Healthcare BPO to India

High costs and obsolete processes are driving US healthcare companies to offshore work. Estimated opportunity: $4.5 billion by 2008 employing about 200,000 people.

Already, over a dozen companies are either consolidating operations or have kicked off pilots in this space. The opportunity: $4.5 billion by 2008 offering employment to about 200,000 people, according to Nasscom. The companies include Apollo Health Street (AHS), iHealthcare, Paramount Healthcare, Hinduja TMT, Ajuba, Affiliated Computer Services, Cognizant Technology Solutions and Vision Healthsource.

The American Healthcare Association estimates the profitability of US hospitals fell from 6.1% six years ago to 2.8% in 2002. Forty per cent of the US hospitals make losses: for every healthcare dollar spent, 21 cents go in administration and 11 cents in fraud due to overstating of expenses. The average margins for publicly traded healthcare firms were 4.4% in 2002. For medical insurance companies, they were a thin 2%. State-owned insurer Medicare had $20 million in liabilities.

So while other BPO work - in banking, telecom, retail, utilities, financial services et al - grew by leaps and bounds, medical transcription wrote its own epitaph. However, thanks to inefficiencies in the $1.4-trillion US healthcare industry, BPO work in healthcare is set to get a new lease of life. And no, it's not medical transcription resurrected, but a whole new range of processes that fetch returns of $16-18 per person per hour at the top end. These include medical billing, disease coding, forms processing and claims adjudication.