Will HITECH Act Be Boon for Outsourcing Providers?

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Earlier this month, in a post about the lukewarm demand for H-1B visas, I cited an Economic Times article that mentioned the Employ American Workers Act, a piece of legislation enacted in February that imposes hiring restrictions on recipients of funding through the Troubled Asset Relief Program (TARP), as one reason for a slowdown in H-1B applications.


It's no secret that U.S. financial institutions are big consumers of outsourced IT services. (And some other outsourced services as well, as I wrote in this post on India's legal process outsourcing industry.) According to an article in the Indian version of Moneylife, outsourcing giant Infosys gets some 40 percent of its revenues from North American customers in the banking, financial services and insurance industries.


Interestingly, while legislation may have had something to do with slowing demand for outsourcing in the financial sector, it may create new opportunities in other sectors.


As IT Business Edge's Lora Bentley wrote yesterday, U.S. hospitals are having a tough time determining how they can comply with requirements to show "meaningful use" of electronic health records, one of the provisions of the HITECH Act, which was passed as part of the American Recovery and Reinvestment Act. If they can't demonstrate meaningful use, they won't get federal stimulus funds.


Lora cited a PricewaterhouseCoopers survey that found eight of 10 hospital CIOs aren't sure they'll be able to meet the "meaningful use" requirements to qualify for the incentive. Nearly all of the survey respondents said they are concerned about meeting meaningful use reporting requirements and are confused by the lack of clarity in the requirements. According to Lora, health care providers have just four years to qualify for and collect the incentives and must satisfy meaningful use milestones along the way.


Also this week, IT Business Edge's Loraine Lawson cited a report from Crosstree Capital Partners that found hospitals rely largely on two labor-intensive means of data capture, typing or image scanning, to produce electronic health records.


Hmmm. Technology projects with a short timeline and lots of manual processes. Reminds me of Y2K, the millennium non-event that was a boon for outsourcers' business. I'm not the only one who thinks so. The Moneylife article includes comments from several financial analysts who believe Indian outsourcing companies will go after new opportunities in the health care industry. Said Rohit Anand, IT sector analyst at Pioneer Investcorp Ltd:


Implementing these reforms will require some sort of investment in IT infrastructure from U.S. companies. If their business is impacted, then the resulting cost pressure may bring about an increase in outsourcing requirement.