Managing transcription in the e-revolution: cost considerations for outsourcing vs. in-house

From article published in Executive Healthcare Management Magazine

Everyone understands the importance of accurate transcription that meets quality standards and how important those standards are to quality patient care. With pressure to reduce costs within health care facilities, in-house transcription departments present well-known challenges for health care administrators – recruiting, training, retention difficulties; work flow fluctuations; workspace requirements; technology upgrades and maintenance.

Medical facilities from small to large are struggling with the idea of moving into the e-age of outsourcing transcription to potentially reduce overhead costs or allowing their in-house transcription department to continue to handle the task. It’s a balancing act of weighing the pros and cons. At first glance, it doesn’t seem logical for a facility to outsource its transcription. HIPAA and HITECH regulations, patient confidentiality, and the prospect of not knowing exactly where your dictation is being sent and who is transcribing it are major concerns for facilities today.

You face increasing costs and increasing and/or fluctuations in volume (some providers really are lack luster when it comes to dictating on time). Recruiting, training, retention, and work flow shortages are not only becoming a struggle, but extremely costly. Equipment upgrades, rising annual maintenance costs, and exploding IT issues create even bigger challenges. Finally, capital expenditures for new technology must be budgeted for future implementation (2 or more years), but will that new technology be obsolete before it can provide a return on your investment?

Right about now you’re probably thinking that outsourcing is beginning to look very attractive. When you look at the “fully loaded costs” required of a facility to handle transcription in-house (and keep it running) versus looking at fixed costs, elimination of management and staffing issues, coupled with diminished ongoing technology investments, it becomes apparent why many facilities choose outsourcing vs. keeping transcription on the home front.

But let’s delve into what is actually meant by “fully loaded costs”. Fully loaded costs refer to total expenses (both direct and indirect costs).

When transcription is kept in-house, a facility must:

* Locate a qualified employee
* Train the employee
* Pay employee salary, benefits, taxes, and worker’s compensation insurance
* Pay management and administrative costs
* Provide a physical workplace
* Provide equipment and software (including upgrades and maintenance)
* Provide IT support

Note: A few of the above items are typically overlooked when calculating the true cost of in-house transcription departments.

With outsourcing, the facility must only do 2 things:

* Locate a reputable vendor
* Pay the vendor for the services provided

Comparing the true costs makes a strong case for outsourcing a facility’s transcription, and the cost savings are typically estimated to be in the 25-40% range.

Cost Comparison

According to the Bureau of Labor Statistics, U.S. Department of Labor, News Release 07-0453, March 29, 2007, the national average median salary for an experienced MT is $14.36 an hour. Factor in the national average of approximately 28% of total compensation for insurance benefits (8.2%), legally required benefits (8.0%), paid leave benefits (7.0%), and retirement benefits – (4.4%) per hour worked, and you are looking at a national hourly wage of $18.38, or $38,230.40 per year…per employee.

Recently I had a discussion with one of our clients about the yearly cost savings her facility had saved since outsourcing with our company. Their facility had approximately 25 employees in their transcription department 8+ years ago. The figure she gave me was astounding…right around $650,000 yearly. That’s a savings of over $5 million over a period of 8+ years.

But let’s not take that figure and encrust it in stone just yet. Let’s break it down into a more concise formula you can use to figure your savings.


Overall, the biggest compelling factor for a facility to move to outsourcing is the financial piece. However, other factors that come into play for administrators and supervisors are workforce issues – finding locally qualified MTs and the time involved to train them – and Quality Assurance issues. More often than not, MTSOs have QA standards in place whereas such an avenue is not financially feasible in your standard medical facility. Quality Assurance is vitally important. Good patient care demands accurate medical records. Patient safety, document integrity, and containment of health care costs are the driving factor for renewed efforts by health care compliance agencies and health information managers to scrutinize records for dictation and transcription quality. The AAMT Guidelines relative to Quality Assurance, its current policies, procedures, and standards, as outlined in the AAMT QA Primer, June 2004, pages 3-5, is an excellent resource.

Bottom line, what would quality transcription, alleviation of workforce issues, and an effective Quality Assurance program mean for your facility? Could you assign a dollar figure to those aspects of your day-to-day business? Some providers, and some clients, have come to regard medical transcription as little more than a commodity. They seek the lowest-cost provider, unknowingly sacrificing timeliness and quality for quick, short-term savings. What they should be looking for is real added value achieved through systems integration, client-sensitive delivery options, unmatched data security, and a track record of business continuity. Unfortunately, it is all too common for those health care providers who look only for short-term cost savings to not get what they thought they were paying for.

If a potential client says to me, “I can get this done at X cents per line through ABC,” I will tell them they can certainly find lower line rates than ours, but will probably regret making that decision based on a few cents. I am open and honest with potential clients, and current clients, on exactly what our overhead costs are, and the need to recoup those costs. They understand our cost per line is our bottom line and that there are HIPAA and HITECH compliance issues, technology upgrades and maintenance, and payroll that must be met.


In today’s economy, medical facilities are keeping a close eye on their bottom line. Health care costs across the United States are out of control, and rising, and for CFOs, executives, and managers the result of these rising costs is obvious. Staying abreast of technology and preparing staff to use those new technologies will be the biggest money challenge facing managers and supervisors over the next few years, as well as maintaining a qualified staff of medical language specialists to efficiently and effectively transcribe the voluminous minutes of dictation generated each day at their facility. Outsourcing your facility’s transcription can be more cost effective than maintaining an in-house transcription department, thereby streamlining cash flow back into the facility. And, realistically, at the end of the day, isn’t the true bottom line about quality patient care?