Will Indian outsourcers loose out on the coming health care spending wave?

December 3, 2010

The coming health care related outsourcing and IT spending wave in theory could be bonanza for Indian IT services firms and outsourcers alike but will increased concerns over the outsourcing of medical records derail the efforts of Indian firms to grab a significant piece of this market? Much is at stake as starting next year, the US government will begin to dole out billions of dollars to health-care providers who adopt electronic medical records while doctors themselves will also face a federal mandate to upgrade their software as the country switches to a new system of insurance billing codes. In fact and in a recent article in the Wall Street Journal, Pradep Nair, the head of the health-care practice at New Delhi’s HCL Technologies Ltd., referred to the upcoming spending wave as being the next Y2K opportunity.

However, the Wall Street Journal also quickly noted that concerns over the offshore outsourcing of medical records and medical data could derail the efforts of Indian IT services firms and outsourcers from winning big contracts. Specifically, American hospitals continue to cite concerns over security and privacy when it comes to offshore outsourcing. Moreover, the chief information officer of Cedars-Sinai Medical Center in Los Angeles was quoted as saying that designing and installing new medical systems is difficult to do onsite, let alone from offshore, and that 80% to 90% of the work is not the type of commodity coding that can easily be outsourced as an intimate knowledge of a hospital’s terminology and how its doctors and nurses work will be required.

On the other hand, a recent article in the Financial Times noted that the National Health Service (NHS) Shared Business Services, which is jointly owned by Steria and the UK Department for Health, performs front office services locally but much of the administration and data entry work is in fact done in India. The FT then quoted Mark Kobayashi-Hillary, an author, blogger and adviser on globalization, as saying that while tax payer money is in fact paying for people to work in another country, Steria is becoming more efficient and innovative as a result. Hence, the arrangement means that cash is actually returned to the National Health Service (NHS).

Moreover, a recent article in Business Today appropriately entitled “Profiting from Europe’s pain” (as in profiting from Europe’s need to cut costs and control spiraling debt) noted the specific mechanics of the Steria deal with the NHS. Basically, Steria benefits by establishing an in-country presence and together with the NHS, a central body has been formed that autonomously makes decisions on where to locate a center, the number of people to hire and what tasks could be off-shored in order to achieve greater cost savings. And while Sachdev Ramakrishna, Sternia’s Marketing Director, noted that balancing job losses and cost savings can be tricky, they have also returned US$1 million in cost savings to the NHS.

Will Indian outsourcers loose out on the coming health care spending wave
However and whether such arrangements would work in the increasingly politically charged US environment remain questionable. Nevertheless, what is clear is that Indian IT services and outsourcing firms will need to strengthen their onshore presence in the USA if they have any hope of riding the upcoming health care spending wave.


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