Healthcare Outsourcing Trends: Advantages Of Outsourcing Healthcare Compliance

Richard P. Kusserow | October 2014

One of the most significant healthcare outsourcing trends is the movement to outsource activities not directly involved in the core business. A number of studies cite the benefits of outsourcing activities tied to the healthcare compliance program but the two most prevalent benefits are cost saving and expertise of the vendor.

Outsource trends have increased in areas related to the compliance officer and healthcare compliance programs. A key component of healthcare compliance programs that is increasingly being outsourced is the compliance hotline.  A benefit analysis reviewing internal and outsourced hotline programs shows that contracting with a vendor is a cost and quality benefit.  For many, the question is just how far does this outsourcing concept go with regards to healthcare compliance programs and might this include outsourcing the whole program?

Over the last few years, there has been growth in the use of an interim or designated healthcare compliance officer. In most cases, these are outside consultants brought in to operate or manage an organization’s compliance program. An interim compliance officer (ICO), as is implied in the name, is a temporary healthcare compliance officer serving for a period of time while the organization seeks a qualified permanent replacement.  However, there is also growth in healthcare compliance programs to use a Designated Compliance Officers (DCOs) that is in effect outsourcing the compliance program.

The U.S. Department of Health and Human Service Office of Inspector General (OIG) recognized the question of costs and expertise in connection with smaller organizations. The OIG’s compliance program guidance documents state that “[f]or those companies that have limited resources, the compliance function could be outsourced to an expert in compliance.”[1] Further, the OIG in its guidance on a “Compliance Program for Individual Physician and Small Group Practices”[2] suggests that one solution for ensuring compliance in a small entity would be to designate a staff person to serve as a liaison with an outsourced compliance officer. The OIG noted that if the healthcare compliance officer responsibility is outsourced, it would be beneficial for the ICO or DCO to have sufficient interaction with the entity to be able to effectively understand its operations.  Therefore, there is a need for an internal liaison to keep the outside consultant informed of activities and to assist in implementing compliance actions.

The use of a DCO may arise for a variety of reasons but mostly comes from the realization that the organization just does not have the size to warrant having a full time compliance officer and using someone part-time as a secondary duty just does not work.  The decision of compliance outsourcing to recognized experts has a lot of advantages.

  • The organization is not paying the loaded cost of a full-time employee and has a reduced cost of recruiting, supporting full-time compliance staff and benefits.
  • DCOs have knowledge and experience working with executive leadership and boards.
  • DCOs are more efficient and are not subject to a learning curve with respect to compliance.
  • DCOs bring experience and detailed knowledge of federal and state laws/regulations.
  • An outside party shows independence and objectivity without investment in prior decisions and actions.
  • DCOs have experience in dealing with a wide range of compliance issues.
  • Executive-level reports on all compliance functions.
  • Senior executive and shareholder confidence.
  • Accurate compliance budgeting.

If you decide on compliance outsourcing, whether the healthcare compliance officer activities or other areas of healthcare compliance programs it is critical that the party engaged to perform the service is qualified with a wide range of compliance expertise in of healthcare compliance programs development, implementation, management and evaluation. A highly experienced consultant should be more efficient in carrying out the duties on a part-time basis.

The limitations on using a DCO are the size and complexity of an organization.  The larger the organization, the less attractive is the idea of outsourcing the entire program to a DCO. Conversely, the smaller the organizations, the more likely that the DCO concept may be the right answer, although the organization may not necessarily need to engage a full-time DCO.

For larger organizations, where outsourcing is not the answer, there still is the question of whether portions of the healthcare compliance programs could be outsourced, such as compliance hotline, sanction screening and writing policy and procedures.


[1] See  for example Federal Register Volume 63, Number 243

[2] 65 Federal Register 59435

About the Author

Richard P. Kusserow established Strategic Management Services, LLC, after retiring from being the DHHS Inspector General, and has assisted over 3,000 health care organizations and entities in developing, implementing and assessing compliance programs.