RCM outsourcing in Healthcare: Do large deals elude Indian vendors?

Wednesday, 26 March 2008

Mar 08: MedAssets, Inc. (NASDAQ: MDAS) entered a multi-year agreement with Ivinson Memorial Hospital, a 99-bed facility in Laramie, Wyoming to provide revenue cycle management (RCM) tools and services.

Feb 2008: Keane has been awarded RCM implementation with Mount Sinai Hospital of Queens, a 235-bed hospital.

Feb 2008: Siemens signed a deal with Christiana Care Health System, a 1000-bed regional healthcare system in the mid-Atlantic region to improve its RCM initiatives. Other recent RCM contracts won by Siemens include those from:

         BryanLGH Health System, a 600-bed hospital
          Riverside County Regional Medical Center, a 439-bed hospital
          Hamilton Medical Center, a 280-bed hospital
          Wentworth-Douglass Hospital, a 178-bed hospital

While the exact value of the above deals is not known, the bulk of recent deals from prominent and large hospitals have been awarded to US-based RCM vendors.

The Indian vendor community is characterized by relatively tiny scale, and small deal-sizes. This has changed somewhat with the entry of large players like Perot, Apollo, and Zavata.

Some of the prominent contracts during 2006-2008 in the RCM space are given in the table below:

Date	Vendor Name	Client Name	Contract details
Feb 2008	DST Health Solutions	Regional Paramedical Services	DST Health Solutions will provide services that include technology and software for billing and accounts receivable management.
Sep 2007	Globerian	NA	Globerian will offer medical billing and other revenue cycle management services for over 50 physician group practices, in association with another healthcare BPO services provider.
Aug 2007	MedQuist	VHA Texas	MedQuist will provide VHA Texas with remote medical coding services and the requisite coding technology.
July 2007	MedQuist	Catholic Healthcare West	MedQuist will provide remote medical records coding services based on CodeRunner application service provider technology with enhanced coding delivery capabilities.
Nov 2006	Zavata	Major hospitals in West Virginia, Illinois, California and Missouri	Zavata bagged over $80 million contract to provide end-to-end Revenue Cycle Management services to major hospitals in West Virginia, Illinois, California and Missouri.
Sep 2006	Per-Se Technologies	Howard University Hospital	Per-Se Technologies will offer outpatient accounts receivable management services
July 2006	GeBBS Healthcare Solutions	NA	GeBBS signed a contract with US-based provider of Hospital based ARM services to provide back-office services in the accounts receivable management space.
Apr 2006	T?la Sourcing	Leading care management organization in California	The outsourced services include hospital bill processing and will scale up over next several months.
Mar 2006	GeBBS Healthcare Solutions	NA	GeBBS won a medical bill services contract from a US-based healthcare cost containment and reduction services company.

Source: ValueNotes Outsourcing DealTracker

After the large deal signed by India-based Zavata (now part of Apollo Health Street) in November 2006, large contracts from hospitals in the RCM space have been meager for Indian vendors. However, this is not to indicate that this is a future trend.

Healthcare is a major segment in the US that is highly sensitive to data privacy as well as automation. Our research has shown that large hospitals are more comfortable outsourcing to large US-based vendors especially those that have provided the software for the hospital management. These IT vendors (For example: Perot) leverage their relationship to handle other business processes. Indian vendors find it very difficult to crack the 'Large Hospital' market since being a non-US vendor increases the risk perception of a large hospital. As a result, the RCM companies and physicians make up a large chunk of business for Indian vendors.

Further, while most Indian RCM vendors offer a range of services, there are very few that offer end-to-end services. Vendors like Perot, Apollo Health Street have capabilities across the entire provider and payer value chain. These players focus on acquiring large contracts from hospitals and cater to all the outsourcing needs of a hospital by positioning themselves as providers offering end-to-end services in RCM. However RCM vendors of global scale and intent are few and far in between in India. Moreover, requirement of specific domain skill sets has kept large multi-service BPOs at bay from competing in this space.

As the India-based vendors look for large contracts from hospitals and greater client confidence, acquisition of mid-sized RCM companies in the US is a likely way forward. Apart from the mere "marketing presence", the approach of "being close to customer" should help further drive the move. This approach not only enables getting contracts, but is also a great confidence builder for the client that maybe averse to offshoring. Apollo Health Street followed a similar approach, and acquired a medical billing company in the US to complement its capabilities. To be counted amongst leading and trusted vendors in the healthcare space there is a definite need for Indian vendors to build not just scalable delivery but also customer proximity.

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