Outsourcing opportunity in the Health Care Sector may touch $24 billion over next 4-5 years

It is estimated that there will be a USD 24 billion outsourcing opportunity for the service providers within the next four to five years time. The Indian Information Technology industry expects that the changes in the regulations in the healthcare sector will open up huge opportunities.

Many of the leading service providers in India such as Tata Consultancy Services, Wipro and Infosys are closely watching the changes happening in the regulations in the US Healthcare sector. Estimates made by analysts’ show that the healthcare market in the United States is worth USD 25 trillion. It is projected that the market will be worth USD 4.6 trillion by 2020.

What is urgently required by the healthcare industry is the change of coding systems. The reforms in the regulations necessitate the need to shift the coding system that is used for billing medical procedures from ICD 9 to ICD 10 diagnostic classification. The government of US wants this to be accomplished by October 1, 2013. This alone forms an opportunity of USD 1 billion for the IT service providers. Deloitte says that the changing of code can overtake the Y2K problem, in terms of its impact and cost. The entire system that supports the code should be modified and that involves a herculean task.

Even though many service providers have their presence in the healthcare sector, the contribution of the sector towards revenue generation is minimal. The only player in the IT industry that has benefited significantly is Cognizant. This is as a result of their focus on the healthcare sector. The healthcare sector contributes 27 per cent towards revenue and it increased at a rate of 38 per cent. In the case of TCS, the contribution made by the healthcare sector towards revenue generation was just 5.3 per cent; in the case of Infosys it was 1.8 per cent; Wipro 10 per cent and HCL 8.6 per cent. Many of the leading service providers in India are looking forward to acquire US companies with strong expertise in the healthcare sector. They are specifically looking for companies with USD 50 to 100 million revenue and strong client base.

A recent survey by Technology Holdings observes that there were about 100 contracts in the last 25 months, which amounts to about USD 20 billion. It says that outsourcing in the payer market will increase at a compound annual growth rate of 9 per cent and will amount to USD 15 billion by 2016.

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