Acute Cost and Growth Pressures to Drive Large-Scale BPO and ITO Outsourcing/Offshoring in Healthcare Sector over Next Three to Five Years

July 08, 2008 09:30 AM EDT | BUSINESS WIRE

HOUSTON -- The slumping economy may be slowing deal flow in some sectors, but it is accelerating adoption of outsourcing in the healthcare industry as it struggles to streamline its back-office and ramp up to meet increased demand for services as the U.S. population ages, according to EquaTerra, a leading business advisory firm. In its newly released poll of leading outsourcing service providers on the state of the healthcare outsourcing market, EquaTerra expects these competing macro economic trends to drive large-scale outsourcing and offshoring deals over the next three to five years, especially in business process and information technology outsourcing (BPO and ITO).

Half of the respondents to EquaTerra’s 2Q08 Healthcare BPO/ITO Service Provider Pulse Survey* report demand is up quarter over quarter and 70 percent expect an increase next quarter. The scope of healthcare outsourcing is expanding too as healthcare organizations attempt to gain efficiencies through greater automation, self-service capabilities and improved IT infrastructure and functionality.

Typically, healthcare companies that are currently outsourcing have already reduced labor costs. Now, they want to achieve business process improvements via technology, business process reengineering and implementation of Six Sigma methodologies. As a result, they are prioritizing their outsourcing goals and focusing on functions and processes core to healthcare front and back-office operations. Seventy percent of healthcare services providers polled cited vertical healthcare business service areas, like claims administration and revenue cycle management (RCM) as the top areas of outsourcing demand in the market today.

Outsourcing buying patterns also appear to be changing. There is an emerging trend toward consolidating work sourced to several providers (e.g. claims imaging, data entry and claims processing) to a single, large vendor that can handle the entire claims function. In addition to standard BPO services, the clear expectation from this single-source solution is overall business transformation plus value-added knowledge services, including claims analytics, collections and reserve forecasting.

The survey also indicates more healthcare industry work is moving offshore to both India-based and multinational service providers. IT infrastructure monitoring and support along with RCM were identified as the two functions using the highest levels of offshore talent. Cost reduction continues to be a major impetus, but there’s also a significant shift to more strategic activities, according to 65 percent of the survey participants. As a result, outsourcing buyers are migrating from a contract labor model to longer-term, project-based work and multi-year outsourcing efforts that require greater control over functions and processes. Service providers cited the top two drivers for the increased use of offshore resources as immediate access to expertise and talent (50 percent) and knowledge services (42 percent).

To compete for this upscale work, outsourcing providers are developing more compelling offerings, according to Mark Voytek, healthcare industry practice lead for EquaTerra. “Healthcare companies need tools that support effective fiscal management and IT applications that can automate clinical processes and assist in improving quality, especially reducing medical errors. The low upfront costs associated with outsourcing versus a total-cost-of-ownership model is especially attractive in the current economy.”

Voytek’s thoughts are echoed by an executive from a leading healthcare service provider who says escalating costs and cuts in Medicare and Medicaid payments coupled with the increased demand of an aging population threaten the solvency of many U.S. hospitals. “Sixty percent of U.S. hospitals are already unprofitable and rely on charity and donations for supplemental funding. Cuts in claims payouts will further shrink revenues just as more Americans will utilize health services. The number of hospitals that are highly unprofitable will grow unless they adopt large-scale outsourcing and offshoring to reduce overall cost levels.”

Top-line finds from the 2Q08 Healthcare Service Provider Pulse Survey:

• Outsourcing service providers (82 percent) said the healthcare payer industry exhibits the greatest demand for BPO and ITO services. The healthcare provider market ranked second (73 percent.)
• Costs savings are still paramount, but 75 percent of the service providers polled report buyers are putting greater emphasis on process improvement, innovation and transformation.
• EquaTerra estimates approximately 75 IT and BPO deals were initiated from 2004 through 2007 with a total contract value (TCV) of $50 million. Of these, 75 percent were ITO deals and 25 percent were BPO. To date, healthcare represents less than five percent of total outsourcing deals in the market, highlighting the relative immaturity of the healthcare outsourcing market as compared to other industries like banking, financial services and manufacturing. But the healthcare outsourcing market is expected to grow at close to 10 percent over the next five to seven years, faster than overall market growth of seven to eight percent.

“The use of offshore and global resources in healthcare outsourcing is accelerating,” said Stan Lepeak, managing director of research for EquaTerra. “In fact, deteriorating economic conditions will likely drive more outsourcing in the healthcare market over the next several quarters.”

*About the 2Q08 Healthcare Industry Pulse Survey

EquaTerra recently polled top outsourcing service providers in the healthcare market. Based on these findings and its own direct market experience, the company mapped the level of buyer demand across several sets of emerging BPO and ITO functions and processes specific to the healthcare space. The demand-level ranking is based on a 1 to 10 scale, with 1 equating to low buyer demand, 5.5 to moderate demand and 10 to high levels of demand. Service providers were asked to comment on current demand and projected levels for the balance of 2008. For more details or to obtain a copy of this survey, please contact Stan Lepeak.

About EquaTerra

EquaTerra sourcing advisors help clients achieve sustainable value in their IT and business processes. Our advisors average more than 20 years of industry experience and have supported over 2000 transformation and outsourcing projects across more than 60 countries. Supporting clients throughout the Americas, Europe, Middle East, Africa and Asia Pacific, we have deep functional knowledge in Finance and Accounting, HR, IT, Procurement and other critical business processes. EquaTerra helps clients achieve significant cost savings and process improvement with internal transformation, shared services and outsourcing solutions. For more information, please contact Lee Ann Moore at +1 713.669.9292; leeann.moore@equaterra.com; www.equaterra.com.

Medical Transcription in India: A challenging career option!

Upendra Singh | MyNews.in
1/7/2008, 7:04:10 PM(IST)

Medical Transcription is one of the fastest growing fields in health care business in Western countries, especially in the US where the entire healthcare industry is based on insurance, and detailed medical documents are needed for processing insurance claims. Therefore, the hospitals and doctors avail medical transcription services to cater with the demands of documental records, basically outsourcing the business. In the last few years, India has shown an unprecedented success in this field of medical transcription cashing in on the outsourced business from US and other western countries.

Medical Transcription provides an exciting and challenging job option with an ever expanding knowledge based career. It is the process whereby a medical transcriptionist has to accurately and swiftly transcribe medical records dictated by doctors and their associates comprising of history and physical reports, clinical notes, office visit notes, operative reports, consultation notes, discharge summaries, official letters, psychiatric evaluations, laboratory reports, x-ray and MRI reports and pathology reports. A medical transcriptionist is a person who carries out the process of converting the voice format of medical data into text data.

The data is received in the form of digital data files and voice data files and converted into text format in the process of transcription. There are certain prerequisites to convert those voice files into text documents which basically involve transcription and editing. To ensure maximum accuracy, the editing part of the transcribed files include quality checking, visual proofreading, spelling checks, grammatical corrections, rephrasing to streamline the context, and removal of inconsistencies and illogical content so that the desired accuracy of at least 98% is met before being uploaded back to the clients.

India provides an ideal locale for conducting medical transcription work with a large population of educated English speaking people, a large pool of IT professionals, the internet revolution, and the computer-savvy new generation aided by free market policy. Advancement in technology has tremendously metamorphosed the global economy and work place and the field of medical transcription has undergone tremendous progress because of constant advances in communication and Internet technology. Majority of the work is outsourced from US, but even British and Australian doctors are beginning to consider India as a possible source of getting this work done-quickly and efficiently.

Outsourcing of medical transcription work to India has the direct and immediate advantage of cost reduction, reliability in turnaround time, and total document security. The comparative low cost in India to those of US or other developed countries serves as an encouragement for companies abroad to outsource their work to the Indian Medical Transcription field thereby making India to be one of the top destinations of medical transcription industry. Turnaround time is critical in this industry, and India, because of its advantageous time zone in comparison to America and Europe, holds the advantage of delivering the work the very next working day for them.

India witnessed a boom in medical transcription field a few years back with a plethora of companies and training institutes mushrooming all over the place, but due to lack of training, experience and planning, most of them went into oblivion. Those who augured well with this new concept of business still persist and are providing job opportunities to thousands. The success of the surviving companies is a kind of indication that medical transcription, if handled appropriately, has the capability of creating opportunities and maneuvering the Indian job scenario to an extent.

Transcription services in India range from small, one-person home-based businesses to sophisticated, high-tech IT enabled corporations which employ transcriptionist on well paid pay rolls. In the metros and major cities, many big business names have ventured into this field and are flourishing and expanding day in and day out. Most of the bigger companies prefer to have in-house training programs so as to cater with the demand and curb down the effects of growing attrition rate. Some medical transcription firms even get their work done by employing on-site as well as home-based medical transcription basis.

It is not a cake walk for Indian companies in this field to compete with the medical transcription professionals of the western nations who seem to enjoy all the advantages of language and backdoor environment. Every now and then there is an anti outsourcing voice raised for the work outsourced to India and trying to bring out faults in the work done here. At the same time, Indian industry is pitted against some new developing destinations like China, Philippines, Sri Lanka and others who are eager to fight out with Indian dominance. But still India enjoys an upper hand with its efficient work force and competency which augurs well with the high demanding western world. Ultimately, what matters most is the honest work, truthfulness, and diligence which would win against all odds!