Healthcare organisations are increasingly looking at IT outsourcing (ITO) and business process outsourcing (BPO) to improve the efficiency and effectiveness of their back-office and support operations, according to an EquaTerra 'Perspective' paper, Emerging Outsourcing Trends in the Healthcare Industry . The report examines the various market challenges that the healthcare industry is facing, especially in the US. Essentially, then, the document concerns private care on the other side of the Atlantic.

EquaTerra estimates that, globally, 75 IT outsourcing (ITO) and BPO deals with total contract value of greater than $50 million were signed from 2004 through 2007. This represents a small percentage of the total number of outsource deals, "highlighting the relative immaturity of the healthcare outsourcing market compared to other industries, such as banking, financial services and manufacturing", says the company.

That said, the healthcare outsourcing market is expected to grow at close to 10 percent over the next five to seven years, faster than overall market growth of seven to eight percent.

The report's co-author Mark Voytek, EquaTerra’s healthcare industry lead, said: “Healthcare organisations that have not recently done so should update and reassess their strategy and action plan for use of alternative service delivery models for both back-office and core operating functions and processes.

"If successfully executed, outsourcing can play a positive and growing role in helping them address the serious challenges they are facing today. And while they should use caution when exploring and assessing emerging BPO areas, the market is expanding and rapidly maturing, and what was premature in the past could be ready for prime time today.”

The report identifies the following challenges faced by the (US) healthcare payer segment:

• Merger, acquisition and divestiture activity has placed increased demands on technical and support infrastructures, further driving the need for change.

• Many of the larger payers have remained with legacy hardware and proprietary or internally developed applications which no longer meet their needs.

• The growing complexity of offerings, as well as government and regulatory changes, have increased delivery and support requirements.

• Confidentiality and privacy issues around personal health data has caused an increase in expenses associated with the delivery of services.

Of course, the report is less relevant (at present) to the UK healthcare sector, which is driven less by the needs of insurance and private care.

The NHS has been the focus for a massive investment in outsourcing, centred on the National programme for IT (NpfIT), which has been criticised for being misconceived, insecure and massively over-budget – despite the success of some individual elements, such as the digitisation of patients' medical scans.

It may take decades for the NpfIT to deliver savings that cover its escalating costs. The introduction of a central database of patient records has also created the kind of security and privacy fears that EquaTerra's report suggests are being addressed by technology elsewhere.

The extent of private involvement in the NHS remains a focus of much controversy in the UK, given that the state-run service is regarded with envy in many parts of the world, including the US.

Nevertheless, US trends are becoming increasingly relevant to a UK government that seems keen to emulate transatlantic ideas. Based on a poll EquaTerra conducted with outsourcing service providers in the US healthcare 'payer' space, the process areas exhibiting the greatest levels of outsourcing demand included knowledge services, such as reporting, planning and analytics.

This chimes with recent Gartner analysis into global customer/citizen relationship management (CRM) trends, which suggest that analytics are one of the hot areas of that market.

It's known (and has been discussed elsewhere in the Editor's Blog) that local authorities throughout the UK are joining together through cross-border CRM schemes, mainly with the intention of sharing data about citizens – either to provide targeted and more efficient services, or to withdraw services from late-paying or antisocial people (depending on your viewpoint).

It is not a huge leap of the imagination to suppose the NHS might follow the same route, in the name of preventative rather than medicinal care.

In the US, EquaTerra sees that buyer demand is outpacing supplier maturity, which is characteristic of an outsourcing market in more of a demand pull than a supplier push mode. This, says the company, is due to the recent increase in buyer demand levels, coupled with a supplier lag in developing and expanding service offerings as a result of historically weak demand for outsourcing services in this market sector.

However, EquaTerra finds that outsourcing service providers that target healthcare – including Indian firms moving into business services – are starting to develop more targeted and compelling outsourcing offerings.

Given the close cultural fit, the entry of an Indian outsourcing player into the UK healthcare market seems to be a distinct possibility, if EquaTerra's findings do map onto the very different UK healthcare landscape.