CBay and Medical Transcription
Business India Intelligence - March 2000
Dictating to Delhi

CBay Systems of the US plans to use India's abundance of low-cost, English-speaking graduates to become the largest medical transcription company in the world.

CBay Systems, an American medical transcription company, has done things differently than most of its competitors, both in the US and India. While most other medical transcription companies in the US rely on American home-based transcriptionists, CBay is building its business around Indian transcriptionists.

Unlike competitors who have set up in India, CBay does not directly employ its transcriptionists. Rather, its fully owned Indian subsidiary, set up in 1998, identifies potential entrepreneurs who have the managerial capability to set up and finance production centers (data capture and data delivery are in the US). CBay (India) then provides technical assistance, including hardware and software, as well as help with recruitment and training. Once training is complete the centres start commercial operation with 100% of capacity being filled by CBay. Through the Internet, voice data (in encrypted and compressed form) flows directly from the US-based servers of the company to the production centre and the transcribed data is sent directly back.

Moving quickly

Mahidhar Reddy, managing director of CBay Systems (India), says that a production centre typically starts with about 60 people and then expands to about 100-120 people. A few ambitious ones plan for 300 to 500 people. CBay has seven centres that are already in commercial production employing about 400 people. Another 13 centres employing about 700 people are under training. Each of the production centres has invested around US$500,000. CBay's key requirements from these centres are low turnaround time and high quality. The goals are a 12-14 hour turnaround time and a 98% level of accuracy. When CBay finds that an entrepreneur is performing well, it helps him expand by giving him more business. CBay is also open to investing in production centres.

No factories here

Why has CBay chosen this model, when competitors like HealthScribe (US) employ transcriptionists directly (HealthScribe has about 450 transcriptionists at its Bangalore office)? CBay's thinking is that the white-collar professionals required for this business would find a factory-like work environment unattractive. A large operation would also require a big investment and would be more difficult to manage, particularly in terms of meeting quality targets. In contrast, CBay's production centres are small and managers are totally focussed on making their enterprises succeed.

The technology-transfer model has also allowed CBay to spread its operations widely in India in just two years. It has production centres located in several cities including Bangalore, Delhi, Ahmedabad and Trivandrum. Mr. Reddy says that besides tapping human resources all over the country, the multi-location strategy offers protection against any local instability (such as strikes) which could affect turnaround time.

Getting the quality right

High quality is critical for the success of CBay's business. While there are a number of commercially run institutes in India, which offer training in medical transcription, CBay has found them inadequate.

Mr. Reddy says that this is because the training institutes try to compress training as much as possible and increase student throughput to maximise revenue. This implies a lot of compromises and shortcuts. Hence, CBay deploys its own team of trainers, including doctors, senior medical transcriptionists, and English-language trainers. There are about 70 trainers across the country, most of whom are Indian. However, from time to time personnel from the US, such as editors, are flown in for the advanced stages of training.

To expand the pool of prospects, CBay is now thinking of experimenting with transcriptionists not trained by the company (it would set a stringent certification exam open to all). Mr Reddy feels that one constraint in CBay's operations is that it is forced by commercial considerations to compress training. While training lasts about five months in India, some courses in the US run for as long as two years.

At the moment CBay has 35 editors in the US who verify all the data before sending them to the hospitals. While this costs a lot, it is necessary to ensure quality.

Staff employed by the production centres are typically young graduates (in any discipline) in their early twenties, fresh out of college. The starting salary is generally about Rs.5000-6,000 (US$115-140) per month. There is also an incentive scheme based on the quantity and quality of work (quality is measured by a classification of errors depending on their seriousness). With these incentives, after a year of experience, a medical transcriptionist may be taking home Rs.10,000 to 15,000 a month (US$230-345).

Bottlenecks

High telecommunications costs in India and inadequate bandwidth (which means that file transfers take a long time and boost telecoms costs) has been a major bottleneck for CBay, especially since voice files are multimedia data and thus huge. However, Mr Reddy is hopeful that this will improve rapidly in the near future since the monopoly on Internet gateways has been abolished and a number of new Internet service providers have been allowed to set up.

CBay's production centres will still have to contend with other infrastructure problems like power cuts, which require substantial investments in back-up power supplies.

CBay is not yet profitable, which is understandable since it is only about one and a half years old. But the company hopes to break even this year. According to Donald Conover, president of CBay Systems, the corporate goal is to emerge as the largest medical transcription company in the world within three years. This might seem like an unrealistic objective. However, MedQuist, the current market leader in the US medical transcription industry, reached its leadership position within a period of five years through a series of acquisitions, which is feasible given the fragmented state of the industry. Not surprisingly, CBay is also looking at strategic acquisitions within the US to build business volume.

In India, CBay's goal is to have 2,500 people in its production centres by the end of this year. It hopes to expand this to between 7,000 and 10,000 people within the next three years.

In the future, CBay plans to go beyond medical transcription and offer services like medical billing and data centre management. CBay also sees significant scope for medical transcription for hospitals within India itself with the opening of health insurance, since claims processing requires a lot of documentation.

Why India?

American hospitals must maintain extensive documentation at every stage of treatment of a patient for several reasons. Such documentation is a mandatory requirement since it is used to support claims for medical insurance. Moreover, it is the best protection for doctors and hospitals against malpractice suits litigation.

There is now a movement in the US to convert all medical records to electronic form so that they are accessible anywhere a patient seeks treatment.

The medical transcription industry in the US is estimated to be worth about
US$ 18bn per year, employing about 270,000 Americans. Though most of this industry still consists of in-house work by hospitals, the value of out-sourced work is large-about US$6bn annually. The amount is growing since more hospitals, finding it difficult to recruit transcriptionists, are out-sourcing.

Rapid advances in technology have given the transcription industry great flexibility in terms of location. Rather than using dictaphones and sending tapes to transcriptionists, doctors can now lift a phone, punch in a toll free number and dictate. The dictation is captured by powerful voice storage servers which digitize the data. The data is transmitted to a medical transcriptionist, whose report goes back to the hospital database as an electronic record. Hence, a transcription company could be located anywhere in the US-or in India.

The main advantage of using Indian transcriptionists are found in cost and availability:

· The cost per line of medical transcription in India (5 US cents) is almost half that charged by home-based transcriptionists in the US (8-9 US cents).

· India's huge pool of English speakers-at the last count, in the 1991 census, there were 90m-gives it an advantage. While developing countries like China can complete in terms of low wages, no other developing country has such a large pool of English speakers.

· The 12-hour time difference between India and the US is a major competitive advantage. The voice data that flows in during an American work-day can be transcribed in India (when it is night in the US) and the transcribed data sent back by dawn in the US.

· The number of working American transcriptionists has been falling by about 10% annually in recent years. The profession is not attractive enough to draw many new entrants, especially since incomes are not commensurate with the long training involved (six months to a year). At the same time, the demand for medical transcription services is growing (at about 20% per year) as the US population ages and the healthcare market subsequently expands.

· The potential of the medical transcription business has attracted a large number of Indian players, most of them small or medium-sized enterprises. It is estimated that there are about 200 units across India employing about 5,000-8,000 people with a total revenue base of between US$25m-50m. Many companies offer poor quality and an industry shake out is expected. There are less than a dozen serious players and three major foreign players-CBay Systems, HealthScribe and Heartland Information Services.

According to Mr. Conover, India ranks number one (followed by the Philippines) in terms of medical transcription for American hospitals done outside the US. However, the amount of work currently done by overseas vendors amounts to less than 0.2% of the total, hence the potential increase is astronomical.

Given India's competitive strengths in this field, the National Association of Software and Service Companies (NASSCOM) has estimated that the Indian medical transcription sector has the potential to generate revenue of Rs110bn (US$2.Sbn) and employ 160,000 people by 2008.