CONTENTS

1. Introduction ............................................................................................................. 3
2. Conceptual Framework .......................................................................................... 3
2.1. Definition of Service Offshoring...................................................................... 3
2.2. Business Process Outsourcing (BPO) ............................................................. 4
3. Case Study of Medical Transcription Offshoring in India .................................. 6
3.1. Indian Medical Transcription Offshoring Industry and Needs from the U.S.
................................................................................................................................... 6
3.2. Impacts on Indian Labor Market ................................................................... 8
3.2.1. Job Creation .................................................................................................. 8
3.2.2. Wages ........................................................................................................... 9
3.2.3. Labour Skill .................................................................................................. 9
3.3. Social Corporation Responsibility in Indian Labor Force ......................... 10
3.4. Negative Impacts on U.S. Labor Pool ........................................................... 11
4. Conclusion .............................................................................................................. 12
REFERENCE ............................................................................................................ 13

1. Introduction
In recent years, India has become an attractive destination for medical process
outsourcing from healthcare providers in developed nations such as the United States
(U.S.), the United Kingdom (U.K.) and Canada (Kshetri, 2009). Telehealth service,
which includes teleradiology providing diagnostic services, telemedicine medical
opinion and consultations, laboratory testing, medical transcription - specialized data
and records are some popular examples of medical functions offshored to developing
countries (Murphy, 2008). Medical transcription especially has many characteristics
of a highly outsourceable job.
Although there are several academic articles that provided deep insights into the rapid
growing of offshoring industry and its impacts, this paper aims to bring a clearer and
more details picture about healthcare service offshoring and its impacts on human
resources. The case of U.S. and India, two largest players on medical transcription
offshoring ground, was chosen as a model illustration to analyze.
The main content of the paper is divided in two parts. In the first part, the conceptual
frameworks about service offshoring are presented and in the second part, the case
study of the U.S medical transcription outsourcing to India is discussed. The papers
investigation targeted two research questions, in which the first question is the main
discussion of the paper: (1) To what extent does the U.S. medical transcription
offshoring to India impact Indian workforce? (2) How does the offshoring affect the
jobs and wage of workers in home country?
2. Conceptual Framework
2.1. Definition of Service Offshoring
To understand the term service offshoring, it is important to grasp the definition of
outsourcing and offshoring in general. Outsourcing is used when corporations
contract out non-core business activities to other companies. Offshoring is used when
the source of supply is placed in a third country, which is different from the sourcing
country (UNCTAD, 2014). Table 2.1. provides a summary surrounding these two
terms definitions.
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Table 2.1. Offshoring and outsourcing

Location

Domestic

Internalized production
Production kept in-house
at home
Production by own foreign

Foreign (offshoring)

affiliate captive
offshoring

Externalized production
(outsourcing)
Production outsourced to
third party service provider
at home
Offshore outsourcing to
third party provider abroad

Source: UNCTAD, 2009

There are two ways to achieve offshoring: internally by moving production from
parent firm to its foreign affiliates or externally by outsourcing services to a third
party service provider abroad (UNCTAD, 2014). The service shift might occur to
diminish costs, to advance 24/7 provision and access skilled and cheap labor (Bryson,
2007). Service offshoring is complicated since service jobs can be exported or
imported in four ways: Mode 1 represents cross border supply, mode 2 consumption
abroad, mode 3 commercial presence and mode 4 presence of natural person
(Bhat, 2015).
The supply of medical transcription service is categorized under mode 1, in which
technology make almost all service cross border supply achievable (Cattaneo, 2010).
Under this mode, the home country based and the host country based service
providers do not move across borders, only the service (medical transcription) crosses
the border. Employees are still recruited locally based on job demands.
2.2. Business Process Outsourcing (BPO)
Services activities affected by offshoring were categorized under distinguishing
information technology (IT) services and information and communication technology
(ICT) enabled service (UNCTAD, 2014). Some service segments are given as
examples in the following table.

Table 2.2. Categories of services affected by offshoring

Service Category
IT Services

Example of service activities

Programming, application testing, data processing
and database services, data warehousing, IT
consulting, IT support services, IT infrastructure
management and maintenance, systems
integration, software development and
implementation and content management and
development.

ICT-enabled services:
Front office services (business
process outsourcing (BPO))
Back office service (BPO)
Knowledge process
outsourcing

Call centres and customer contact centres

(inbound and outbound)
Data entry, HR, finance and accounting,
payroll, procurement and transcription.
Financial analysis, data mining, engineering,
insurance claims processing, remote
education and publishing, research and
development, architectural design, medical
diagnostics, journalism

Source: UNCTAD, 2009

As shown in the table, the BPO forms of outsourcing service in developing countries
have developed with the expansion of ICT. BPO can be defined as the movement of
non-core business process from inside the organization to an external service provider
(Duening and Click, 2005). Although BPO are non-IT business process, they highly
depend on IT access or are facilitated by IT (Kshetri, 2007). Medical transcription is
categorized under BPO service and is so-called an information-technology-enable
services (ITES) (Ghodeswar and Vaidyanathan, 2008)
BPO services varied from basic and simple service such as data entry to complex
service requiring high skill such as medical transcription (Kshetri and Dholakia,
2011). Most developing country throughout the world provide low-value BPO
services, however, a few including India have been able to improve the quality of
their expertise so as to provide more complex service (UNCTAC, 2003).
The emergence of BPO enables organization to reduce the human resources cost
while improve the service quality (Sople, 2009). In the case of India, low labor cost
5

with a sizeable skilled English speaking workforce and the time zone difference
convenient are the main reason for developed country to outsource business process to
India (UNCTAD, 2009).
BPO not only brings advantages to companies at home country but also benefit the
host country. Overall, BPO would contribute the improvement of economics growth,
reduce unemployment and create new employment opportunities (Harbhajan, 2006).
Especially the problems concerning to women inequality are partly solve, where most
of BPO jobs can be completed from home (Noronha, 2008). The development of BPO
also create motivation for education, in which employees are encouraged to develop
their skills to meet the requirement of high-value, complex BPO service (Kshetri and
Dholakia, 2011).
3. Case Study of Medical Transcription Offshoring in India
3.1. Indian Medical Transcription Offshoring Industry and Needs from the U.S.
The term Medical transcription was first introduced in the 1990s. The service refers
where healthcare information dictated by a doctor or physician is converted into
electronic text format by listening to a tape or digital recording. This text will be used
as a note for healthcare profession as well as the patients to follow up the treatment
process. (Kennedy and Sharma, 2009).
Medical transcription offshoring to India first become popular and got a lot of media
attention in the 1995 1997 period, even before the term BPO appeared in the
business vocabulary (Kennedy and Sharma, 2009). The major reason was that in
1996, changes in health insurance accountancy requirements combined with the
declining number of transcriptionist in the U.S. had led to a demand for outsourced
service, which has grown at 20% per year, to a third country (Zimny, 2011).
Moreover, along with the development of ICT, India has also gained competitive
advantages in doing mode 1 trade. Nowadays, India is a leader in exporting medical
transcription service in mode 1 with its infrastructure and skilled manpower base
(Bhat, 2015). Medical transcription was the second largest contribution to the revenue
as well as fastest in development among service segments in healthcare service in
2005 (Table 3.1).
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Table 3.1. Revenue Earned by India in Mode 1 Trade in Healthcare Service

(revenue in USD million)
Service segments
2000
2005 (increase in times)
Customer interaction centers
60
2,250 (37.50)
Medical transcription
30
800 (26.67)
Financial and accounting services
50
375 (7.50)
Medical billing and collection
3
75 (25.00)
Insurance claims processing
12
30 (2.51)
Pre-press and digital pre-media
45
200 (4.45)
Geographical information system
50 (new)
Distance learning
60
150 (2.50)
Human resource services
115 (new)
Litigation support services
3
27 (9.00)
Total
264
4,072 (15.42)
Source: Revenue of the BPO (business process outsourcing) industry estimates (by
service type) by ESC: Electronic & Computer Export Promotion Council (cited in
Smith et al., 2009).
India is a ground for numerous larges and small medical transcription services
providers. There are more than 180 firms involved in medical transcription service
with the average revenue of USD250 million in 2010 (Bhat, 2015). All of providers
can be divided into three groups: Indian units of large U.S. players, mid-sized players
and smaller players (Kennedy and Sharma, 2009). The largest players are often
American corporations or Medical Transcription Service Organization (MTSOs,),
who early successful built up their transcription centers in India with some famous
names such as CBay System, Spheris, Acusis, Spryance and Heartland. These
companies account for almost 70% of Indian offshoring revenue. The mid-sized
players (less than 500 employees) operate as franchisees or vendors for larger players,
while the smaller sized players (less than 50 employees) are subcontractors for the
other two groups (Research and Markets ValueNotes, 2006).
Given the fact that health costs are increasing in U.S. and the demand of digital
medical records is high, the revenue India gains from medical transcription service in
the future will increase sharply (Bhat, 2015). One estimate suggests that about 47%

of U.S. hospitals outsourced medical transcription to India in 2006, and the number
has still grown continuously in a constant rate. (The Hindu Businessline, 2006).
3.2. Impacts on Indian Labor Market
As discussed in previous section, all of largest players in India medical transcription
service are American corporation or MTSOs. These companies generate around 70%
of Indian offshoring revenue in this service segment. Their emergence has also
created huge number of jobs for massive available Indian workers, offer higher salary
to some extent and enhance skills of the labor force by training to staff.
3.2.1. Job Creation
The medical transcription outsourcing industry in India is relative new with it
presence around the mid-1990s. However, this segment has grown dramatically and
brought bright prospect for entrepreneurship with a numerous opportunities of
employment. According to a strategic report of NASSCOM (n.d.), the medical
transcription segment in India, in which the presence of U.S. based company accounts
two-third, planned to employ as many as 50,000 people.
One observable example for job creation impacts on India medical transcription
industry comes from Cbay System Ltd, a leading U.S. based healthcare BPO service
vendor. In U.S. market, CBay System provides service to nearly 40% for the U.S
hospital market (Mukherjee, 2010). In 2010, CBay acquired a bankrupt medical
transcription technology company Spheris Inc. and also added 2,000 employees from
Spheris to CBays manpower in India (Vanderford, 2010). After 10 years stepped in
India industry, this U.S. based company had created jobs for at least 8,000 local
people (Mukherjee, 2010). Raman Kumar, vice-chairman and CEO of CBay System
also emphasized that transferring work to India is an important part of companys
global strategy. It had planned to employ addition 2,000 workers in India in 2012
(ibid.).
Furthermore, the development of industry also provides opportunities for women to
get some income. In particular, for women in India, combining home work and
childcare is not a choice but the only way to overcome the high cost and low
availability of childcare (Noronha, 2008). Most of the U.S. larger players in the
8

industry focused on the results and paid based on products. This enables women to be
able work from home and have equal conditions and wages as the other male
employees.
3.2.2. Wages
One of apparent reason that most of American medical transcription service providers
preferred acquiring smaller Indian offshore vendor is to gain access to the low-cost
labor (Kennedy and Sharma, 2009). While a transcriptionist in the U.S. earns USD
24,000-38,000 at entry level and USD 60,000-80,000 with some experience, in India,
he or she only make between USD 2,000-3,000 (Ernst, 2005). Recently, there is no
research showed evidence of the changes in transcriptionist wages, although the
industry has developed at notable rate and the foothold of U.S. offshoring companies
has become stronger. The reason would be the abundant labor pool, which has
satisfied the manpower need from service providers.
However, there still exists a situation that the wages of transcriptionists working
medical transcription providers who would like to gain competitive advantages in
turnaround time and the quality of work seemed to be higher compared to the industry
standard in India.
Acusis, a Pennsylvania-based, was founded by U.S. and Indian healthcare industry
veterans in 2001. Although Acusis step into the market fairly late, its customer base
and revenue grew rapidly. The company also follows the popular trend to offshoring
to India market. In 2013, the company recruited approximately 400-500 transcriptions
in India and most of them are university educated, even several had some kind of
medical degree. In Acusis, transcriptionist earned three or four times on average
compared to the standard in India (Mirchandani and Ehlich, 2013).
3.2.3. Labor Skill
According to HQMT, one of the largest medical transcription & medical coding
training institute, the service segment required to have the skill in language of
medicine (LOM), American English, computer basis, keyboard skills and medical
transcription techniques.

Although the medical transcription industry has been expanding at a significant rage,
it was suffered from lack of skilled workers (PTI, 2005). Being the employee of
global service providers such as CBay or Acusis, the employees have chances to learn
new technical skills. Technologies supported to the job are always continuously
changing and updating. Large player always use the latest technology to enhance to
productivity and their employees get to continuously train and learn or update skills.
These skilled are also acquired on job training, which accelerated employees skill.
3.3. Social Corporation Responsibility in Indian Labor Force
Medical transcription is an ideal for blind professionals who are used to the available
assistive technology. Recently, when U.S. based firms in India planed social
corporation responsibility (CSR) project, the idea of providing training and creating
job for the blind is always prioritized. Since 2005, the blinds have gradually stepped
into medical transcription industry under some special policy from larger corporation
such as CBay or Trans-tek. However, the number is still small compared to the size of
the industry workforce.
In 2007, CBay System ran a CSR trial that recruit the blind to do its job in India. An
director in the company was introduced to a social worker who assists the blind, and
they had developed a plan together whereby CBay would hire a small group of blind
workers. It was entirely not for business purposes but contributed somehow to support
the disability society. At that time, they recruits 7 blind worker and provide them
training in medical terminology and transcribing (Giridharadas, 2008). The fact is that
this experiment only reflected a tiny corner of a vast industry; however, many Indian
blinds believed in a bright coming future for blind job pool through this first step of
CBay (ibid.).
The U.S. companies not only directly recruit the blind but also bring opportunities to
them to work in medical transcription segment by providing training. Trans-tek, an
American company offshoring in India launched the course in association with the
Ramakrishna Mission, Narendrapur offering free training for the visually impaired in
2005. It started to receive five blind students from Blind Boys Academy in

10

Narendrapur (PTI, 2005). The company also provided all study material, software,
and medical transcription faculty to support running the project.
3.4. Negative Impacts on U.S. Labor Pool
Trade in medical transcription service under mode 1 has the controversy. Regarding
to the case of outsourcing, the controversy is often raised between two different
parties: the U.S. TNCs and the U.S. workers. Apparently, corporate managing board
sees advantages to outsourcing medical transcription to India that cheap labour cost is
primary benefit. Medical transcriptionists are paid $13.17 an hour in U.S, while this
rate in India was between $1.50 - $2.00 (Corsi, 2009).
However, the cost saving always comes with consequences. The most controversial
impact of medical transcription outsourcing to India is the loss of hundred U.S job
(Marquez, 2006). According to the research of University of Californias Fischer
Center for Real Estate and Urban Economics, medical transcription is one of the most
vulnerable jobs in the second wave of outsourcing in 2009 (Corsi, 2009). From
2007 to 2013, there was a 56 percent decrease in job posting for medical
transcriptionist. In the middle of 2014, there were only 600 postings for the entire
country (Katz, 2014). And by 2015, medical transcriptions will account large part of
3.3 million lost jobs in the U.S. due to outsourcing (Corsi, 2009).
Job lost is not only the negative impact from outsourcing medical transcription to
India. The wage in this field has been decreasing dramatically. Lee Tkachuk, CEO
and present of Keystrokes Transcription Service, a U.S. company, said that the
salaries for transcriptionists are much lower than in 2005, as much as 30% - 50%. The
average annual wage for a transcriptionist 10 years ago was $55,000. Now it is just
around in $35,000 (Schaeffer, 2015). Even now, the wage has been dropping
somehow to the minimum line. Tkachuk confirmed again that outsourcing, especially
overseas, is one of major reason that led to the lowing of medical transcription wages.
This is the consequence of the decrease in job demand and the remaining number in
labor supply. The other reason should be mentioned is the need of learning new
technology to enhance the productivity and efficiency in medical transcription section
(Schaeffer, 2015). Hence, with the aging working labor force, many of these U.S

11

workers are stressed and not able to re-educate lead to the consequence that they lost
job and have to depend on the government assistance (Marquez, 2006).
However, the picture of U.S. medical transcription career is not totally in darkness.
There is still a need for an accurate medical record and expertise in this career that is
the limitation of outsourcing to India, where English is not the mother tongue and the
overall labor force is low-skill. There will be opportunities for those who make an
attempt learning new skills and technologies, increasing their efficiency and
productiveness, and really care about patient (Schaeffer, 2015).
4. Conclusion
India is a dream destination for offshore outsourcing from U.S. based medical
transcription service corporations due to its massive low price and skillful labor force.
All of largest players in India medical transcription service are American corporation
or MTSOs and account approximately 70% of the industry revenue in this service
segment.
Their emergence of U.S. based service providers plays important roles in the
development of India, mostly impacts on labor force in particular. The industry
created huge number of jobs for massive available Indian workers, offer higher salary
and enhance skills of the labor force by training to staff.
These companies also provided brighter future for blind labor force to work in this
industry under several CSR programs. The companies not only provide direct job but
also corporate with NGOs or disability school to transfer knowledge and enhance the
blind capability.
However, the offshoring strategy to India of U.S. medical transcription service
providers also has adverse impacts to the home country. The most visible
consequences are the decrease of demand in the industry that led to hundred of job
loss. Moreover, the wage of transcriptionists dropped dramatically to the minimum
line.

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