In Conversation: Automation is the keyword

There is a huge growth potential for companies that are able to upgrade their capabilities to handle complex tasks and move up the value chain, says Devendra Saharia

<b>In Conversation:</b> Automation is the keyword
AGS Health is an analytics-driven, technology-enabled revenue cycle management company that provides medical billing, medical coding and business analytics services to healthcare providers in the US. It has over 5,000 billing and coding specialists based out of US and India serving hospital corporations, physician groups and academic medical centres. AGS Health has been able to take advantage of the severe pricing pressure and shortage of talent faced by revenue cycle companies in the US. At the same time, Indian companies do not have even one per cent market share in the $30 billion global healthcare revenue cycle industry. There is a huge growth potential for companies that are able to upgrade their capabilities to handle complex tasks and move up the value chain, Devendra Saharia, CEO, AGS Health tells Financial Chronicle.

You had earlier co-founded Ajuba, which also operates in the revenue cycle management space. What made you move out?

When I co-founded Ajuba, the offshore revenue cycle management industry was very nascent. The US healthcare trained talent in India was very small. I moved from San Francisco to set up the India business. Over the years, we grew the business successfully and then sold it.

In 2011, I decided to focus on more advanced revenue cycle opportunities as the industry was maturing. I required an independent platform to pursue my plans and started AGS Health. Here we have approached revenue cycle in a highly sophisticated manner by bringing substantial technology, analytics and process excellence into our solutions. We are delighted that the market has accepted our technology and analytics driven solutions in a big way. We have grown to over 5,000 employees in just about five years across 13 office locations globally, and serve a large number of leading healthcare providers across the US.

The global healthcare revenue cycle industry is a $30 billion opportunity. Where does India stand in this?

Currently India has a very small market share (probably not even one per cent) of the estimated $30 billion market. There is a huge growth opportunity here for India. Even a 3-4 per cent market share will make it a billion dollar industry here. The opportunity is enormous in terms of revenue growth and employment potential. Things are beginning to change now both in India and the US as globalisation picks up pace.

The revenue cycle companies in the US are facing severe pricing pressure as well as shortage of skilled expertise/talent. These factors are driving them to look at India, which has emerged as the largest outsourcing hub. In terms of scale, skill and speed of growth, India continues to be the most favoured destination. The biggest challenge that we face in India is high staff attrition. Attrition makes Indian companies less competitive and can become a huge bottleneck for growth. Indian companies will have to tackle this issue quickly.

How well is AGS Health placed to tap the available opportunity?

I believe we are placed very well. We have been in the business for a little over five years. Our cutting edge people practices have won us best employer awards globally – both in India and the US. The growth so far has been only organic and we have done no acquisitions. We have established a good track record of delivery and have been achieving 45 per cent annual growth consistently. We have demonstrated the ability to scale successfully. Customers want to work with companies which have the ability to scale with quality and that’s why they are comfortable working with us.

Can you describe the present global scenario in the revenue cycle management industry? Are Indian companies capable of playing a substantial role in it?

Revenue cycle management industry is going through rapid changes in the US. There is significant consolidation happening over the last few years. When clients face pricing pressure, they want vendors to reduce costs. Smaller, generic revenue cycle companies are not able to sustain growth and maintain margins and are being acquired by larger players.

Several larger players are using acquisitions as a tool for growth as organic growth slows down. In this industry, companies that do not have high quality processes and human capital cannot survive independently for too long. Financial sponsors are strategically driving their portfolio companies to become more efficient.

Offshore companies have an opportunity to grow in this scenario. We are able to provide high-end solutions and at substantially lower costs. Also, our customers are very savvy and are interested in directly working with global companies, instead of through intermediaries. Hence, the growth potential is even bigger.

What is the state of the medical coding industry in India today, especially after ICD-10?

The medical coding industry in India has come of age. Last year, when the migration to ICD-10 happened, there was a shortage of skilled coders in the US market. This resulted in coding work moving to India in a large scale. It was a bit like the Y2K phenomena. The quality of work at substantially lower rates led to a massive shift towards offshore coding. It led to a seismic shift in the US medical coding industry.

India has a young, tech-savvy, well-trained and highly educated medical coding workforce. They were able to learn ICD-10 very quickly and customers benefited from a great combination of cost and quality. The domestic US based coding firms are now using India based coders more and more. They cannot continue to charge their hospitals and physicians clients high rates anymore. By using offshore coders, they get a huge cost advantage, faster turn-around-times and high-quality work.

Among the major verticals, healthcare is one that is likely to be largely impacted by automation. How well are you prepared to tackle that?

Automation is a reality. In our industry, it has been happening over the past 7-8 years. It will help our industry become more efficient and benefit our customers. We welcome this change and have been pioneers in embracing technology in everything we do. As more technology and automation comes in, companies that evolve will survive and succeed.

This is similar to what happened in the travel agency industry with the emergence of online travel solutions. Most traditional travel agents are no longer there. The ones who exist are providing many more value-added solutions.

At AGS Health, we have continued to evolve with the technological changes in our industry. Certain processes, that needed manual intervention, have been now automated. But, there have been more complex processes that have been coming our way and business continues to grow. We are also upskilling our capabilities to handle complex tasks. We have successfully moved up the value chain with our strong process-oriented domain knowledge.

Good companies will have to stay agile and drive a culture of continuous learning within their organisation. If we do not embrace automation, we will become victims of change. If we embrace it, we will grow faster than others.

What are your expansion plans? What is the roadmap for revenue growth?

Apart from multiple offices in Chennai and Vellore, we recently expanded our presence in Hyderabad with a large centre in HITEC city. We have two centres in Hyderabad. We have also recently set up a base in Noida. We expect to grow 30–35 per cent annually in terms of revenue for the next four-five years. And we will have 10,000-12,000 employees by 2020. We may, at some time in the near future, look at expanding our operations to a couple of other locations. We may also expand to a facility overseas, but the bulk of the work will be carried out from India.

We are open to acquisition opportunities, especially if those companies are going to bring us new opportunities in terms of customer access or new capabilities. We are always open to inorganic growth options.

govardand@mydigitalfc.com

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