Will UK and US Offshore Surgery?
Will UK and US Offshore Surgery?
Date: Wednesday, October 08, 2003 11:40 AM
JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
All Mr. Bloggs wanted was to have his gall bladder surgery done in a
good USA hospital but his insurance company refused to pay for it
unless agreed to go to a cheap clinic in Honduras. This scenario might
seem to be far-fetched until you hear what's going on in the United
Kingdom. Recently a delegation of Indian doctors went to London to
convince British Prime Minister Tony Blair's medical advisers on the
virtues of flying surgery patients from the United Kingdom to Mumbai
for low cost surgery.
Just wait until profit hungry U.S. HMO's hear about this!
What happens if, for instance, US health-insurance providers
cotton to the fact that an unwilling Joe Bloggs could be flown
to Honduras, say, to have his gall-bladder surgery, and that his
airplane fare (charter, of course, to take a planeload of surgery
patients at a time) and lodging could cost half or a tenth what it
costs at Sinai Mercy Omni-Surgery in Middletown, USA? The
insurance
company, like the British National Healthcare Service, would
contemplate that the out-of-control cost of medical care in the
United States is going to stabilize, no matter how much Mr Bloggs
would prefer to have his gall bladder incised at home - especially
if their pharmaceutical costs descend as well.
http://www.atimes.com/atimes/South_Asia/EJ08Df03.html
South Asia
The rich world's disappearing jobs
By John Berthelsen and Indrajit Basu
If the North American Free Trade Act passes, "you will hear a giant
sucking sound of jobs going south of the border". - H Ross Perot, 1992
In the developed world and particularly in the United States, the scope
of jobs disappearing overseas is widening beyond all imagining, to
professions that almost nobody expected to be hit, and with far higher
incomes than anybody thought possible as globalization bonds with the
law of unintended consequences.
The catalyst is the Internet. As instant communication becomes more
ubiquitous, the developed world's white-collar professions, from
CAD/CAM (computer-aided design/computer-aided manufacturing) to
accounting to medicine to architecture to aircraft design to research
and development to engineering to equity research and financial
management to knowledge management to revenue-cycle management - a
whole panorama of high-income employment - are inexorably going.
The impact on American and European society is inevitably going to be
far more profound than almost anyone understands today. It is already
responsible for major positive changes in the living standards of the
middle class in other parts of the world.
The United States currently accounts for as much as 70 percent of the
world's "outsourcing", as it is called, or sometimes offshoring.
McKinsey & Co, the international consulting firm, projects that the
flight of jobs offshore to developing countries will grow by 30-40
percent a year over the next five years. By the highest estimates, as
many as a million jobs have disappeared overseas from the US job market
since the current economic slowdown began in 2000 and could represent a
major reason for the struggle the US economy is undergoing to right
itself.
McKinsey puts the number lost from the United States at a much lower
400,000 today, but expects it to grow to as many as 3.3 million by
2015. The business-consulting firm A T Kearney Inc projects that half a
million jobs, or 8 percent of total employment by banks, brokerage
houses and insurance companies, will go overseas within five years.
But to show how extensive the phenomenon can be, consider some of the
more unlikely developments over the last three months:
India is emerging as the health-care destination of choice for an
increasing number of surgery candidates, with more than 60,000 foreign
patients from 34 countries treated in its top-flight Apollo Hospitals
chain in the past decade. A delegation of Indian doctors was recently
invited to London to brief British Prime Minister Tony Blair's medical
advisers on flying surgery patients from the United Kingdom to Mumbai
and or New Delhi for operative and post-operative care, allowing them
to recuperate, and flying them back to the UK far cheaper than treating
them at home. Routine cardiac surgery at the best hospitals in India
costs about US$35,000, with a success rate of 98.5 percent, compared
with about $150,000 in the United States. For more complicated problems
that cost far more than that, cost differentials are anywhere from 200
percent to 500 percent to off the chart. And India is not alone; breast
implants in Thailand from top-flight cosmetic surgeons cost as little
as 50,000 baht ($1,260) compared with a median price of about $5,000 in
the United States.
Fifteen global car makers, including General Motors, Ford,
DaimlerChrysler, Audi, Isuzu and Nissan, have set up design offices in
India with a combined budget of $1.5 billion to outsource auto design.
Industry estimates are that the cost of auto design in Europe's
exclusive Pininfarina and Bertone design houses run as high as $800 an
hour, while low-cost designers in Bangalore can do lower-level design
for $60 an hour.
India's government is in the process of liberalizing its accounting
rules under continuing World Trade Organization (WTO) negotiations on
services. In a move being closely watched by the Big Four accounting
firms - PriceWaterhouseCoopers, Ernst and Young, KMPG, and Deloitte
Touche and Tomatsu - accounting, bookkeeping and auditing services are
to be opened to overseas competition by the end of next year. Indian
firms are to be given reciprocal market access abroad. Indian
accounting costs are a fraction of those in the United States.
Fashion design is a fast-growing field in Vietnam and India; 350
domestic and international buyers came to Mumbai to look at India's
fledgling clothing fashion designs in a glitz-filled week in July.
Designer Rophit Bal is working with putative tennis star Anna
Kournikova. Ritu Beri is showing in Paris. Tarin Tahiliani has been
featured in New York's Fashion Week and is booked for a show in Milan,
the heart of Europe's fashion industry.
The US Department of Education estimates that the United States will
need an additional 2.2 million teachers over the next decade. The
Executive Recruiters Association, the representative body of
recruitment agencies in India, is urging the Indian government to
appeal to the WTO seeking an end to what they consider to be
restrictive trade practices in the teaching professions and allow more
Indian teachers into the US. Indian teachers, with excellent
English-language skills, would find an annual salary of $35,000 an
enormous amount of money. There are already some school districts from
Texas said to be recruiting in India.
This article concentrates mainly on India and is only a small specific
sample of the developed-world jobs and services that are in the process
of disappearing overseas. Canada, Ireland and Israel, with large
English-speaking populations, are also particularly attractive to
Western firms, primarily because English is widely spoken, and well.
But in other countries such as India, the Philippines, South Africa,
Ghana and Sri Lanka, English is also widely spoken, and well, and costs
are minuscule. Russia, with its well-educated tech professions, is also
a destination.
"Anywhere you have social and economic growth, any of the Third World
countries are wonderful opportunities to set up services platforms. You
can pretty much follow where the British Empire went," Marc Liebman,
president of Everest Group, an outsource consulting firm in Dallas,
told Asia Times Online. "They left strong business and physical
infrastructure behind them."
In a stunningly prophetic article, Frances Cairncross, a senior editor
at The Economist, wrote in 1993 that the communications revolution had
wrought what she called "the death of distance". In that article, she
posited that there had been three profound transport revolutions since
the 19th century, the first when the arrival of steam initiated a steep
fall in the cost of moving goods. The second came in the 20th century,
when the cost of transporting people fell to the point where vast
migrations across borders brought tens of millions of immigrants from
old Europe to the Americas, and since has resulted in massive movements
of economic refugees from the poor countries to the rich ones.
The third revolution, Cairncross wrote, would dominate the first half
of the current century. It is the diminishing cost of transporting
information. Her vision has come true even faster than she thought.
Because of fiber-optic cable, satellites and digital compression, the
transport of information can be basically free. The enormous charges
for personal calls on telephone lines across the Atlantic or the
Pacific are virtually all gravy. Once the satellite or the cable is in
place and the capital expenses are paid, there is no expense. Companies
with their own transponders on satellites have lowered their costs
dramatically.
Thus it is possible, for instance, for Fidelity Investments to put its
call centers in Ireland. It is increasingly probable that a call to any
repair service or help line will be routed not to the Midwestern United
States but overseas to the Philippines, Ireland, India or any one of a
half-dozen other locations. Indian schools are training prospective
employees to speak in American accents. Back-office processing such as
accounts receivable and payable, claims processing, revenue collection
and passenger management are not going to be done in the United States
anymore.
JP Morgan Chase, the investment-banking firm, said it plans to move
some of the work of preparing stock-market research reports to India.
The Financial Times of London has more than 100 such analysts in
Manila, entering data from company reports all over Asia into
computers, so the information can be sold as databases for investment
banks at a fraction of the cost the banks would have to pay their own
people.
"What we went through 10-15 years ago with manufacturing and
blue-collar jobs, we are now about to go through with white-collar
jobs," said Michel Jenssen, president of supplier solutions for the
Dallas-based Everest offshore consulting group. "It still takes three
to six months to ship manufacturing components offshore, less if you
can send by air. But with services, with telecommunications technology,
movement is now measured in milliseconds. You can move the work around,
you can scan images, you can move workflow to India with no more
difficulty than you move it from the San Francisco Bay Area to Texas."
It is possible, as Vivek Agrawal, who led a McKinsey team studying the
issue of offshoring and wrote a report titled "Offshoring: Is It a
Win-Win Game?" said in an interview recently with Asia Times Online,
that the departure of these jobs is healthy for American society. It
frees up capital and labor for more rewarding, or productive, or
effective jobs, Agrawal says. A JP Morgan Chase spokesman told
reporters recently that moving market research preparation to India
would get rid of number-crunching, freeing its US staff to focus on
higher-level financial analysis and spending more time with customers.
But it is hard to figure out what jobs are more rewarding or productive
or high-end, for instance, than thoracic surgery or architectural
design, or what jobs can replace them in the developed world.
Agrawal describes most of the information-technology (IT) jobs headed
offshore as relatively low-skilled. If Indians or Pakistanis or other
nationalities can do the really high-skilled jobs, he says, it is much
more likely that they would obtain visas to move to the United States
and do the jobs here - although the US government, on October 1, cut
the quota for so-called H1-B visas for skilled workers from 195,000 to
65,000. The effect of that cut is most likely to be that US employers,
unable to find people to do the jobs here, will take the jobs to where
the workers are - and pay them lots less, thus losing the multiplier
effect of their paychecks in the United States (see H1-B visas: US gets
it wrong again ).
The loss of these jobs overseas is also probably going to affect
developed-world inflation. The investment bank ABN-AMRO, in an October
3 analysis of the US economy, wrote that while a cyclical rebound in
economic activity is forecast for late 2003, "this rebound will not
produce the typical firming in underlying inflation that influenced
monetary-policy decisions and the interest-rate outlook in previous
recoveries".
That is at least partly because, while US Federal Reserve chairman Alan
Greenspan has been given credit for keeping inflation in check in the
United States over the past decade, it is equally likely that it has
been due to outsourcing and offshoring. Inflation classically starts to
pick up as households increase consumption spending and firms increase
investment spending. That tightens the labor market, which in turn
means that labor can pick and choose between jobs, and for many jobs
there aren't enough workers. Workers had the luxury of going on strike
to demand higher pay.
But since manufacturing jobs first began to go offshore with the
assembly of consumer products in the 1950s, workers from auto plants to
steel mills to the panoply of America's rust-belt industries discovered
that going on strike to demand higher pay meant their jobs could
disappear, first to Japan, then to South Korea and Taiwan, then to the
Southeast Asian countries, and then all over the world.
Now, ominously, that is beginning to happen to the middle class as
Cairncross's thesis on the death of distance starts to prove out. What
happens if, for instance, US health-insurance providers cotton to the
fact that an unwilling Joe Bloggs could be flown to Honduras, say, to
have his gall-bladder surgery, and that his airplane fare (charter, of
course, to take a planeload of surgery patients at a time) and lodging
could cost half or a tenth what it costs at Sinai Mercy Omni-Surgery in
Middletown, USA? The insurance company, like the British National
Healthcare Service, would contemplate that the out-of-control cost of
medical care in the United States is going to stabilize, no matter how
much Mr Bloggs would prefer to have his gall bladder incised at home -
especially if their pharmaceutical costs descend as well.
And they well could. In August, the multinational pharmaceutical
companies struck a deal with the WTO to create a loophole that allows
the neediest countries to override patents on expensive drugs and order
cheaper copies from generic manufacturers in exchange for a small
payment. A combination of AIDS drugs that in the United States costs
$14,000 per patient per year can be delivered for a small fraction of
that amount.
Indian pharmaceutical companies, for instance, are producing generics
for many pharmaceuticals at pennies on the dollar compared with the
cost in the United States. Even today, hordes of US consumers go to the
Mexican and Canadian borders to buy their prescription drugs.
Americans, and later Europeans, watched with equanimity starting in the
1950s when manufacturing jobs started to disappear into low-cost
factories in Asia. Only the workers who had filled these emptying
factories and the labor unions who represented them railed against the
loss of jobs. Nonetheless, while in 1950 about 35 percent of America's
labor force were engaged in manufacturing, that figure has fallen to
about 12.5 percent today.
McKinsey analyst Agrawal and the team that wrote the study argue that
offshoring is not particularly bad for the United States because at
least 70 percent of US jobs are in services that are produced and
consumed locally.
"We would argue that not only is the US fully capable of withstanding
these changes, as it will be able to create jobs faster than offshoring
eliminates them, but that the current debate misses the point
entirely." The point is, McKinsey says, that offshoring creates wealth
for US companies and consumers and therefore for the US as a whole and
is "just one more example of the innovation that keeps US companies at
the leading edge of competitiveness across multiple sectors".
Indeed. It's great for companies. McKinsey estimates that management
jobs moving offshore will rise from zero in 2000 to 288,281 by 2015.
Business jobs will rise from 10,787 to 328,281. Computer jobs going
offshore will rise from 27,171 in 2000 to 472,632 in 2015. Office jobs
- the back-shop data-entry jobs that consist of keying in data -
already projected at nearly 590,000 by 2005, will skyrocket to 1.66
million by 2015.
Ironically, many of the disappearing jobs owe their departure to H Ross
Perot, the failed US presidential candidate whose "giant sucking sound"
quote started this article and which continues to reverberate across
the United States today.
The five biggest outsourcing consulting companies in the US today are
in Dallas, Texas. Asked why, Marc Liebman of Everest said, "Because
Ross Perot was here." Perot, first with his company EDS and later with
Perot Systems Corp, pioneered data transfer and became a worldwide
provider of outsourced IT services.
According to BusinessWorld, an Indian publication, Perot Systems in
1999 entered a 50 percent joint venture with HCL Technologies of India
to create HCL Perot Systems to handle billing and claims for health
care companies in the United States. It is a pioneer in outsourcing
data overseas to cheaper labor for major corporations.
(Copyright 2003 Asia Times Online Co, Ltd. All rights reserved. Please
contact content@atimes.com for information on our sales and syndication
policies.)
Support this Newsletter and ZaZona.com by donating:
www.zazona.com/Donations.htm
To Subscribe or Unsubscribe send an email to
Back to archives