Feb 2012: The healthcare industry is struggling to cope with challenges. Development and innovation in technology, regulatory changes, new diseases, and a growing population, are all impacting the consumption of healthcare. Though healthcare is expensive, consumption has not reduced. However, the need to curtail costs to maintain affordability is being felt like never before.


Research from HfS Research (the leading research analyst firm focused on outsourcing and shared services strategies), and co-authored by ValueNotes (a leading provider of business research), examines the impact of regulatory change on the conservative global healthcare payor industry, in a report titled The Healthcare Payor BPO Landscape in 2011: Will reform shatter a complacent industry?. While most payors have some limited experience in labour arbitrage-based outsourcing, the future requires them to increasingly leverage the capabilities of their service providers if they are to defend and win new market share.


The research estimates that the US healthcare payor BPO market was a $1.2 billion market in 2011, and will continue to grow at a 15-20% CAGR over the next three years given the immediate pressure on payors to manage regulatory reform. The greatest growth opportunities will come from payor claims, enrolment, service, billing, provider contracting, and care management.


Some of the key findings of the report include:


  • With the new sets of regulations, industry players must comply with rigorous and expensive auditing and reporting requirements, ICD-10 mandates, HIPAA standards, complex rules for Medicare and Medicaid, and health IT standards. Payors are in the midst of planning changes to their business priorities and operations due to the new regulations, but few have made commitments to anything other than ICD-10 and HIPAA-related mandates.


  • Regulatory changes will impact healthcare insurers’ competitive marketplace. Consolidations from companies that cannot effectively compete and new market entrants are highly likely. In particular, large retail organizations are likely to enter the marketplace. These competitors, with strong knowledge of consumer marketing, are likely to pose significant threats to traditional payors.


The healthcare payor BPO marketplace is set to explode as payors require improved technology, lower administrative costs and more scalability. While most focus has traditionally been in claims, enrolment, billing and service areas, few of these areas have been comprehensively outsourced.


Labour arbitrage is insufficient to meet payor needs. Currently, only 18% of contracts include service provider technology, 48% remain full time equivalent (FTE)-based, and 60% do not leverage gain sharing clauses. This will change dramatically as payors seek transformational assistance from service providers.


While niche service providers are primarily involved in providing high-end services for which they will hire experts and qualified people, others will concentrate more on scalability and try to gain traction in volume-driven work. They will also be able to offer improvements in process-driven tasks and impact costs heavily in the routine work.


Service providers are strengthening their onshore presence to accommodate the changes initiated by the regulations. The aim is to develop an onshore destination as a delivery hub for sensitive data processing healthcare services as made mandatory by reform law.


Trends such as these and others have been explored in the new HfS Research Market Landscape titled “The Healthcare Payor BPO Landscape in 2011: Will Reform Shatter A Complacent Industry?”. The study investigates industry drivers and the major services outsourced, the service provider landscape and segmentation, and a discussion of trends in outsourcing over the next few years.



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