Questions Two
According to Salmon (2008), in the past recent years, outsourcing has been increasing in America. Many American businesses outsource various jobs to countries like India, Russia, China as well as other foreign countries. Healthcare services were one of the sectors that appeared to be cushioned against such forms of competition from the fact that health care services are provided in the country where the services are required. However, this trend has since changed as medical tourism is on the increase and health care providers are finding it cheaper to outsource some medical services such as MRI to countries like India. This situation begs the question as to whether such forms of outsourcing are good or bad for the economy.
Boyd, McGrath and Maa (2011) concur that, as with other types of outsourcing, thousands of American jobs are lost overseas. When a health care provider opts to seek services from other countries; services that could be provided within the country, it effectively leads to less demand for local medical practitioners, in this case, the radiologists. This trend has a negative impact on American business. Taking the example of the MRI services, once this service is outsourced to countries like India, the radiologist in America will lose his job because it is much cheaper for the healthcare provider to outsource than contract the services of local radiologists. The implication is that the radiologist might be forced to look for alternative employment in which case, it will be difficult to find a comparable job.
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Consequently, the economy will suffer in some ways. Workers may find other jobs that pay less income, thus directly affecting their economic status. They won’t be able to maintain their current standard of living and might end up losing most of their assets and even go bankrupt. This will not only affect the individual but the whole national economy altogether. Considering that there is a shortage of radiologists in America, it means that their population is very small and this might not affect the whole economy. However, more and more medical services are outsourced to offshore countries, entailing that many medical practitioners might end up being affected and this would translate to the whole economy. If this trend continues and spread to other sectors, the workforce, medical services, welfare, and employment will be negatively affected (Boyd, McGrath & Maa, 2011).
Tanzil and Shaikh (2014) add that, there is also the question of a reputation for the healthcare providing institutions that outsource their services from foreign countries. This brings in the issue of service delivery. Even though it is cheaper for them to seek offshore services, the quality of such services might be sub-standard as compared to those who rely on local services. As such, bad customer service may arise leading to clients avoiding to seek treatment from hospitals that outsource their health care services to foreign countries because of distrust.
According to Daft, Murphy and Willmott (2010), outsourcing has a negative impact on US business leading to high unemployment, loss of competitive advantage as well as income. Regarding employment, as companies contract offshore professionals to do services because they end up paying them much less than they would otherwise pay to the local professionals, they contribute to unemployment. This is because they transfer thousands of services to foreign countries leaving Americans with no jobs, especially the semi-skilled and skilled workers. This trend can lead to higher poverty levels, resulting in reduced consumer expenditure and thus fewer tax revenues. Cooper, Vafadari and Hieda (2015) concurs that outsourcing may not always lead to cost savings as there are various other costs involved for instance the transfer costs. As such, the loss to the economy as a result of job losses cannot be recovered through cost savings made by those companies that seek to outsource their services to foreign countries. In the end, there is a net loss to the economy. Due to innovation, America became an economic powerhouse. However, since companies want to cut on costs, they are sending jobs overseas. Consequently, innovation will no longer lead to the social benefits that it has been producing because, Research & Development that creates it has drastically reduced because it is being outsourced to other countries.
The extent to which outsourcing will negatively or positively affect the American economy, in the long run, is not yet known. A contrary opinion is that it may indeed be beneficial to the economy. As healthcare providers outsource some medical services to countries like India where they are much cheaper, it becomes possible to cut down on their labor costs which will enable them to provide health services at much less expensive rates and be able to offer higher dividends to shareholders. They will also be able to concentrate on their core competencies so that they can deliver higher quality services and allow for greater productivity (Cooper, Vafadari & Hieda, 2015)
Question Three
According to Noree (2015), as much as outsourcing may be appealing to health care providers, certain limitations would prevent them from pursuing it. In seeking offshore services, there is the need to incur various transfer costs to access the services. Outsourcing procedures for offshore companies require IT services which might be costly to the extent that it outweighs the savings made from cheaper services outside. Ferrante-Wallace (2013) points out that i t would then mean that outsourcing is no longer feasible since additional costs are higher than savings made. It may, in the end, be more economical for health care providers to seek local professionals to offer the same services. Also, the skilled workers in the foreign countries may be able to provide the same services but not to the liking of the American people.
Countries have different cultures which distinguish them regarding what they prefer and what they don't (Gupta 2008). As a result, these foreign services may lead to customer dissatisfaction and drive them away from those health facilities known to use outsourced services. The healthcare providers will thus have to analyze such issues very carefully and may end up seeking local services if they anticipate that outsourcing could reduce customer satisfaction and thus jeopardize customer relations. The other obstacle is that medical problems that are present in the American population may not be witnessed in the Indian population, for instance, where services are being outsourced from. As such, for example with the MRI services, the radiologist in India may not be able to interpret a problem because they do not have experience with some cases that may be rare in their country but common to America. In this case, only an American radiologist may be in a position to make such interpretations, and the health care provider will be left with no other option other than to contract local services. Again, the specialists in the offshore country may not possess the expertise required for a particular illness. Therefore, health care providers may only outsource those services that the foreign doctors are well acquainted with and not all services, so that some services must still be sourced locally (Ferrante-Wallace, 2013) .
While outsourcing, the primary objective is to cut down on costs (Gupta, 2008). The hospital may lack the justification for outsourcing services because at the end of the day, it may be inconvenient, less efficient and not make any financial sense. There is also the issue of management. Since the services are being provided from outside, it does not have direct control over service delivery. In the end, outsourcing may not meet the company's financial objectives, and the affected managers will blame the outsourcing vendor. On the other hand, the company can reach its financial goals, but the vendor might still have some complaints. As a result, it might lead to a lose-lose situation for both parties and would be better for the company to contract local service providers.
Every organization has its own culture that defines its values and operations that may not promote outsourcing as it favors in-house employees over outsourced employees (Culyer, 2014). The outsourced vendor may not deliver as per the company requirements. Some hospital stakeholders may have negative reactions to outsourcing due to its impacts on them, and the management needs to know what to do in such situations. If the hospital leadership does not have the necessary skills to manage to outsource while still maintaining control and consistency within the organization, then this could pose a serious barrier to outsourcing.
According to Samli (2017), there are specific features of outsourcing that may present obstacles to a company, making its operations difficult. He elaborates that many outsourcing contracts suffer "suicide by change order." Also, the senior leadership will not have a clear understanding of outsourced operations, and this will harm the company. Again, most of the outsourced vendors may not be aware of all the costs involved and would thus incur several unexpected expenses leading to blame games. Many of the outsourcing firms may not have the capacity to provide these services and would, therefore, overstretch their resources, leading to poor quality services. Customers would also prefer a flexible and innovative partner that they may not get through outsourcing. It may also lead to motivational issues for employees. Once an organization seeks to outsource its services to an outside vendor, it may be forced to terminate employment for some of its employees. The remaining ones would lack the morale to perform their work as they are not sure if they will remain in employment in the near future.
In conclusion, in the short-run, it may be beneficial for healthcare providers to outsource medical services to offshore vendors but in the long run, it may have a serious negative impact on the American economy, as more jobs are lost to foreign countries. Customers will be less loyal to health care providers as customer service, and service quality reduces. If this trend continues, the economy will face a downturn. Outsourcing is also not without its limitations. Such obstacles may pose serious barriers that could discourage companies from pursuing this business strategy as the costs may outweigh the expected benefits.
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