With $16bn deals, US health reforms can energise software companies

Software and outsourcing firms are expected to reap contracts worth $10-16 billion down the road, thanks to the US healthcare reforms announced by President Barack Obama in 2010.

Indian firms are expected to bag half of these opportunities by 2015, by way of healthcare consumerism, care management, International Classification of Diseases (ICD)-10 transformation and electronic health record implementations across health insurance and healthcare.

According to the recent mandate passed by the US Centre for Medicare and Medicaid Services, coding system for billing medical procedures has to move from the WHO’s ICD-9 to ICD-10 by October 1, 2013. Coders in India are grabbing this opportunity with both hands.

According to Deepali Sathe, project manager at ValueNotes, a business research and consulting firm, vendors in India anticipate a massive increase in demand for coders.

“There is a lot of training involved. It is not just the number of coders that is likely to fall short, the ICD-9 to ICD-10 transaction will take up the actual coding volume demand significantly, from 18,000 codes to over 100,000 codes,” she said.

Estimates show there is a shortage of around 30% of medical coders in the US vis-a-vis the demand. Hence, the shortage, coupled with the time and effort required to train a coder in ICD-10, presents a significant opportunity to Indian BPO service providers, who employ young and talented life sciences graduates as part of the medical coding workforce, to enable this transition.

HCL Technologies, India’s fifth largest IT outsourcer, terms these reforms as a great opportunity. 

It is a major challenge to map the codes accurately, given the complexities brought about by the newly introduced codes. Thus, this recent healthcare reform is arguably one of the biggest opportunities for the Indian IT services industry in the US healthcare market,” said a spokesperson of HCL. Even Wipro has embarked on an initiative to create a team of 300-400 competent ICD-10 coders.

Viju K George and Amita Sharma, analysts with JP Morgan, said in a recent note that healthcare as a vertical has never been a big opportunity as it is now, and could potentially compensate the likely long-term decline in spending rates in the financial segment.

Infosys and Wipro are at a relatively early stage in healthcare IT practice though both have started to make investments in this vertical. With 26% of healthcare IT revenues, Cognizant has an almost uncontested leadership position. It also stands tenth among 11 healthcare IT players with over $1 billion in revenues.

In healthcare insurance, Indian IT players expect to start to develop, manage and administer policies. Also, hospitals and physicians constitute a $28-billion opportunity that has been traditionally out-of-bounds for Indian IT firm. In fact, even Accenture has a relatively limited presence in this space. But thanks to cloud computing and digitisation, this segment is more accessible now, but it is not a cakewalk yet.

The JP Morgan report says that Indian companies will have to compete with a wider array of local healthcare solution providers in the US and Europe. They need to provide solutions as a platform that is particularly suited to the needs of smaller hospitals.