XYZ Hospital is a community hospital that is not part of a larger healthcare system. This acute care hospital has 160 beds and 348 employees. Benefits and employee pay account for 30 percent of the hospital’s total salaries and wages budget. Currently, the HR function is done inhouse, and the chief executive officer, Ms. Jones, is evaluating whether to keep the HR function internally or outsource it.

An outsourcing company that services several large companies in the area has approached Ms. Jones, proposing that it can perform the hospital’s HR function and provide benefits to each employee for a price of 28 percent of the hospital’s total salary budget. As a result, employees would get better health insurance and pension benefits because of the advantages of economies of scale obtained by the business processes of the outsourcing company.

Question

1. What key factors should Ms. Jones address, and what benefits should be evaluated?