Cognizant Acquires TriZetto To Expand Health-Care Offerings

Cognizant will acquire TriZetto in an effort to continue serving hundreds of thousands of health-care providers and customers across the country through its signature IT services, the company said Monday.

For $2.7 billion, Cognizant representatives said they expect the acquisition to close in the company’s fourth quarter.

In a call with investors Monday, Cognizant's CEO Francisco D'Souza said there is a potential for revenue of about $1.5 billion over the course of the first five years with the Englewood, Colo.-based TriZetto, which works to assist health-care organizations with enhancing their administrative efficiencies and improve the cost, quality and delivery of care. Working with more than 350 health plans, TriZetto solutions reach nearly 245,000 health-care providers.

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Cognizant plans to roll TriZetto’s 3,700 employee business into its operations, which already service 16 of the top 20 U.S. health plans and four of the top five pharmacy benefit management companies.

D'Souza said due to the impending changes coming down from the U.S. Affordable Care Act, health-care providers are looking to streamline their businesses and find efficiencies. Health care currently represents approximately 26 percent of Cognizant's revenue, which leads to opportunities for the company.

"This is a very unique moment in the health-care industry. Our health-care clients are looking at how they build the winning business models of tomorrow," he said. "They're grappling with new regulations, grappling with shifting demographics of an aging population, dealing with new digital technologies and, overall, dealing with this very significant changing industry landscape. Against that backdrop, what we're seeing is our health-care clients are looking for an integrative technology and services partner which will allow them … to run more efficiently and … take advantage of the market and drive that top line."

He added that with this recent acquisition, he hopes Cognizant and TriZetto create a $3 billion integrated "leader of the health care market."

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A significant portion of the U.S. economy is spent on health care -- an estimated $2.7 trillion annually. Cognizant representatives said structural changes, such as exchanges and high-deductible health plans, drive the need for new solutions. Health-care constituents need integrated technologies and services to drive efficiency and innovation to meet a changing landscape, the company said in a press release.

D'Souza noted in the call, TriZetto touches approximately half of those insured in the U.S. and stressed "Software-as-a-Service’ greatly reduces the administrative burden for providers. He said both companies are looking to the future of IT operations in the health-care field. He touted the "As-a-Service" solution as a way to combine services, software and analytics, for a modern adaptable approach.

"TriZetto shares this vision. We're clear on their objective," D'Souza said. "This is the winning business model of tomorrow. We're excited to create new opportunities for our clients."