New Horizons Consulting
The healthcare insurance industry is beginning to attract tremendous attention for offshore business process outsourcing. While the economy remains soft and information technology is taking a backseat, BPO continues to forge ahead. Offshore vendors have developed expertise in various business processes and many are in the process of penetrating this market. Governments of countries such as India, China and Philippines have made policy decisions to promote this industry in order to earn important and much needed foreign exchange, while leveraging the talent pool of skilled English-speaking college graduates.
While the hype in offshore countries has outstripped the interest onshore, many onshore vendors (those vendors who are in the business of providing BPO services through onshore processing centers) as well as end clients have instituted initiatives to explore this option further. Given the nature of the industry including regulatory constraints and conservative business practices, offshore BPO will witness a slow but steady adoption rate. This trend can also be attributed to the newness of the concept and to clients taking time to educate themselves and conduct their own due diligence on the business imperatives involved.
2002 in Review
The year 2002 saw the emergence of offshore BPO in this industry. Fueled by the success that Aetna has had in moving their claims adjudication process to India, many other organizations want to trod the same path. Another HMO out of Florida, Wellcare has also employed this strategy to lower cost and increase flexibility. Other large payors moving in this direction include Wellpoint, Coventry Health, United Healthcare, Horizon BCBS, & BCBS of Michigan
Many payors and onshore vendors have embarked on this route by outsourcing those processes which are lower on the value chain (Eg. Claims Data Entry) to determine the dynamics involved in offshore outsourcing as well as validate true benefits and catch hidden costs. This has also been a boon for offshore vendors as the capabilities needed for these low end processes are not very difficult to cultivate.
However, the most significant development in 2002 has been the decision by companies such as CSC, EDS, ACS and Perot Systems, to start the process of migrating business processes offshore, on behalf of their clients. Having already experienced success in offshore IT outsourcing these organizations have been the early adopters of this concept. The other notable fact has been the foray by Progeon (subsidiary of Infosys), Nipuna (subsidiary of Satyam), Spectramind (subsidiary of Wipro) and Intellinet (a joint venture between TCS & HDFC) to penetrate this niche. The advent of the big 4 Indian IT & BPO vendors into this segment clearly demonstrates the latent potential and the opportunity for offshore BPO.
2003 and Looking Ahead
2003 will be an exciting year for those following the industry and participating in it. While 2002 has set the tone and laid the foundation, 2003 is likely to produce more success stories as other onshore vendors as well as payors reap the benefits of going offshore. The greater part of 2003 will also be spent in the actual process of migrating processes offshore and smoothening out the bumps in the road.
While the larger onshore vendors have already taken steps to establish a presence offshore, 2003 will see other players in the secondary market follow suit. The majority of the activity is likely to be dominated by the secondary market (comprised of the onshore vendors and third party administrators or TPAs), however, payors too will take steps in this direction.
Many offshore vendors are currently in the process of formalizing their BPO strategy. Most are in the process of identifying industries / verticals that they want to target and also figure out service lines (call center, data entry, revenue recovery, etc.) that they want to focus on. The other aspect that they will plan towards is building the necessary infrastructure and developing the required domain expertise if they have not already done so. The criticality of building necessary domain expertise to establish confidence and credibility with clients cannot be overemphasized.