BPO: What Is It and How Can It Help TPAs?

Business Process Outsourcing, or BPO, is the hiring of external vendors to complete tasks requiring additional expertise, personnel, or both. In their Global Outsourcing Survey 2022, Deloitte defines three types of BPO services:

  • Traditional Outsourcing involves simple, discrete tasks which can be automated to achieve cost reduction.
  • Managed Services Outsourcing and Operate Services Outsourcing offer cost reduction and value-added service in areas like specialized expertise, innovation, technology, and cost optimization.

Across the business spectrum, tasks can range from simple (e.g., generating mailings) to complex (e.g. cybersecurity).

Evolution of BPO

Modern outsourcing began in the 1980s with customer support call centers. However, BPO has evolved and dramatically expanded since then, especially with the arrival of the internet and other technological advancements. McKinsey & Company notes that while BPO was once primarily a strategy to save costs by automating basic tasks, today’s companies outsource not only those tasks but also more sophisticated, customized, and industry-specific functions. The BPO industry generated $241.7 billion globally in 2021 and is projected to reach $512.4 billion globally by 2030.

How BPO Benefits TPAs

Service Expansion

A TPA may decide to pursue business growth by offering additional accounts and services, but not have the operating capital needed to hire additional personnel in support of that effort. By hiring the right BPO partner, the TPA can pursue their growth goals without having to invest in additional staff until justified by the new business.

Staff Supplementation

Another area in which BPO can help TPAs is staff supplementation. Current personnel may be sufficient to meet day-to-day needs, but things like extended leave by a staff member or the high-volume open enrollment period can overwhelm the team. In such cases, hiring the right BPO partner can provide the TPA with the skilled and experienced temporary help they need to meet short-term challenges like these.

Cost Savings

Finally, hiring the right BPO partner can generate significant savings in operating costs. With total compensation averaging $42.48 per hour for the average U.S. civilian employee (Bureau for Labor Statistics), it’s not hard to see just how quickly TPAs can achieve major cost savings by hiring the right BPO partner for certain tasks.

Choosing the Right BPO Partner

When choosing a BPO partner, TPAs should consider several factors, including:

  • Pricing structure – Is it affordable, and are there full and FTE options to simplify budgeting and productivity comparisons?
  • Experience and expertise – Do they have industry-specific expertise, and how much experience do they have?
  • Flexibility – Is the provider flexible? For example, if the TPA changes its administration software platform, can the provider still support the TPA? Or can they downsize or upgrade services as needs change?

The Bottom Line

With the right BPO partner, TPAs can gain the ability to meet operational needs and pursue prudent but ambitious business goals without incurring potentially harmful levels of financial risk. As a result, they may find themselves in a much better position to improve customer service and overcome market challenges while simultaneously reducing costs and increasing revenue.

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