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BPO firm CBay sets up unit in Bangalore

Subir Roy in Bangalore

CBay Systems Ltd, an NRI-promoted US-based healthcare business process outsourcing company, has opened a Health Insurance Portability and Accountability Act -compliant data and process centre in Bangalore.

It has also simultaneously announced the acquisition of a one-third stake in Arrendale Associates of North Carolina, which is both a technology and service provider in healthcare business process outsourcing and a partner of CBay for two years.

V Raman Kumar, chairman of CBay Systems, said these moves are aimed at putting CBay in place to grab a share of the HIPAA-compliance business.

"HIPAA is a $24 billion opportunity that will unfold over five years. Gartner has declared it to be greater than Y2K," adds Kumar.

The HIPAA of the US will come into force over the next two years with security and privacy provisions becoming operative next year (2003) and electronic data interchange provisions the year after (2004).

The US has brought in this legislation to standardise the electronic recording and transmission of medical records so as to speed up the process of payment to healthcare service providers by managed care organisations and eventually insurance companies while ensuring the security and secrecy of such data.

CBay, which began in 1999, has grown rapidly to reach a turnover of $ 5.1 million in 2001. In the current year, it expects to clock $20 million and has set a target of $55 million for 2003. This exponential growth will be made possible through the new business that will be front-runners among HIPAA-compliant healthcare BPO companies as the entire US healthcare system switches over to the new system of recording and handling medical data.

CBay broke even last August and is targeting a net margin of 24 per cent on turnover and a profit after tax of 15 per cent. This has enabled it to get an additional round of venture capital funding of $2.5 million each from two hedge funds Kingdom Capital and Baupost. The first round of funding came from, among others, Godrej Industries and Mascot Systems.

Total funding now stands at $14 million and at the last round of funding, when turnover was $5.1 million, investors valued the company at $28 million. The promoters own a 28 per cent stake.

CBay has 50 employees in the US and 150 employees in India, along with 2000 certified medical language specialists who constitute its franchisee network.

Kumar, who originally belonged to the Indian Revenue Service (1984 batch), left it to take an MBA from Yale and eventually started CBay. He attributes the success of his medical transcription business, compared to the trouble many Indian companies have faced, to his business model.

It does not own back offices. And is primarily based in the US where marketing and software architecture designing is undertaken. In India, CBay's own operations handle the software development, while the transcription work is done by its franchisees.

"We will own 6-7 mega centres only when the business comes of age," says Kumar.

CBay attributes its success in the US to its cost advantage, quality assurance and technological distinctiveness that also leads to cost reduction. Hospitals do not have to buy costly dictation equipment when switching over to CBay.

CBay's additional technological advantage is it provides a secured data transmission system using the public Internet highway with the data residing in its servers and not the world-wide web. Its software has been standardised to work on open platforms and uses defence grade encryption technology.

The end-to-end solution for dictation, transcription and document management is provided by products owned by CBay and its joint venture partner Arrendale Associates.

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