Monday, December 6, 2004

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So does this count as "good" outsourcing?

Whenever I talk to critics about offshore outsourcing, they tell me that the claim by proponents that offshoring addresses the problem of a skills shortage in the U.S. is bogus, that there are more than enough tech workers here to perform the necessary tasks. I don't think that holds for the late 1990's, when offshoring and the H1-B visa craze started, but that's neither here nor there. The point is, they argue that firms have no compelling need to to outsource offshore since the set of necessary skills resides in the United States.

Beyond the IT sector, however, there do appear to be instances where offshoring is a necessary and effective means of accessing a labor supply of specialty skills for which there is a shortage in the United States. Lindsey Tanner reports in the Associated Press of one example in radiology. The highlights:

When a patient in Altoona, Pa., needs an emergency brain scan in the middle of the night, a doctor in Bangalore, India, is asked to interpret the results.

Spurred by a shortage of radiologists in the United States and an exploding demand for more sophisticated scans to diagnose scores of ailments, physicians at Altoona Hospital and dozens of others are outsourcing work.

Over the past few years, the number of nighttime emergency cases was swamping Altoona's seven radiologists.

"Somebody was waking up all night to cover all this extra work," said Dr. Richard Wertz, a radiologist. And while that doctor was groggy, "we didn't have the luxury of that guy taking the next day off."

Using radiologists halfway around the world where it is daytime, "solves that problem for us," Wertz said.

Such moves are part of the telemedicine trend, with technology enabling the speedy transfer of medical data over the Internet to a compatible computer anywhere in the world. That means radiologists in Australia, India, Israel and Lebanon are reading scans on U.S. patients.

Despite fears of some doctors, advocates insist offshore radiology is not stealing U.S. jobs and replacing them with unqualified cheap labor. Most of the doctors are U.S.-trained and licensed, though Indian radiologists generally earn about a tenth of the estimated $350,000 median salary for those in the United States.

More typical is the Altoona situation, which involves doctors such as Arjun Kalyanpur. A U.S.-licensed and credentialed radiologist, Kalyanpur got his postgraduate training at Yale University and runs a two-man service in southern India.

The Pennsylvania hospital is among 40 that use Teleradiology Solutions....

In recent years, demand has far exceeded the supply of radiologists in the United States. A trade journal reported this year that an average of four vacancies existed for each radiology department at American academic centers since 2002.

Two questions on this:

1) I know nothing about the supply and demand of different medical specialties -- is the statement about there being a drastic shortage ofradiologists an accurate one?

2) Assuming that the answer to the first question is "yes," would traditional opponents of outsourcing concede that this case looks like a standard trade story that clearly provides value added to the United States?

UPDATE: This might be the most bizarre twist on outsourcing I've seen yet -- Europeans emigrating to India to work in offshored call centers (thanks to N.D. for the link)

posted by Dan on 12.06.04 at 05:00 PM


But even if there is a "shortage," it is not carved in stone that there will always be a shortage...there is some curve of radiologist supply vs radiologist income...maybe at $500K instead of $350K, supply would equal demand. If one takes a dynamic and long-term view, I'm not sure there really is such a thing as a "skills shortage."

posted by: David Foster on 12.06.04 at 05:00 PM [permalink]

A trade journal reported this year that an average of four vacancies existed for each radiology department at American academic centers since 2002.

Let's try that again:

A trade journal reported this year that an average of four vacancies existed for each radiology department at American academic centers since 2002.

There could be radiologist-friendly trade journals, and there could be radiologist-employer-friendly trade journals. If the "shortage" is based on the latter's interpretation, the real "shortage" might be of cheap radiologists.

Perhaps a lawyer could discuss venue in the case of a suit against an Indian radiologist. If they make a mistake, are you going to have to travel to India to sue them?

posted by: / Lonewacko on 12.06.04 at 05:00 PM [permalink]

Once the infastrucutre is in place to pick up "exccess" demand -- What's going to stop offshore comapnies from taking the whole pie? American doctors can't compete on price. America doesn't really need high tech software companies or radiologists anyway, cause we always got _______ ? I really want someone to outsouce punditry. Seriously, how hard is it to write the crap you find in the WingnutStandard or TechHackStation.You couldn't do any worse outsourcing it. Since 4+ years of negative job growth isn't enough to convince people something significantly is changing, only when the idiots lose their jobs to somebody across the world, will they start to consider "things are different".

posted by: Jor on 12.06.04 at 05:00 PM [permalink]

Briefly, I consider the "state of affairs" to be the realignment of power in the post Soviet/Bloc era. That's post Super Power Era. That includes economics. Realignment.


HELPING THE TROOPS: Reader Ron Ford sends this very comprehensive list of support-the-troops websites...

posted by: polltroll on 12.06.04 at 05:00 PM [permalink]


Shortage of radiologists I'm not qualified to answer, but the other facet of the question presented in the article that you didn't ask I can - optimizing time-critical response through leveraged global resources.

Everyone automatically assumes outsourcing is about moving detailed work overseas and using the commensurate cost reduction as market advantage, and certainly it is in the majority cases. But a significant minor percentage is also about delivering 24/7 support and administration where local resources are often unavailable 24/7.

The scenario played out where a medical patient needs intelligent diagnosis in off-hours where local expertise is out of normal working hours is one I typically find in the engineering and IT industries. Here our consideration for using outsourcing is as much, and sometimes more, about delivering concurrent execution in design and critiacl systems support as it is taking advantage of the cost reductions of offshore labor. It is about support for global execution and the rational cuts all ways. As my project resources (people and tools) are used globally yet executing locally it can be as true that the US provides off-hour support to India as vice-versa. Yes the people cost of resources to provide this support is less in India. I note that and this allows me to offer a lower extended rate for this service than US-only resources. Yes, it helps me be more competitive. But most importantly it allows me to offer a 24/7 service I couldn't otherwise offer effectively.

posted by: Jon on 12.06.04 at 05:00 PM [permalink]

Linked, with commentary.

posted by: David Foster on 12.06.04 at 05:00 PM [permalink]

There is no shortage of US radiologists, although there may be a misdistribution. Doing 24/7 coverage in rural markets is tough.

The teleradiology services are available in the US, although at the US market price.

This is about profit margin, the docs are still billing the insurers full price, while paying the overseas docs a lower rate.

The problem comes when the rad tech turns and says, "how should I position the patient for these images" and there is no radiologist to answer the question. While your brain is bleeding the doc in India is of no immediate help.


posted by: Tom Ealey on 12.06.04 at 05:00 PM [permalink]

On the emmigration to India. The europeans seem to be 'sojourners', i.e. kids that were travelling around India or wanted to see India and needed a few bucks. This is quite common -- I am sure of lot of the audience here has done the backpack thing and met Aussies etc who have been on the road for a year or two, working in bars, restaurants, etc. The call center thing adds a new twist.

The US would have less immigration problems if we would let some of this pool of sojourners do 'the jobs Americans won't do' (at prevailing wage). A six month work visa for OECD countries' under 26's might work.

posted by: stari_momak on 12.06.04 at 05:00 PM [permalink]

350 grand is the _median_ for radiologists? Daaaaamn. Why didn't I listen to my parents and become a doctor.

posted by: tc on 12.06.04 at 05:00 PM [permalink]

Remember that next time you hear a doctor bitch and moan about how put-upon doctors are these days. That calls for the world's tiniest violin if anything does.

posted by: Steve LaBonne on 12.06.04 at 05:00 PM [permalink]

Yeah Steve, that 10 years in college and $500k in student loans is just an externality.

posted by: Peter on 12.06.04 at 05:00 PM [permalink]

I wonder a bit about this; I would think a second, verifying opinion in the medical profession, to be a positive hting, and thereby while it can be used in a shortage situation, this technology will not be going away if and when that shortage is dealt with.

posted by: Bithead on 12.06.04 at 05:00 PM [permalink]

"Yeah Steve, that 10 years in college and $500k in student loans is just an externality."

Hey, even then, they've got it easy.

Consider the guy who gets $50,000 in student loans for a computer science degree then can't get a job over minimum wage...

posted by: Jon H on 12.06.04 at 05:00 PM [permalink]

Just as an aside, if the guy with the CompSci degree had asked me, any time in the last 10 years, I'd have told him to save his money... the tech industry still values skills over sheepskin and you don't really get that in college.

But my main point... in this particular case I find it concerning from a patient perspective. What happens if the radiologist in Bangalore mis-diagnoses a tumor, a sinus blockage, or even a simple fracture?

You'd think that the hospital would be the person to sue for relief, but that's not the case... many doctors work on contract and the hospital itself is not liable. So who do you sue? Certainly in this case, the radiologist is outside any conceivable jurisdiction.

posted by: Tony on 12.06.04 at 05:00 PM [permalink]

Stari: We do have a "sojurner" program like that. Loads and loads of Irish come in on the J-1 work visa every year... I'm sure other nationalities do it too.

posted by: Tony on 12.06.04 at 05:00 PM [permalink]

Having been in this business a bit, I have a couple of comments:

(1) Most doctors can (and do) diagnose images themselves on screens for a variety of medical issues. They often use radiologists to protect themselves from liability, not for some special expertise. The AP article is focusing on areas in which radiologists need to help doctors. This is not true of all applications, like a generic sports injury analyzed on an MRI, in which a radiologist will still read the pictures even though the doctor is probably equally if not better qualified to make the diagnosis. Even if there is no shortage of radiologists, the doctors are improving a large and expensive inefficiency in medical service.

(2) The Europeans being recruited to India, it makes perfect sense to me. One of the biggest obstacles to Indian firms gaining share in the European outsourcing market is the lack of Western language skills beyond English. Call centers in Eastern Europe or Ireland, organized by American and European companies, were getting the revenue because Indian firms were not competitive. Because of the large market opportunity and the skills the Indian firms are developing in managing call centers, technology, and corporate processes, it makes sense that Indian firms would import the skill to access the second-largest outsourcing market.

posted by: Ben on 12.06.04 at 05:00 PM [permalink]

As for the shortage of radiologists, it certainly exists in the United Kingdom, partly for what I think are similar reasons as in the US. What follows comes with the proviso of being anecdotal, but based on my experience of working in a Trust Hospital here in the UK.

Radiological technology has advanced in leaps and bounds in recent years, and various types of scans are now far more frequently than ever they were. Not only do you have the humble (though extremely useful) X-ray, but CT, MRI, and ultrasound (not to mention the rarer PET). All are used very regularly. Then you have not just simple scans, but procedures (like biopsies) guided by some of these devices. All this takes up Radiologists' time, and (as yet) not enough are coming through to fill the extra demand and replace the retiring crop.

Now, geographical spread is certainly part of it - in more rural areas/hospitals the effects are most acute, as one would expect. More urban large hospitals are less likely to feel the pinch. But the shortage - that I can well believe.

posted by: Lewis Maskell on 12.06.04 at 05:00 PM [permalink]

Outsourcing is essentially a negative for the US economy and it is going to stay that way. This arises because the income gained by the average worker from it stays in that country not ours. In turn the wealth does what wealth does generates a return as education, infrastructure, better health care et. al. THERE. Traditionally, some of this wealth should return here in the form of payment for more expensive wealth generating objects. This might be education, access to research not funded elsewhere and advanced goods etc. Very little of this is occuring because what has changed is the SPEED at which the flow of information changes hands and the SHORT TIME any product(especially high wealth producing goods stay on the market and it is worse with regard to intellectual property-drug patents)stays on the market. The internet is the primary reason this is happening.

The internet facilitates the transfer of information at light speed. For a poor country w/ a modicum of intellectual capital its a godsend. One Silicon Valley engineering grad returning home with a high speed link can in a very short time educate those with the apttitude and background education an enormous amount of people to coompete in the marketplace at a fraction of the cost here in the USA. On the other side the goods such as fiber cable, high speed switches produced a boom in employment here(my example is Scranton PA which in the 90's had an enormous influx of manufacturing firms of said goods from manufactures like NT, Corning Glass,etc). By 2000 these jobs all but disappeared overseas as education(tranfer of information) improved for overseas workers and capital became available to build the next generation factories.

So each time the benefit gained here becomes less and less for the average worker. Given that the USA is among the highest cost countries in the world almost every product will move away from us unless we are the least expensive. Even here it becomes a problem retaining the benefits as the number of people employed becomes smaller and smaller due to technology. Changes in work compensation rules, legal costs, environmental costs if eliminated will not bring these costs in line. Better education will help but the cost is again higher here and the knowledge accruing from it too quickly transferred to low cost sites of production.

For those whom argue that productivity and innovation create wealth you are correct. But the spread of that wealth is not in the hands of those whom do the physical or intellectual labor. It is in the hands of companies that can produce most efficiently in any part of the world. These countries are trans-national. The wealth they create may be stored in the USA but the great benefits of it are not accruing to the USA population.

The real problem that remains is how and can the USA adjust internally so that the wealth created remains for our benefit.

posted by: Robert M on 12.06.04 at 05:00 PM [permalink]

My simple thoughts: You may not care that the person reading your radiological tests is beyond the reach of laws protecting you from malpractice and dr. incompentence, but I do. I'm not at all comfortable with a doctor who cannot be punished for missing something obvious and thus causing me irreperable harm doing this work. I want the opportunity for redress, especially in the possible case of malicious and intentional malpractice. Which is not likely to be possible if the doctor is in India or possibly any nation outside of the United States.

posted by: flaime on 12.06.04 at 05:00 PM [permalink]

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