4 Steps to Smarter Outsourcing: Moving Beyond Offshore vs. Onshore
A practical framework for healthcare leaders navigating outsourcing, AI, and the shift from location-based decisions to outcome-based delivery.
By Donna Reed, Chief Growth Officer, Catalyst Solutions
For years, healthcare payers have framed workforce strategy around a simple question: Should we offshore or onshore? It’s a familiar debate, and increasingly, the wrong one.
Today’s operating environment is more complex. Leaders are balancing regulatory constraints, rising member expectations, persistent talent shortages, and rapid advances in AI. In that context, reducing the decision to geography alone oversimplifies what is fundamentally a multidimensional problem.
The real question is no longer where work should live. It’s how work should get done. Leading payer organizations are taking a more structured approach; one that moves beyond location and focuses on outcomes. Instead of defaulting to offshore vs. onshore, they are applying a four-step framework:
What role should outsourcing play in your operating model, and who will own the vendor partner relationship?
Can you outsource, given regulatory and operational constraints?
How should technology be integrated with human delivery and are there any regulatory implications?
What is the right combination of onshore, offshore, and hybrid delivery, and what operational and technical integration points are required?
This shift from a binary decision to a strategic framework is redefining how payers think about workforce design.
The Limits of the Offshore vs. Onshore Debate
Historically, offshoring has been driven by cost efficiency, while onshoring has been associated with quality, control, and customer experience. That binary framework made sense when labor arbitrage was the primary lever available. But it breaks down under modern conditions.
Payers now face:
Product-specific regulatory restrictions that limit where work can be performed
Heightened sensitivity around member experience, particularly in Medicare populations
Operational complexity that spans multiple lines of business and geographies
Technology capabilities that can augment, or sometimes replace, human labor altogether
In practice, organizations that treat offshoring as a simple cost play often make reactive decisions, typically in response to backlogs, staffing shortages, or seasonal spikes. The result is rarely optimal and often introduces new risks around quality and consistency.
A more effective approach starts by reframing the problem entirely.
Step 1: Define the Role of Outsourcing in Your Operating Model
Before evaluating location, organizations must first clarify how outsourcing fits into their overall operating strategy. The question is no longer whether to outsource, but how to use it effectively. Payers typically turn to outsourcing to scale capacity, improve cost efficiency, access specialized capabilities, and address ongoing talent shortages. Increasingly, it also serves as a pathway to accelerate access to technology, including AI-enabled solutions. In this context, outsourcing is not simply a labor decision, but a capability strategy. The most effective models integrate outsourcing and technology, leveraging partners who can deliver operational scale alongside embedded innovation. This approach ensures outsourcing delivers measurable outcomes (balancing efficiency, experience, and long-term flexibility), rather than labor alone.
Step 2: Can You Outsource? Understanding Real Constraints
Even when outsourcing is desirable, it is not always feasible. Healthcare payers operate within a complex regulatory environment. Certain products, such as Medicare Advantage and Medicaid, may impose restrictions on where specific functions can be performed. Additionally, state-level sensitivities and attestation requirements can further limit offshore options.
A disciplined strategy accounts for these limitations early, ensuring that decisions are grounded in operational reality rather than assumptions.
Step 3: Integrate Technology with Human Delivery
One of the most significant shifts in outsourcing today is the role of technology, not as a replacement for human delivery, but as a force multiplier. Historically, outsourcing decisions have been centered on labor: how many resources are needed, where they are located, and what they cost. That model is rapidly evolving.
Today, the more relevant question is how to combine technology and human expertise to deliver better outcomes. While AI and automation are already reshaping how work gets done, technology doesn’t eliminate the need for people; it changes how they contribute. Routine, repeatable tasks can be handled more efficiently through automation, allowing human resources to focus on higher-value activities that require judgment, empathy, and problem-solving.
This is where modern outsourcing models are differentiating themselves. The most effective partners don’t simply provide labor; they deliver integrated solutions that combine process expertise, technology, and talent.
The question is no longer whether to use people or technology; it’s how to orchestrate both effectively. Organizations that embrace this approach move beyond traditional outsourcing and toward a more scalable, adaptable operating model.
Step 4: Defining the Right-Shore Model
Once organizations determine that outsourcing is appropriate—and feasible—the question of location becomes relevant. But even here, the answer is rarely absolute.
Instead of choosing between offshore and onshore, leading organizations are adopting a right-shoring approach: aligning the location of work to the specific needs of the business.
Offshore delivery can offer significant cost advantages, access to large and scalable talent pools, and a high degree of operational flexibility, making it an attractive option for organizations looking to expand capacity efficiently. At the same time, it demands a higher level of discipline, including strong process definition, robust quality oversight, and deliberate attention to communication dynamics and customer experience to ensure outcomes remain consistent and aligned with business and member expectations.
Onshore delivery is often favored for work that involves high-touch interactions (particularly direct engagement with members), situations where communication clarity and cultural alignment are critical, and scenarios that benefit from faster onboarding and closer day-to-day collaboration. While these advantages can support stronger experience and control, they typically come with a higher cost structure and, in some markets, more limited access to available talent.
Hybrid delivery models are emerging as the standard approach, with many payers combining onshore and offshore capabilities to create more flexible and resilient operating models. By distributing work across geographies, organizations can extend operating hours through follow-the-sun coverage, build redundancy that reduces dependency on any single location, and better absorb peak volumes, such as those seen during open enrollment, without overburdening one workforce. As a result, hybrid models move the conversation beyond pure cost optimization and toward intentional operational design, enabling a more balanced focus on efficiency, experience, and continuity.
What Actually Determines Success (and Failure)
Regardless of the chosen model, several factors consistently determine outcomes. These are often overlooked in early-stage decision-making but become critical in execution.
Process Maturity
Outsourcing does not fix broken processes; it exposes them. Organizations that lack clear, well-documented workflows often struggle when transitioning work externally.
Institutional knowledge must be translated into repeatable, structured processes. Without that foundation, performance and quality will suffer.
Quality Management
Quality challenges are one of the most common issues in outsourced environments, particularly offshore. Success requires clearly defined performance metrics, continuous monitoring and feedback, and strong governance and issue resolution mechanisms. These disciplines are necessary in any operating model but become more critical as distance increases.
Access to Talent
In some cases, outsourcing is driven less by cost and more by necessity. Persistent hiring challenges, high turnover, and competitive labor markets can make it difficult to sustain operations internally. Global delivery models provide access to broader talent pools, helping organizations stabilize and scale.
Experience Sensitivity
Not all interactions are equal. Member-facing functions, especially in populations such as Medicare, often require a higher degree of sensitivity and clarity. Provider-facing or back-office functions may offer more flexibility in how and where work is performed. Understanding these distinctions is essential to designing an effective model.
Operational Commitment
Outsourcing, particularly offshore, is not a “set it and forget it” solution. It requires ongoing engagement, willingness to operate across time zones, and active participation in governance and communication. Organizations that underestimate this commitment often encounter challenges in alignment and performance.
AI Is Changing the Rules
As AI capabilities continue to mature, many of the traditional barriers associated with offshore delivery are beginning to diminish. Technologies now exist that can neutralize accents in real time, enhance communication clarity, and automate routine interactions.
At the same time, AI is enabling new commercial models that shift away from paying for headcount toward paying for outcomes. This evolution does not eliminate outsourcing, but it fundamentally changes how outsourcing is structured and delivered.
From Location-Based to Outcome-Based Thinking
The most important shift underway is not geographic; it’s conceptual.
Historically, organizations have focused on inputs such as number of resources, hours worked, or cost per FTE. Increasingly, the focus is moving toward outcomes like quality andaccuracy; speed and efficiency; and member and provider experience. In this model, location becomes just one variable among many, not the defining factor.
The Takeaway: Design for Outcomes, Not Geography
The shift reshaping workforce strategy is not about geography; it’s about intent. As payers move beyond measuring inputs like cost and headcount, outsourcing decisions are increasingly guided by outcomes like quality, speed, resilience, access to technological advances and experience. Leading payers are stepping back to clarify the role of external partners, recognize where real constraints exist, and determine how technology can reshape delivery before settling on location. The result is less about choosing onshore or offshore, and more about designing an operating model that aligns people, processes, and technology to the outcomes that matter most.
