Skip to content Skip to navigation


July 20, 2015
by Mark Hagland
| Reprints
Cognizant's TriZetto acquisition speaks volumes about where accountable care is headed

It’s not as though no one was paying attention to the Teaneck, N.J.-based Cognizant before September 2014. After all, the company had already been making waves as a provider of IT services across many industries, with an already-significant presence in the health insurance world.

Still, the announcement that Cognizant (number 5 on the Healthcare Informatics 100 list, with $2,689,427,000 in U.S. healthcare revenues in 2014), was acquiring the Englewood, Colo.-based TriZetto for $2.7 billion in cash was seen as some in the industry as a harbinger of things to come, as the concepts of managed care, population health, and accountable care, begin to blend together, with health insurers and providers collaborating to manage patient’s care, and as providers take on more financial risk, in the broad effort to improve outcomes and cut costs in U.S. healthcare.

As a report in Bloomberg Business put it  on Sep. 15, the day the news broke, “Cognizant, one of the largest providers of outsourcing services, is tackling its biggest-ever acquisition to bulk up in information technology that helps providers streamline processes, improve the cost and quality of care and cope with an industry overhaul. The takeover follows Cognizant’s 11 percent share decline this year, driven largely by the company reducing its annual revenue forecast in August because of tech-service deals taking longer to close.”

Meanwhile, in a Sep. 17, 2014 analysis of the acquisition announcement entitled “How Cognizant’s TriZetto Deal Could Trigger the Next Wave of Consolidation in the IT Services Industry,” Harichandan Arakali wrote in the International Business Times online, “There is an accelerating shift in customer expectations: they want vendors to move from merely deploying software packages and maintaining them to implementing technology solutions that solve real business problems and provide additional value, such as insights that can drive new revenue streams.”

In addition, Arakali wrote, “TriZetto’s cloud-based software-as-a-service platform for hospitals accounts for about 20 percent of its revenues, Cognizant's president Gordon Coburn told analysts on a call on Sep. 15, after the deal was announced. Further, including software licenses for packages used by insurers, about 60 percent of TriZetto’s sales represents recurring revenue, he said.” What’s more, Arakali wrote, “Cognizant is setting the pace in acquiring the intellectual property in terms of software around which its... services team can go where Indian outsourcing services providers have never gone before.”

Krish Venkat, president, Global Healthcare & Life Sciences, at Cognizant, says the acquisition of TriZetto fits in perfectly with the company’s broader trajectory. “What Cognizant is trying to do is obviously synchronize to where we believe the industry is heading, and where the various participants in the healthcare ecosystem are making their moves,” he says. “When you look at changes in the Affordable Care Act, they’re forcing many changes: the lines are blurring between payers and providers; a lot of consolidation is occurring; a lot of providers are taking on more risk to fully become health systems; and there’s a lot of consolidation on the payer side as well.”

Venkat says that while Cognizant was already all in, in terms of the provision of IT services for health insurers,  “One of the things we didn’t have in our repertoire, as late as last year—one aspect we see emerging, and we didn’t have the full suite of product offerings—when we look at large and small customers and those in between, we look at the challenges we have in terms of what is imposed on them under the ACA [Affordable Care Act], in terms of the administrative costs and medical loss ratios. And many health plans are operating with dated technologies—and they have a smaller footprint, and want to have the support of somebody with a much larger challenge.” In other words, he believes that many health insurers, in order to expand their capabilities in their markets, will need the kinds of enabling services that the combined Cognizant/TriZetto can offer.

Observers See Opportunities