Global Healthcare BPO Market dominated by India, double digit growth till 2018

The Global Healthcare Business Process Outsourcing market is expected to continue its double digit growth for five more years as the healthcare companies that include payer, provider and pharmaceutical outsourcing companies have to adopt BPO to reduce costs, focus on improving the core offerings rather than focus on business processes that are support functions and by outsourcing these noncore business processes they can take advantage of skills and expertise of low cost professionals and also innovation provided by BPO service providers. According to a report provided by MarketsandMarkets, a global market research and consulting company, the global healthcare BPO market is estimated to be $92.3 billion in 2013 and is expected to grow at a CAGR of 10.8% from 2013 to 2018, to reach $188.8 billion by 2018. The payer outsourcing segment is categorized into claims processing, HR services, member services/customer care, and finance and accounts segments. The provider outsourcing segment consists of medical billing, medical coding, medical transcription, and finance and accounts segments. The pharmaceutical outsourcing segment consists of clinical research organizations (CROs), contract manufacturing organizations (CMOs), and non-clinical services segments. Indian healthcare BPO providers targeting the provider and payer market aggressively.

United States Healthcare industry is the largest player in this segment and US Healthcare companies outsource significant portion of their business processes to countries like India (largest Healthcare BPO services provider), Philippines and Latin American countries. Obamamcare, HIPPA compliance and ICD 10 coding are the major regulatory changes that are driving the huge Healthcare BPO market globally and Healthcare BPO service providers in India are expected to dominate and acquire most of the contracts from US Healthcare companies. Claims processing, transcription services and medical coding are some of the core business processes that are outsourced and demand for these services is expected to increase significantly in the near future. Indian Healthcare BPO service providers are well equipped, low cost providers with all the infrastructure facilities needed and prepared for the rising demand in this segment and are aggressively bidding for these contracts although the Philippines based healthcare BPO providers are also looking to compete with Indian players, they lack the skills and expertise that is mandatorily required for the healthcare sector like doctors, nurses, medical coders, transcriptionists, etc.

Pharmaceutical outsourcing is also expected to continue its growth as the pharmaceutical companies are struggling with raising costs in manufacturing, R&D, intense competition in the industry and government regulations is forcing the companies to cut prices of drugs. Not only the manufacturing of drugs is being outsourced but also R&D is also being outsourced to countries like India. Contract manufacturing, contract research and with patents expiring generic drug manufacturing is a big business in India. Pharmaceutical companies across the globe are being forced to innovate new drugs constantly to survive in the market. Low cost, talent base in terms of specific skills and expertise, available of infrastructure and government support are key to India’s success in global Healthcare BPO market.

Major Healthcare related acquisitions by Indian IT/BPO Vendors

US Healthcare Reform (Obamacare) – Big opportunity for Indian IT Outsourcing vendors in Healthcare Outsourcing

The US healthcare outsourcing market is currently estimated to be about $20 billion, according to outsourcing advisory firm Everest Group. Indian IT Vendors are targeting major chunk of this business worth billions of dollars in the next few years as US Healthcare Services Providers have to upgrade their systems, software and other infrastructure by January 1, 2014, when President Barack Obama’s landmark legislation Patient Protection and Affordable Care Act, popularly known as Obamacare will come into effect, which would result in United States spending $2.5 trillion. Obamacare seeks to extend insurance to country’s poor, which would extend insurance cover to 32 million Americans and also targets to reduce healthcare costs significantly and one way of reducing costs is outsourcing to countries like India and which will open up projects for Indian IT service providers that will help them in keeping up the revenue, margin and industry growth rates. Healthcare providers in North America which also happens to be the world’s biggest software services market are forced to upgrade existing medical systems by deploying newer software applications and they are outsourcing projects to Indian vendors such as Wipro, Cognizant Technology Solutions Corp., HCL Technologies Ltd, etc.

Work that can be outsourced to Indian IT/BPO Vendors include the maintenance and care of health records, conversion to ICD-10 coding, effective collection, management and use of information within healthcare systems, providing innovative healthcare technologies and applications that will help in delivering effective, efficient and low cost healthcare to the people. Indian Vendors have been providing medical coding and transcription services to US Healthcare providers for some time but the billing generated through medical coding is far less than the billing generated by Health care IT Systems projects. US Healthcare reforms will drive revenue growth for the Indian IT vendors in the coming future may be for next 10 years as the traditional strong vertical of Banking, Financial Services and Insurance vertical which contributes 50% of the revenues for the Indian IT Vendors is facing rough times since past few years and expected to face tough and volatile economic conditions for the next few years.

But the question arises whether Indian IT Outsourcing vendors have the necessary resources in terms of skilled professionals, domain experts, technologies and capabilities to service the US Healthcare providers. As highlighted by Jimit Arora, vice president at Everest Group Indian IT Vendors face a major challenges as they lack understanding of the domain solutions and are not familiar with medical terminology that will have  an impact on the ability to translate that into technological solutions and product offerings. But Indian IT Vendors are overcoming this challenge by acquiring the small medium players in the healthcare segment that offer niche product offerings and possess the necessary skills for the Healthcare outsourcing. All the major Indian IT Vendors TCS, Infosys, Wipro, HCL Tech have been eyeing acquisitions in this space since past three years and BPO vendors like Genpact have acquired companies in Healthcare space like Jawood.  But overall the fact is that there is a significant revenue opportunity worth billions for IT companies because of Obamacare and Indian IT/BPO providers are likely to get 40-50 per cent of this revenue.