Why outsourcing makes sense for medical device suppliers

Why outsourcing makes sense for medical device suppliers

An aging population depends on products and services necessary to address many of the infirmities associated with advanced age. Considering the number of U.S. citizens reaching retirement age, the need for affordable health care and medical supplies is great. While institutions in the health care industry have taken advantage of establishing a partnership with an outsourcing company to handle medical records and payroll duties, suppliers of medical devices have been slower to adopt the practice. It is important for companies in the industry to recognize the benefits of outsourcing research and data processing to a third-party service provider. Legislation enacted by the Affordable Care Act will have a significant impact on the bottom line of of many medical device makers.

Why do suppliers matter?
The medical device sector represents a $300 billion industry worldwide, according to MedCity News. Moreover, at least 400,000 American workers are employed in the sector and nearly 2 million more positions are affiliated with the supply and support aspect of the industry, Forbes wrote.

However, the vast majority of companies supplying medical devices are categorized as small to medium-sized businesses. Forbes reported 80 percent of these enterprises employ 50 workers or fewer, which makes them vulnerable to changes in regulations, which impact how these companies maintain revenue streams. As a result, many in the industry have already begun outsourcing some of their business operations. In fact, citing a 2011 study conducted by Global Industry Analysts, MedCity News reported the market for medical device outsourcing is predicted to grow to $44.7 billion annually by 2017.

Why is outsourcing attractive?
The number of suppliers partnering with an outsourcing company is likely to rise as a result of provisions included in the ACA. As of Jan. 1, a 2.3 percent excise tax will require medical device manufacturers to pay a significant amount of their revenue to the government. Because of the nature of the industry, a lot of the money generated is canceled out by the need for research and acquiring materials. Therefore, a business that raises $1 million but, because of overhead costs, sees a profit of $100,000 will pay nearly one-quarter of their profits – $23,000 – in excise tax, according to Forbes.

Consequently, these small businesses can take advantage of having an outsourcing company handle research and data analysis. In doing this, companies can better maximize their profits by cutting down on overhead costs.

Written by Jeff De Jesus

Jeff De Jesus

With his exposure to the outsourcing industry since 2003, Jeff was able to share and implement his leadership insights with respect to managing business process accounts, particularly in the healthcare department. Jeff has also taken part in assessing the fundamentals of the company’s operational processes, utilizing his experience as an Operations Manager across different verticals, identifying and executing methods that can improve the quality of workflow in the company. Jeff’s experience is not only limited to the Healthcare solutions as his capability in handling Customer Support is also mirrored in the successes that the company has achieved.

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