, J. J. eds., 2013. Biomedical informatics: computer applications in
health care and biomedicine. Springer Science & Business Media.
Sofia Kalvemark, A. T. H. M. G. H. P. W. B. A., 2004. Living with conflicts-ethical dilemmas
and moral distress in the health care system. Social Science and Medicine, 6(58), pp.
1075-1084.
USAID, 2010. Emerging Trends in Supply Chain, s.l.: USAID.
Vahit Yigit, D. T. A. K. a. M. Z. Y., 2007. Outsourcing and Its Implications for. J Health Care
Finance, 4(33), pp. 86-92.
Van Deursen, N., Buchanan, W. J. and Duff, A., 2013. Monitoring information security risks
within health care.computers & security. 37. pp.31-45.
Veronica Toffolutti, A. R. M. M. D. S., 2017. Outsourcing cleaning services increases MRSA
incidence: Evidence from 126 english acute trusts. Social Science and Medicine, Issue
174, pp. 64-69.
WHO, 1998. Russian Healthcare System. Healthcare Systems In Transition.
Zarei, E., Daneshkohan, A. and Arab, M., 2015. An Empirical study of the Impact of Service
Quality on patient Satisfaction in private Hospitals, Iran. Global journal of health
science, 7(1), p.1.
Online
The World Bank, 2017. Health expenditure, total (% of GDP). [Online]
Available at <http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS>.
[Accessed July 2017].
24

Asafyev, A., 2016. Outrage and Outsourcing in Russian Healthcare. [Online]
Available at <https://www.opendemocracy.net/od-russia/artur-asafyev/outrage-and-
outsourcing-in-russian-healthcare>. [Accessed July 2017].
25