Revenue cycle management (RCM) offshoring is a relatively young industry in India. While medical transcription was one of the earliest elements of the RCM services to be offshored, vendors are now gearing up to offer the entire gamut of services. This is one of the key findings in the report "US Healthcare Revenue Cycle Management: Offshoring of Medical Coding and Billing Services " released by ValueNotes this week.

What does RCM involve?

The US Healthcare industry can be divided into two major groups:

• Healthcare providers' market (comprising of Physicians, Hospitals, Clinics and other healthcare institutions)
• Healthcare payers market (comprising of Healthcare insurance companies and Third party administrators)

While the provider segment offers services to the patient, the payer segment handles the patients' insurance and payment transactions. The provider segment handles all the transactions starting from the time a patient is admitted to a hospital to post discharge. The exhibit below lists various processes in the healthcare provider segment. At every stage there are several process that are required to be performed by US medical establishments:

Indian vendor landscape

ValueNotes research shows that there are over 70 to 80 vendors in India providing various revenue cycle management services to US clients. We have classified the Indian vendor landscape as four-tiered based on the different sizes, focus areas and capabilities of vendors. The industry consists of leading vendors like Zavata, Perot, Apollo Health Street and Ajuba (tier I) having over 800 employees, co-existing with small, home run outfits (tier 4) having as few as 5 to 10 employees.

Most vendors currently offer a mix of medical billing, coding and transcription services. While some of the Tier 1 players do offer end-to-end RCM services, others are rapidly building capabilities to do the same. This trend is set to further accelerate in the next 2-3 years.

Going forward…

The size of the US healthcare industry is approximately $2 trillion and the potential for revenue cycle management outsourcing is estimated to be $8 to 10 billion in 2006. The primary drivers for offshoring are an aging population, ever-increasing documentation workload and inadequate workforce within the US. Further, with an increasing level of maturity amongst Indian vendors, offshoring is set to gain huge momentum in the next 2-3 years. As vendors get ready for more action, we estimate that Indian offshore revenues from Revenue Cycle Management services will to grow to USD 410 million by 2011, from USD 125 million in 2006.