I am being asked more and more about the opportunity in India in medical outsourcing. We have to look at two very different activities which are being clubbed under the medical outsourcing term

1. Healthcare outsourcing : This has been the traditional IT/BPO outsourcing model, wherein healthcare companies in the US - Providers & Payors have been outsourcing IT and BPO work like Medical Transcription, Insurance Billing, etc to Indian firms. Wipro made a big splash a few years ago when the announced the outsourcing by Mass General Hospital of their radiology reading to Bangalore.

2. Medical Tourism: Increasingly, there is talk of medical tourism to India, given the high cost of healthcare in the US, Japan and the long waits for treatment in more socialist healthcare countries like UK, Canada and others in mainland Europe. We are seeing two types of companies emerging from India to cater to this market. The packagers - in essence these companies tie-up with hospitals as well as leisure travel providers and can offer a patient, say a heart transplant in Mumbai followed by a 2 week recuperation period in Goa. The other type is the hospitals themselves which offer high quality medical and surgical services.

Will this trend catch on? Are a significant number of people going to travel to India to get these services? What is the entry barrier against similar activities propping up say, in the Caribbean? What is India's competitive advantage?

Let us explore this in some detail

In favor of India:

• For one, most of the developed world has experience with Indian doctors in their own countries and these doctors have on average, been of a very high quality
• Secondly, Indian hospital chains, especially Apollo, Fortis & Max are really stepping up their infrastructure, equipment and talent quality as well as their presence all around the country.
  
• There have been good experiences by patients from all over the world and the cost of surgical services could be as low as 1/10th of that in the US or Japan.
• The Indian government has created a Medical Visit Visa for one year duration, signaling that the bureaucracy will not be an obstacle in this business model
• Thailand has been attracting 1 million plus medical tourists per year, and has been in Medical Tourism for much longer than India.
  

Against India:

• Healthcare is not always a price sensitive decision and patients don't always want to visit a beach after a heart bypass surgery.
  
• The reputation of India is not as a healthcare hub, in fact rich Indians have been traveling outside of India for healthcare for a long time
• Just improving hospitals is not enough, the public infrastructure needs to improve as well
• Patients could have anxiety of their doctor not performing their surgery or being involved in post operative care.
• Patients will not be governed by their country laws in case of problems with their procedures. And problems do happen
• India needs to go up against more established players like Thailand & Malaysia
  

In my judgment, we will see this catch on to some extent for now - but it will be more hype than volume. The true inflection point will be when employers, health insurance companies and/or hospitals in the developed world make India a part of their activities. They need to educate patients, encourage and provide insurance cover for procedures in India.


Here is some more stuff to read:

1. Sekai Nippo Newspaper - Japan
   
2. Outsourcing your Heart - Time Magazine
3. Surgeries, Side Trips ...... - Washington Post
4. Top 5 Hospitals for Medical Tourists
5. Wikipedia on Medical Tourism
   

In my view, the offshore business has a "value add" problem. By that I mean, there is a problem that adequate value is not being added.

In a recent conference where I was a panelist, Rajesh Hukku of iFlex compared the Indian Offshore Model to Bollywood story lines. He said, very accurately, that there were, but a handful of story lines in Bollywood - the lost brothers, the rich girl meets poor boy; the rich boy meets poor girl, etc - and that as soon as any one of them became a successful movie, all the other production houses rushed to create a movie with the same story. He added that the Indian Offshore Model was the same - there were in essence a handful of story lines.

About 10 years ago the offshore model's sales story went like this

• we can do it in India where there are abundant resources,
• we can do it faster taking advantage of the time zone differences and running 2/3 shifts in a 24 hour day,
• we can do it cheaper because of the cost arbitration, and
• we can do it better with the ISO/CMM/6 Sigma certifications.
  

The offshore model's story today is...., you guessed it - almost the same. More services (like BPO) & service lines (QA, etc) have been added, but the fundamental basis remains the same for most companies. While the top 5-6 companies have been able to climb up the value chain either to business consulting or organizing their services vertically, the bulk of the offshore companies are still hawking the same story.

The offshore model has gained tremendous acceptance, very fast and most companies are scrambling to hire fast enough to deliver their projects. One thought hence could be - we are obviously adding some value; why change what is not broken.

This argument will stand the big players in good steed - the TCS, Infosys, Wipro, Cognizant, etc. They have an established base, a critical mass, a repeat clientele from where they make 90% plus of their yearly revenue. But it will not hold good for the small and medium sized companies, as other companies and countries replicate their current "value".

The small and medium companies cannot be content with being a clone of the big players. They need to innovate into untested areas and create their own niches and/or open up new markets.

Where are these opportunities? Let us explore that for a moment.

While the offshore model has been successful in pulling the rug from under CSC, Cambridge Technology, Sapient, (ineffect, forcing them to join them), it has not been able to make a dent in the business models of services companies like Convergys, ADP and others.

Convergys is a leading telecom billing services company, while ADP is predominantly an employer services company. These companies have domain expertise in specific industry segments around which they built proprietary technology around which they wrap their services (think something like Quickbooks). This is a value add driven from Intellectual Property and has more sustainability. It has sustainability beyond cost arbitration, beyond process certifications, beyond hiring resources.

Indian Offshore companies need to acquire or build IP in specific industry segments areas and then wrap their IT and BPO services around this. This will propel the small and medium offshore companies into their own.