The dramatic economic growth of India has created some negative implications for offshore Business Process Outsourcing organizations (BPO). Some of these implications can be directly attributed to the devaluation of the USD in comparison to the rupee. If this trend persists, and the USD continues to lose its value in comparison to the rupee, only the most efficient BPO's in India will be able to continue to make a profit.
Hundreds of physical therapy practices and rehab billing companies in the United States have outsourced their billing and transcription processing to India, taking advantage of the differences in economic development and favorable exchange rates. Outsourced billing processes typically include claims processing, coding, follow up, and data entry of patient demographics, charge and payment data. Labor arbitration between the United States and India has caused considerable heartache for numerous American transcription specialists, billers, and coders, many of whom had to find other jobs or learn new skills. But in the long run, the grand picture has paid off for both sides by creating new jobs in India, saving money in America, and creating more challenging and better paying jobs for those who stepped up to leadership and managerial roles in the new playing field.
The profits for both the outsourcing and the outsourced organizations depend directly on the exchange rate. If the exchange rate changes and the rupee appreciates against the US dollar, an Indian BPO suffers eroding profit margins. In the last six months of 2007, the rupee exchange rate dropped twelve percent from 44-45 down to around 39 against the USD. Since American doctors are paid in USD and not in rupees, the revenue of the US doctor or therapist, when translated to rupees, shrinks in step with the narrowing gap between the economic levels of these two countries and the melting exchange rate.
"For quite sometime I've been reviewing the bottom line margin that started to dip considerably," writes Deepak, Head of the Medical Billing Department in one of the major Business Process Outsourcing (BPO) organizations in India. "During the past six months we adopted various methodologies to keep our cost down in all aspects (staff costs, technology, training, etc) so as not to affect the billing rates with our clients. But with rupee exchange rate dropping to around 39 against USD and with no hope of depreciating over the next few quarters, we understand that it would be very difficult to sustain our margins going forward."
Can a physical therapy billing company with significant offshore labor components maintain its profit margins in 2008, against the background of the appreciating rupee? If not, should it reconsider the entire labor arbitration model and in-source at least some of the outsourced jobs?
If the USD continues to lose its value, in comparison to the rupee, only the most efficient BPO's in India will be able to continue to make a profit on outsourcing. To afford the decreasing revenue per doctor, a BPO must be able to increase its volume of clients while simultaneously reducing their workload per each client through automation and, perhaps, secondary outsourcing to other countries.
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