Healthcare BPO, like IT Services BPO, comes of age as healthcare spending increases in US: Report

New Delhi [India], March 10 : The healthcare business process outsourcing (BPO) industry like the IT industry, is gaining momentum as it expands its presence in the U.S. healthcare sector, despite being a niche segment, it has now achieved a scale that validates its total addressable market (TAM) says a report by JM Financial.
The report noted that the sector benefits from the vast U.S. healthcare market, which recorded a total expenditure of USD 4.8 trillion in 2023. Out of this, about USD 200 billion is spent on operational processes by payers (insurance companies) and providers (hospitals, clinics, and other healthcare institutions). This USD 200 billion operational spend represents the total addressable market (TAM) for healthcare BPO firms.
It said, "Healthcare BPO, As outsourced as IT Services...... It is their coming-of-age as, in spite of the niche, they have achieved a scale that validates the TAM of their pursuit."
Currently, around 22 per cent of this operational spend in US, or approximately USD 45 billion, is outsourced.
The outsourcing trend is expected to grow at a 7-12 per cent compound annual growth rate (CAGR) due to several factors, including rising healthcare costs, a shortage of medical staff, and increasing regulatory complexities.
The payer segment, which includes federal, state, and private insurers, accounts for USD 138 billion of the operational spend, while providers contribute USD 63 billion. Over the next five years (2023-2028), this overall operational expenditure is expected to grow at a 5 per cent CAGR.
Despite its growth potential, the report also mentioned that outsourcing in the healthcare sector has already reached a penetration level of 20-24 per cent, similar to the IT services industry. This means that outsourcing alone may not be the primary growth driver for healthcare BPO companies. Instead, market share gains among existing players will be the key to further growth.
Another key aspect is the increasing reliance on offshore delivery. Currently, 80-85% of healthcare BPO services are delivered from offshore locations.
However, since offshore revenue is typically only one-third of the onshore operational spend, the total addressable market for offshore service providers is effectively lower.
Overall, the healthcare BPO sector is well-positioned for steady growth, with outsourcing playing a crucial role. However, companies in the sector will need to focus on efficiency and market share expansion to sustain their momentum in the coming years.