Indian pathology labs that hope to generate business from the United Kingdom may have to invest in a front-end operation there because of issues related to legal liability in the event of faulty analysis of samples.

A team of 13 chief executives of different hospitals under the UK's National Health System (NHS) visited India recently to study the healthcare delivery service. Some Indian pathology labs have worked towards using India's relative cost advantage to attract basic pathology lab business from the UK and the United States.

Indian pathology lab chains such as SRL Ranbaxy [Get Quote] and Metropolis have had their main lab accredited to the College of American Pathologists to project the credibility needed for outsourcing opportunities.

The NHS has already outsourced pathology samples to India's SRL Ranbaxy and Metropolis Health Services as part of a pilot project. The NHS team, however, felt that any meaningful outsourcing of analysis of pathology samples to India was not going to be easy in the present situation.

G S K Velu, managing director of Metropolis Health Services, said the NHS team felt that Indian entities would need a legal presence in the UK for a meaningful extent of business to flow into India.

The main obstacle to a flow of business is that authorities in the UK are uncomfortable with a situation where the pathology labs cannot be prosecuted in the event of mistakes in analysing samples.

According to Velu, one solution to the problem would be for the Indian labs to bid for the chance to manage one of the NHS' labs. A front-end entity could be set up in the UK for the purpose which, in turn, would outsource the work to the parent company's lab in India.

A challenge Indian companies face is the magnitude of investment needed to set up a front-end entity in the UK. Velu estimated that a simple front-end entity in the UK may need an investment of Rs 7 crore to Rs 10 crore (Velu forecast that Metropolis could log a revenue of about Rs 75 crore in the current financial year).

He felt that one of the positive outcomes of the NHS team's recent visit was that the collective mindset had begun to change and a better appreciation of the capabilities of top-end Indian labs had begun to grow.