Nasscom pegs IT spending for the US healthcare market at $15 billion, while Gartner estimates range between $20 and $40 billion. Frost and Sullivan says that US companies in this segment spent more than $4.2 billion on outsourcing IT in 2002 and are projected to spend more than $5.2 billion by 2006.

While Indian companies have made some inroads into the US healthcare market, companies in this segment have traditionally been not too keen on outsourcing IT requirements, especially to offshore locations. This explains why IBM Global Services, EDC or Perot Systems in the US are the largest outsourcing providers for computerized physician order entry (CPOE)—that help reduce medical errors—though many Indian firms also have CPOE expertise. Nevertheless Indian software majors and now BPO companies have been focusing on this segment with considerable success.

Today healthcare contributes between 10% to 25% of the total revenues for most large Indian software companies.

Need for IT Outsourcing
The anticipated rise in IT spending and subsequently outsourcing can be attributed to a number of factors. Globally, the healthcare sector comprises payer organizations like health maintenance firms, health insurance companies, employers, care delivery organizations like hospitals and physician groups and governmental health organizations.

However, this sector is highly fragmented—in the US alone, there are over 1,500 payer organizations, over 250,000 providers and over 700 government health agencies.

In addition, even the nature of IT spending in this sector is highly discretionary—a majority of the healthcare organizations do not have a CTO/CIO or a centralized purchase department. This has resulted in the absence of segment-wise uniform applications, where vendors have products targeted at specific sub-segments. This has resulted in disparate IT systems, where solutions have been built on a piece-meal basis and from different vendors.

Explains J Rajagopal, director, Global Life Sciences & Healthcare, TCS, "The fallout of this highly fragmented solutions from a multitude of vendors compounded with a complex insurance driven health system best exemplified in the US, has led to the demand for increased IT adoption." Most healthcare organizations are also looking at ways to cut down on costs by increasing efficiency and getting legacy applications to interface with new ones.

The main issue facing the US healthcare system today is the increasing cost of providing healthcare to its citizens, compounded by the vast numbers of ‘baby boomers’ growing older thus requiring more and more care.

Healthcare insurers are now also introducing new ideas such as pharmacy benefit management and disease management programs among others. The providers are pressurized by the payers into following streamlined processes which focuses on preventive care and standardized care with a view to reduce healthcare costs. These programs will heavily depend on the use of IT to provide real time information access and transcend the boundaries of physical distances. Manpower shortage, especially in nursing, and the need to get more done with fewer resources are other major drivers behind the outsourcing push.

BK Kulkarni, DGM-Hospital Information Systems, Siemens Information Systems (SISL) lists down the most important factors that would drive outsourcing by the US healthcare IT market in future.

These would include, initiatives to integrate disparate systems; adopt medical codes and conversion to latest versions (i.e. ICD 10); standardize the structures of data collection and storage with respect to electronic patient records, undertaken by the ‘Institute of Medicine’) and finally, establish real-time data flows among all industry stakeholders.

Success Stories
There are already a few successful outsourcing stories—one is the collaboration between IBM, NYU Medical and Mt. Sinai Hospital; another is the partnership between New York-Presbyterian and GE Medical.

To take advantage of the opportunities offered by the global healthcare market, Indian IT vendors should be focusing on providing integrated solutions, solutions with workflow optimization built in, solutions addressing regulatory requirements and standards among others. At present, at least 40 Indian tech firms like Covansys, Silverline, Cognizant, vMoksha, Kshema, Infosys, SISL, Mascot, Wipro, TCS and others have the know-how to grab a slice of the healthcare pie in the developed markets.

Indian IT companies, with their emerging IT skills, can offer US healthcare providers significant savings in certain areas. One of these, believes Dr Praveen Soti, consultant, healthcare practice, Domain Competency Group, Infosys, would be administrative billing practices and improved clinical treatment services through the introduction of expert information systems, computer-based patient records and other advanced technological solutions.

The other would be leading technology developments such as computer-based patient records, data warehousing, document imaging, Internet solutions, expert information systems and tele-medicine. A third, Kulkarni feels, would be clinical system management, which requires timely information availability, accuracy of data and synchronization of activities, and facilitating the making and implementation of life-saving decisions.

For Indian software players catering to the global healthcare market the key focus areas include citizens electronic health records, CPOE, data security mechanisms, data warehousing and data mining, artificial intelligence, point of care solutions besides HIPPA and HL7 (Health Level 7) compliance.

However, the dynamics of the healthcare industry calls for the Indian software vendors to understand a few specific aspects particular to it. The first would be to establish a long-term business strategy with the healthcare provider. Unlike other segments such as CRM, enterprise applications and BPO, the healthcare software sector is not a fast buck revenue stream. Companies need to prepare for a long haul as pharmaceutical, diagnostic, medical or healthcare providers are extremely cautious about outsourcing critical requirements to third party companies, cautions Kulkarni. The sales and marketing team needs to work in close tandem with local partners. A vertical-oriented marketing team will help the company to speed up the sales process.

Another prudent strategy for Indian software companies would be to partner with local US firms. Though the Indian player might have all the software expertise, this would help to understand complicated regulations and standards compliance issues better. One successful example is Covansys partnering with US-based Qurom Health Resources to explore HIPPA market whereby it offers services to Qurom’s 300 odd hospital clients. This partnership strategy has enabled Covansys to complete more than 40 engagements last year.

Even Wipro has a network of relations with global leaders like GE Medical Systems, Beckman Coulter, Agilent, Fujinon and Cerner. Also, the Wipro Biomed business is being transferred into Wipro Healthcare and Life Science, to leverage the existing strong relationship with leading manufacturers of medical and life science equipment. The new business would also leverage the customer relationship with the hospitals of Wipro GE Medical Systems, a JV between Wipro and GE. But, perhaps the most crucial aspect for Indian companies is to understand compliance with different standards and regulations.

Regulatory Conundrum
Regulatory compliance now plays a key role in the global market. The foreign developed markets are now attempting to put in place standards governing both the quality as well as the delivery of care. Organizations such as JCAHO (Joint Commission on Accreditation of Healthcare Organizations) measure ‘Providers’ against standards, set by health care professionals. Medical Insurance-driven HIPAA compliance provides legal acceptance of electronic records and electronic signatures in the US. HL7 provides the much needed industry standard for inter-system communication for hospital management systems. Similarly standards such as ICD, CPT, SNOMED have helped in ensuring medical coding standardization.

To meet regulatory compliance, Indian companies need to get their employees certified on industry processes. Participation in industry work groups and forums that are engaged in preparation and perpetuation of these standards will facilitate quicker implementation of these standards within the company. At present, though many of the software players are exploring the opportunities available under the HIPAA program, very few have been able to execute HIPAA projects. But, compliance with HIPPA guidelines is statutory and non-compliance would draw civil and criminal penalties.

Indian companies are attempting to address the HIPPA business opportunity through services covering the three phases of compliance. These include training and education services to build awareness among various stakeholders. The next set of services include:

Operational and technical assessment services: This consists of review of existing business processes and systems to identify areas affected by HIPAA standards, risks of non-compliance, impacts on operational and business performance, operational changes for compliance and cost of implementing changes.

Privacy assessment services: This comprises of review of all areas of operations and processes to identify privacy-related risks associated with non-compliance to HIPAA.

Security assessment services: This consists of evaluation of a client’s systems and policies to ensure they appropriately protect health information, in accordance with HIPAA requirements and industry best practices.

To push implementation, companies will need to be well-versed in services like information assurance services (develop a strategy for maintaining the confidentiality and security of healthcare data); e-commerce management systems (development of a clearing house infrastructure that would route all e-transactions in HIPAA-compliant formats); and enterprise application integration services (integration of existing systems and applications to process HIPAA-compliant formats).

Implementation would also include code remediation services (to meet HIPPA requirements) and system replacement services (moving away from legacy systems). Indian IT companies are in the initial stages of addressing the HIPPA market. Infosys is planning to offer services on all aspects of HIPPA, besides building capabilities by recruiting people with domain expertise. Wipro has established a centre of excellence for HIPPA that evaluates tools and technologies related to HIPPA, mentors projects, executes proof of concept projects, trains software engineers and refines HIPPA compliance methodologies. Satyam has established a new division, recruiting about 150 professionals to address the HIPPA business.

Although the potential is huge, there are many barriers. Given the backlash outcry and the conservative nature of this industry, Indian companies will have to re-double their efforts to leverage the benefits of outsourcing.

RAJNEESH DE in Mumbai

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