Is Offshore Outsourcing of Medical Business Practices Ethical?

Abstract
The healthcare industry is one of the largest in the United States. The United States spends an estimated $2 trillion annually on health care expenses, more than any other industrialized country (Johnson, 2010). The growth of this industry is expected to continue well into the future. However, today more than ever, healthcare providers are faced with many financial pressures.
Offshore outsourcing offers companies substantial savings on costs which improves profitability. Managed care organizations and healthcare providers realize how outsourcing business processes to experts allows them to focus on their core business without worrying about back-office functions (Namasivayan & Bell, 2006). Despite the cost savings, it is important not to overlook some of the issues that may be associated with outsourcing.

Is Offshore Outsourcing of Medical Business Practices Ethical? The healthcare industry is one of the largest in the United States. The United States spends an estimated $2 trillion annually on health care expenses, more than any other industrialized country (Johnson, 2010). The growth of this industry is expected to continue well into the future. As the baby boomer population gets older and medical treatments become more and more advanced, those needing medical care will increase exponentially giving rise to an already growing field. Yet, despite positive growth levels, it is a market challenged by the often conflicting mandates of improved service quality and reduced costs (Lepeak & Voytek, 2008). Healthcare providers are faced with many financial pressures. The need for management to meet financial constraints often translates into a desire to contract with vendors at the lowest possible cost. One option healthcare organizations have at their disposal is to fundamentally overhaul the means through which they deliver their core service offerings (Lepeak & Voytek, 2008). Offshore outsourcing offers companies substantial savings on costs which improves profitability. Managed care organizations and healthcare providers realize how outsourcing business processes to experts allows them to focus on their core business without worrying about back-office functions (Namasivayan & Bell, 2006). However, it is important not to overlook some of the issues that may be associated with outsourcing. This paper will discuss the ethical implications of offshore outsourcing in the medical field Outsourcing is being described by some as an unfortunate by-product of a global economy. The thinking is simply that when the same work can be done by someone else cheaper, get it done. EquaTerra estimates that the healthcare outsourcing market is expected to grow at close to 10 percent over the next five years. This growth is faster than the overall market growth of 7 to 8 percent (Lepeak & Voytek, 2008). While this is certainly a more profitable way of conducting a business, it does have its negative side too. Some argue that outsourcing U.S. jobs overseas is un-American. Others rightfully point out that some overseas labor markets can be exploitative and contrary to American sensibilities. In addition, the potential for a communication gap is said to be one of the demerits of outsourcing. The person who the work is outsourced to may not be familiar with a particular culture and that lack of understanding could reflect in the work performed. When confidential data is outsourced, it raises the question of data protection, as data protection policies differ. Many countries may not even have proper controls in place. The need for Internet access is essential, and if there happens to be a problem or an outage at the place where some emergency work is outsourced, that could lead to losses for the person outsourcing. Last but not the least, when offshore outsourcing is given, the difference in time zones can be a potential hazard. Companies face a lot of issues while trying to send jobs to cheaper locations. Many of them have to do with employee resentment towards outsourcing while other concerns revolve around ethics of outsourcing at the vendor location. Offshoring forces Americans to compete with foreign workers by undermining their competitive advantage which is their physical presence in the United States (Roberts, 2010). Another negative aspect to offshore outsourcing that has been under discussion for a long while now revolves around the loss of work to people from the hiring company’s country. They consider it a threat to their economy. If an American is outsourcing work offshore, this is believed to be work taken away from another American who could have done that job for them. Offshore service processing has become increasingly popular in recent years. Studies show that an estimated $28 billion dollars is outsourced annually (Lohr, 2008). With the increase in service trade, outsourcing has played a major role in America’s record high unemployment rates. The Department of Labor reports that more than one in three workers who are displaced remains unemployed, and many of those who are lucky enough to find jobs take major pay cuts (U.S. Department of Labor, 2011). Corporate America's short-term mentality, stemming from bonuses tied to quarterly results, is causing U.S. companies to lose their best employees. Employees displaced by foreigners and left unemployed or in lower paid work have a reduced presence in the consumer market (Robertson, Lamin, & Lavanis, 2010). In addition, they provide fewer retirement savings for new investment. The American’s quality of life is reduced which, in turn, directly impacts the U.S. economy. The manner in which the hospital or healthcare provider handles the release of its employees can also be an ethical matter. All too often, employees are not aware of their imminent termination until the axe has fallen. In some cases, displaced workers are asked to train their replacements, which is humiliating and disrespectful. Some employees have been forced to either work extra hours or face an earlier termination. Gordon and Zimmerman give the following example of how an offshore venture can negatively impact terminated employees: The last employees leave their office building. The functions that they had performed for years have been offshored to India where people do the same jobs while getting paid 90% less and without benefits. Many of the US employees had been with the firm for decades. The announcement of the changes was sudden and the transition took place in a matter of weeks. To add insult to injury, top executives of the firm announced that they would receive their highest compensation packages yet for the fiscal year just ended.
While this example is fairly common these days, it still exemplifies the unethical treatment of employees who are forced to join the vast numbers of unemployed Americans that have experienced job loss due to outsourcing. Medical billing and transcription are vital parts of a hospital's operations. The need to have accurate, timely transcription of reports in addition to accurate coding and billing is essential not only for communication among healthcare providers treating patients, but also for defense of medical malpractice suits, and satisfaction of regulatory requirements. Yet transmission of confidential medical information outside of hospital walls places an obligation on the hospital to ensure that the vendor protects the confidentiality of such information, especially given the heightened focus that HIPAA places on privacy of medical information (Davino, 2011). The HIPAA Privacy Rule establishes national standards to protect individuals’ medical records and other personal health information and applies to health plans, health care clearinghouses, and those health care providers that conduct certain health care transactions electronically. The Rule requires appropriate safeguards to protect the privacy of personal health information, and sets limits and conditions on the uses and disclosures that may be made of such information without patient authorization. Similar to the privacy rule, the HIPAA Security Rule establishes national standards to protect individuals’ electronic personal health information that is created, received, used, or maintained by a covered entity. The Security Rule requires appropriate administrative, physical and technical safeguards to ensure the confidentiality, integrity, and security of electronic protected health information (U.S. Department of Health & Human Services, 2011). The University of California at San Francisco Medical Center fell victim to the misuse of medical records through an offshore transcriptionist. On October 7, 2010, a Pakistani woman contacted UCSF via email claiming that she was owed funds for services rendered. She demanded that UCSF pay her, or she would expose all voice files and patient records of UCSF on the internet. To back up her claim, she attached two dictation reports from two different patients. UCSF, who was unaware of any outstanding debt, ultimately paid the woman, and she agreed to renege on her threat (Davino, 2011). The UCSF case is an example of the ethical implications that can follow a bad business decision. Offshore workers may come at a lesser price, but it is very likely that they are less trained. The intricacies of outsourced medical billing are immense. Many coding jobs in the United States require certification. This certification signifies that the billing specialist is familiar with current rules and regulations. In addition to certification, U.S. medical coders are expected to take continuing education courses. Once medical billing is outsourced, it is completely out of the hands of the hospital or physician’s office. There is no way of knowing who is actually processing the claims and the level of education attained by that processor. Often times, the hospital is not aware of mistakes until it is too late. Communication problems are a big concern with offshore outsourcing. Offshore service providers are located in different time zones from the client making it difficult to resolve issues in a timely manner. In addition, there is often a communication barrier. Even if a patient is contacting a local hospital regarding a billing error, the hospital will need to communicate with the offshore billing department to remedy the situation. If the patient contacts the department directly, language barriers can lead to frustration and dissatisfaction. With today’s credit score ramifications attached to unpaid medical bills, it is necessary to be able to communicate with those in charge of dispute resolution. A recent study found that customers who contacted offshore service centers were unhappy with the service they received, which resulted in those customers taking their business elsewhere. For those companies, the cost of losing repeat customers became far greater an expense than the money saved using offshore outsourcing call centers (Miller, 2004). A hospital or provider has a duty to provide quality care to its patients. This includes productive and reliable customer service. When comparing offshore outsourcing of medical business practices to that of a non-health industry, tax preparation seems to have the most similarities. In the past few years, more and more CPA’s and Accounting firms in the U.S. have begun outsourcing their tax-compliance work overseas and to India in particular. ValueNotes Research estimates that in 2011, 1.6 million US tax returns totaling $200 million will be prepared from India in a 4-month period. Returns preparation is expected to lead the way for a host of other accounting services that can be effectively outsourced to India. These estimates are conservative and the potential is as high as 22 million returns that could go to India (ValueNotes, 2011). This trend has experienced a tremendous growth due to the varied advantages such as reduced costs, speedy delivery of completed returns and the ability to focus on higher margin services such as tax consulting and tax and estate planning. Like the healthcare industry, the offshore outsourcing of tax preparation must conquer some obstacles. The secure transmission of highly classified information, the training of offshore employees, the treatment of confidential information, and overcoming communication barriers are all issues that are shared by the two fields. The biggest concern for offshore tax preparation is the transmission of confidential client information, such as a Social Security number, over the internet. Identity theft has become a sore issue, costing billions of dollars in losses each year. Tax preparers, as well as others sending sensitive personal data offshore for processing, must take notice of the emerging legal landscape to protect identities. Fortunately, tighter security controls have been implemented due to the growth in e-filed tax returns. Secure data facilities, private networks, firewalls, and sophisticated data-encryption techniques now mitigate online privacy and security concerns about outsourcing (Robertson, Stone, Niederwanger, Grocki, Martin, & Smith, 2005). Some offshore locations have started requiring clients to upload their files to a 128-bit server which uses Secure Socket Layer (SSL) encryption. Files are then downloaded, read, analyzed, and the necessary work is completed before they are uploaded back to the SSL encrypted server. Although the transmission of data is never completely secure, these measures ensure that the preparer is taking an aggressive stance on information security. In addition to heightened security measures, the CPA Code of Professional Conduct has criteria that must be met when CPA firms outsource tax preparation services to foreign countries. First, the CPA must disclose the use of a third party service provider to the client. Second, the CPA must supervise the third party provider. The CPA Code of Professional Conduct also states that members in public practice shall not disclose any client information without the specific consent of the client. If the client refuses to consent, the CPA should provide the service without the use of a third-party provider (Robertson, Stone, Niederwanger, Grocki, Martin, & Smith, 2005). Many large CPA firms send tax work to Chartered Accountants in India. Chartered Accountants are professionals who are specially trained to work as per U.S. tax laws. They keep themselves updated through ongoing classes conducted live by tax professionals well versed in these laws. Also, through the internet, the professionals are in touch with the changes taking place (Robertson, Stone, Niederwanger, Grocki, Martin, & Smith, 2005). Utilizing the skills of Chartered Accountants ensures that qualified people are processing the returns. The accountants follow a well-defined quality control process that enables timely and error-free tax compliance. While processing tax returns, experienced chartered accountants compare all relevant data with source documents, highlight discrepancies, if any, classify each item, and evaluate the taxability factor – keeping in mind current U.S. Government policies and regulations. Rigorous quality checks are carried out for data accuracy and the completed returns are sent to clients for review, along with our observations. Feedback is taken into consideration before the final tax returns are dispatched for submission (Consystent, 2010). Outsourcing tax-preparation services overseas can also improve service by speeding the delivery of completed returns. Tax information can be transmitted instantaneously around the globe. In addition, the differences between United States and Indian time zones means that a return sent overseas for preparation in the afternoon can be completed after hours (daytime in India) and downloaded by the U.S. CPA the next morning. Finally, because outsourcing overseas moves tax preparation to a mostly web-based system, it can significantly reduce the volume of stored paper files (Robertson, Stone, Niederwanger, Grocki, Martin, & Smith, 2005). While some providers and hospitals have transitioned work overseas without negatively impacting employees and patients, the majority have ethically impacted those involved in the process. There are no established policies regarding the transmission of highly confidential medical data. The accuracy of the work is not audited on a regular basis. The customer service offered to those dealing with medical billing issues is lacking and frustrating. In addition, the training of those performing the business office functions is questionable. In order for the healthcare industry to move forward, they must evaluate the process. Fortunately, they can look to look to the finance industries for guidance. Given our global economy, offshore outsourcing is inevitable. Most big companies do much of their business overseas and naturally want to have some of their employees in those markets. Lower wages in some countries are also a huge incentive to move operations, especially since high-speed communication removes many of the barriers to dealing with U.S.-based colleagues and customers. However, with the growth of outsourcing looming around the corner, further action must be taken to protect the interests of those affected by the changing business environment. The trustworthiness of offshore outsourcing for any type of private or personal identifying data has now become an issue in the public mind and for the United States businesses that hire offshore service providers. Foreign legislation criminalizing abuses of such data will serve the public interest of the foreign government. As offshore service providers compete for outsourcing customers, the lack of data protection, privacy and identity theft laws can only defeat legitimate efforts to solicit transaction processing business. For foreign contractors providing tax preparation services or other privacy-related data, such new laws would serve to educate the public and provide assurance of security relying on foreign governmental enforcement of foreign laws that criminalize the same wrongful conduct. In late 2003, NASSCOM announced they were working on a proposal for privacy legislation, but enactment is still to come (Semerdjian, 2005). Most international outsourcing agreements specify that the service provider will disclose all subcontracting of the work. As a political policy, one might argue that taxpayers as well as medical patients, bank depositors, insured individuals making claims and all others protected by U.S. privacy laws should be entitled to know who does their work. Such disclosure might be appropriate not only because of possibility of some perceived increased security risk, but also for tax law enforcement purposes. Offshore outsourcing in the healthcare industry is currently lacking an ethical foundation. The negative impact of moving work overseas currently outweighs the positive. However, this can change with the implementation of strict guidelines, rules, and regulations. An example of the benefits of outsourcing can be seen in the financial sectors. Now it is up to the healthcare industry to take heed and make the necessary changes.

References
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