Adding insult to injury: Nationalized health care enriches outsourcing firms

US healthcare reform is boon for India outsourcing companies

By Taylor Barnes Taylor Barnes – Thu Mar 25, 10:26 am ET

Mumbai – With 22 pen strokes, President Obama signed into existence not just a historic healthcare reform law but also monumental piles of paperwork: New member registration forms. More claims. Ever-expanding databases. And on top of that, pressure to cut costs.

The bulge in administrative work may look like a nightmare to American insurance firms and government employees. But to outsourcing executives here in India, it’s heaven-sent. A number of Indian companies are already anticipating an increase in workload thanks to Obama's healthcare law.

The addition of 32 million insured Americans is “very significant” for Indian outsourcers, says Ananda Mukerji, chief executive officer of Firstsource Solutions in Mumbai. Companies like his will see “increased opportunities” as US health insurers and hospitals scramble to reorganize to comply with the new law, he wrote in an email to the Monitor.

This extra work will include processing new enrollments, organizing bigger member databases, processing more claims, providing more support services, and managing more revenue, he says.

In particular, outsourcers can expect to benefit from insurers’ need to minimize administrative costs, Mr. Mukerji says, citing a recent Deloitte Center for Health Solutions study showing that up to 41 percent of the cost of a health plan is administrative.

The US healthcare reform offers a "natural extension" of the back-office outsourcing that Indian companies already specialize in, says Tu Packard, a senior economist with Moody's Economy.com.

Outsourcing comes to America But some services in the US healthcare industry cannot be outsourced beyond America's borders due to regulations. That’s one reason major Indian outsourcing firms have set up shop in the United States. In a twist, America's outsourcers are now outsourcing back to America.

In 2008, Bangalore-based Wipro opened a development center in Atlanta that employs 500 people, mostly Americans, and runs a call center for a US healthcare client. Tata Consultancy Services has set up a similar campus with 300 employees near Cincinnati. Infosys is planning a subsidiary in Dallas that will hire locals and seek US government contracts.

Wipro, one of the world's biggest information technology firms with nearly 100,000 employees worldwide, says the new healthcare law dovetails with two of its focus areas: servicing governments and servicing the healthcare industry. "The healthcare reform should translate to more demand," says Rajiv Shah, Wipro's senior vice president for healthcare.

Wipro plans to double its workforce at the Atlanta office by 2013 and open campuses in other cities, says Suraj Prakash, a vice president at the company. “There will be enough work to be done in the US.”