Topic: Everest Group PEAK Matrix TM for Healthcare Payer ITO Service Providers

Transcription

1 Topic: Everest Group PEAK Matrix TM for Healthcare Payer ITO Service Providers Focus on Cognizant September 2013 Copyright 2013 Everest Global, Inc. This document has been licensed for exclusive use and distribution by Cognizant

2 Introduction and scope Everest Group recently released its report titled IT Outsourcing in Healthcare Payer Industry Service Provider Landscape with PEAK Matrix Assessment and Profile Compendium This report analyzes the changing dynamics of the payer ITO landscape and assesses service providers across several key dimensions. As a part of this report, Everest Group updated its classification of 12 service providers on the Everest Group Performance Experience Ability Knowledge (PEAK) Matrix for payer ITO into Leaders, Major Contenders, and Emerging Players. The PEAK Matrix is a framework that provides an objective, data-driven, and comparative assessment of payer ITO service providers based on their absolute market success and delivery capability. Based on the analysis, Cognizant emerged both as a Leader and a Star Performer. This document focuses on Cognizant payer ITO experience and capabilities and includes: Cognizant s position on the payer ITO PEAK Matrix Detailed payer ITO profile of Cognizant Buyers can use the PEAK Matrix to identify and evaluate different service providers. It helps them understand the service providers relative strengths and gaps. However, it is also important to note that while the PEAK Matrix is a useful starting point, the results from the assessment may not be directly prescriptive for each buyer. Buyers will have to consider their unique situation and requirements, and match them against service provider capability for an ideal fit. 2

3 Payer ITO service provider landscape: Background and scope of the research Background of the research The healthcare industry witnessed a rapid increase in the IT and business process outsourcing adoption in recent years. Regulatory reform, consumerization of healthcare, market consolidation, and emergence of new technologies accelerated outsourcing in the healthcare market. In order to cater to this growing market segment, a number and variety of service providers developed capabilities. With healthcare companies stepping up adoption of outsourced delivery, there is an uptick in demand for research and market intelligence on demand and supply trends in healthcare outsourcing, across the three major market segments payer, provider, and life sciences. The need is more pronounced for the vertical-specific IT Outsourcing (ITO) function, where business challenges are driving greater adoption. Everest Group s healthcare outsourcing research program addresses this market requirement by analyzing outsourcing trends and service provider capabilities specific to ITO in the healthcare vertical. In this report, we analyze the capabilities of 15+ ITO service providers specific to the global healthcare payer sector. Twelve of these service providers are mapped on the Everest Group Performance Experience Ability Knowledge (PEAK) Matrix, which is a composite index of a range of distinct metrics related to a provider s capability and market success. We focus on: The landscape of service providers for healthcare payer ITO Assessment of the service providers on a number of capability-related dimensions Characteristics of the Leaders, Major Contenders, and Emerging Players on the Everest Group PEAK Matrix Implications for healthcare payers and service providers Scope of this report Industry: Healthcare payers (public and private health plans) Services: Large (TCV > US$25 million), multi-year (>three years), and annuity-based IT outsourcing Geography: Global (though with a skew towards the U.S. payer market, given dominant market activity) Sourcing model: Third-party ITO transactions; excludes shared services or Global In-house Centers (GICs) 3

4 This report examines the service provider landscape for large annuity contracts in the healthcare payer ITO market Payer Private health plans Public health plans Life sciences Pharmaceuticals Medical devices Biotechnology Others 1 Healthcare Provider NOT EXHAUSTIVE Large health systems Standalone hospitals/clinics Pharmacists Physician practices Diagnostic labs Focus of report Services industry IT Infrastructure Outsourcing (IO) IT Application Outsourcing (AO) Business Process Outsourcing (BPO) Consulting Traditional IO Remote Infrastructure Management (RIM) Infrastructure Management Services (IMS) Cloud Applications development Applications maintenance Independent testing Package implementation ERP services Business intelligence / data warehousing BFSI-specific BPO HRO FAO PO Contact center Knowledge services IT strategy / operations consulting Business consulting Infrastructure consulting Infrastructure roll-outs This report assesses ITO service providers in the payer vertical with a focus on large (TCV > US$25 million), annuity-based, and multi-year (>three years) relationships 1 Includes healthcare data and information services and medical products distribution 4

5 From a landscape of 30+ service providers, Everest Group assessed twelve service providers for their capabilities in payer ITO space on the Everest Group PEAK Matrix Service provider outreach (partial list) Service providers assessed on PEAK Matrix Criteria for inclusion in the assessment Success in large payer ITO relationships, i.e., >US$25 million TCV >three years relationship duration Active as of December 31, 2012 Everest Group s experience and RFI response Assessment based on: RFIs submitted by service providers 1 Everest Group Transaction Intelligence database Service provider disclosures and interviews Everest Group s interaction with payer buyers 1 Assessment for Accenture and IBM is based on Everest Group s proprietary Transaction Intelligence (TI) database, service providers disclosures, and Everest Group s interactions with payers Source: Everest Group (2013) 5

6 Market success These service providers were mapped on Everest Group s Performance Experience Ability Knowledge (PEAK) Matrix Service providers assessed PEAK Matrix assessment dimensions Everest Group PEAK Matrix Leaders Major Contenders 5 Emerging Players Delivery capability 1 Scale Domain Scope investments Delivery footprint These service providers cumulatively represent ~75% of the global large-sized payer ITO transactions 1 1 Contracts that have a TCV of more than US$25 million and are active as of December 31,

7 Market success (Transaction activity) 25 th percentile 75 th percentile Cognizant is positioned as a Leader on the Everest Group PEAK matrix for payer ITO Everest Group Performance Experience Ability Knowledge (PEAK) Matrix for payer ITO 1 High Major Contenders 75 th percentile Dell Services Leaders Cognizant Accenture Leaders Major Contenders Emerging Players Star Performers Infosys 2 TCS CGI IBM Fujitsu Hexaware Virtusa Syntel HCL Low Emerging Players Low 25 th percentile Delivery capability (Scale, scope, domain investments, and delivery footprint) High 1 PEAK Matrix specific to large (>US$25 million TCV) multi-year (>three years) IT outsourcing relationships within the payer sector (i.e., public and private health plans) 2 Infosys officially reports its payer revenue under BFSI. For the purposes of 2013 PEAK Matrix evaluation, Infosys payer revenue have been considered under healthcare; Infosys 2012 positioning was based on estimates derived from numbers Infosys reported under the healthcare industry Note: Assessment for Accenture and IBM excludes service provider inputs and is based on Everest Group s proprietary Transaction Intelligence (TI) database, service provider public disclosures, and Everest Group s interactions with payers Source: Everest Group (2013) 7

8 Market success Additionally, Cognizant is also identified as a 2013 Star Performer based on its strong forward movement on the PEAK Matrix Methodology Everest Group selects Market Star Performers based on the relative YoY movement of each service provider, on the PEAK Matrix Leaders Cognizant Major Contenders Capability Distinguishing feature of 2012 market success Top quartile performance in overall revenue growth in 2012 driven by strong renewal activity Strong traction witnessed across different buyer segments (based on size of buyers) Entrenched its presence in the top U.S. payers, with established engagements in 15 out of the top 20 payers Distinguishing feature of 2012 capability advancements Added over a 1,000 payer ITO FTEs in 2012 Over 8,000 resources trained and certified in the payer domain Enhanced domain capabilities through key investments in the payer space such as the MediCall acquisition and proprietary solutions such as ClaimSphere HEDIS Reporting 8

9 Cognizant Payer ITO profile (page 1 of 6) Corporate and healthcare overview >US$500 million US$ million <US$100 million Company description: Founded in 1994, Cognizant is a provider of information technology, consulting, and business process outsourcing services. Cognizant derives over 26% of its revenue from healthcare; other industries served include BFSI, manufacturing and retail, and logistics. The company serves its global customers through its dedicated nearshore and offshore development and delivery centers, primarily located in India, China, United States, Canada, Argentina, Hungary, Mexico, and the Philippines Headquarters: Teaneck, New Jersey, United States Website: Geographical mix FY 2012; US$ million Europe Service mix FY 2012; US$ million 100% = 7, % = 7,346 Others 4.3% 16.3% 79.4% North America IT Outsourcing 49% 51% IT consulting & technology services Scale of healthcare subverticals Payer Life sciences Provider Key financial parameters Revenue figures in US$ million Revenue 1 from healthcare Revenue 1 from other verticals Enterprise operating margin 18.5% 18.6% 18.8% 7,346 6,121 1,935 4,592 1,622 1,177 3,415 4,499 5,412 FY 2010 FY 2011 FY 2012 Services offered for the healthcare vertical: Application services across the payer, provider, and life sciences segments. Services for the payer segment include ICD-10 transition, healthcare reform compliance, health analytics and BI, claims processing, managed care product configuration and implementation, privacy and security, quality and claims auditing and reporting, and legacy systems modernization Major healthcare clients: HealthNet, AstraZeneca, Pfizer, Merck, Eli Lilly, and Pistoia Alliance 1 FY ends on December 31 Source: Everest Group (2013) 9

10 Market success (Transaction activity) Cognizant Payer ITO profile (page 2 of 6) Payer ITO capability assessment and market success Headline assessment Cognizant positioned itself as a global Leader in the payer ITO services showing strong growth even on a large revenue base. To maintain this growth momentum, it is looking to expand beyond the North American market. Transaction success Average TCV of ~US$100 million for large-sized payer ITO deals Major payer ITO clients: 15 of the top 20 payers Everest Group PEAK Matrix for payer ITO High Major Contender Cognizant 2012 Leader Cognizant Success dashboard 1 Payer subsegments Public health plans Private health plans High Medium Low Geographic scope North America EMEA Latin America APAC Emerging Player Low Low Delivery capability High (Scale, scope, domain investments, and delivery footprint) Scale Strong focus on healthcare with over 26% revenue (US$1.9 billion) from the healthcare vertical With over US$800 million revenue from payer ITO, Cognizant is the largest among offshore majors for payer ITO Over 15,000 FTEs engaged in delivering payer ITO services Domain investments Proprietary solutions for ICD-10 transition, claims management, audit/processing, health records, etc. Alliances in areas such as claims, ICD-10, network management, fraud detection, health portals, HIE, EMR, BPM, CRM with vendors such as PEGA, EDIFECS, HealthEdge, InterSystems, Microsoft, SAP, and Oracle Scope Primarily serves private health plan clients Geographical scope of contracts is primarily the United States Services include infrastructure services, ADM, testing, and DW/BI Equal mix of revenue from large and small deals Strong focus on transformational deals including various aspects Delivery footprint Payer ITO services mainly delivered from India Delivery presence in Shanghai in China, Toronto in Canada, Manila in the Philippines, and Phoenix in the United States 1 Transaction success for large-sized deals Source: Everest Group (2013) 10

11 Cognizant Payer ITO profile (page 3 of 6) ITO domain investments Proprietary solutions (representative list) Line of Business Solutions Payer Claims Audit: End-to-end solution for the claims audit process ClaimsCop: Solution covering detection of fraudulent claims, subsequent investigation, and recovery process ClaimSphere Analytics: Suite of payer analytics focusing on the cost of care, membership analytics, utilization management etc. ClaimSphere HEDIS: NCQA-certified HEDIS solution with standard analytics to identify care opportunities ecaremanager: Care management solution to offer member identification, stratification and care manager workflows, interventions, assessments, outcome analysis, and E2E analytics ehealth Framework: Payers self-services portal and framework to offer self-services to members, providers, groups, and brokers Enrolment and membership pre-processing framework: Payers enrolment solution to address paper and electronic enrolment processing and convert the data to EDI 834 Enterprise managed care services library (emcsl) Framework: SOA services and Process flow framework addressing areas such as membership, enrolment, claims, and ProvidersmyHealthLog, a personal Health records solution, which integrates data from multiple sources RTClaim Framework: Real-time claims adjudication services to support implementations at payers, providers, and TPAs T10 Suite for ICD-10: Cognizant s tool suite enabling ICD-10 compliance Drug Switch Tool: Helps pharmacists identify the low cost therapeutic drug alternates for a member, based on their prescription details Source: Everest Group (2013) 11

12 Cognizant Payer ITO profile (page 4 of 6) ITO domain investments Acquisitions Target Date Capabilities added MediCall October 2012 Acquisition of the U.S.-based medical management services firm with operations in the Philippines provides Cognizant a significant presence in the space IP investment Certifications Ongoing To build reusable IP, platforms, tools, and frameworks around ICD-10 compliance, care / patient management, payer/provider analytics, mobility, and BPaaS/cloud services Ongoing Training and certification in domain areas such as AHP, HL7, DICOM and various technology platforms (.NET, Java, J2EE, IBM, EAI tools, etc.) Key alliances (representative list) Alliance partner (Several) Purpose of alliance Alliances in joint go-to-market programs, implementation services and centers of excellence in areas such as claims, ICD-10, network management, fraud detection, health portals, HIE, care management, HIS/EMR, EDI, EAI, BPM, and CRM Vendors include PEGA, HealthEdge, InterSystems, Microsoft, SAP, Oracle, EDIFECS, VUE, Plexis, Kony, NetApp, Caradigm, etc. Source: Everest Group (2013) 12

13 Appendix 13

14 Market success 25 th percentile 75 th percentile Everest Group Performance Experience Ability Knowledge (PEAK) Matrix classifies service providers into Leaders, Major Contenders, and Emerging Players Everest Group Performance Experience Ability Knowledge (PEAK) Matrix High Major Contenders 2 nd or 3 rd quartile performance across market success and capability 75 th percentile Leaders Top quartile performance across market success and capability Emerging Players 4 th quartile performance across market success and capability Low Low 25 th percentile Delivery capability High 14

15 Market Success Service providers are positioned on the PEAK Matrix based on evaluation across two key dimensions Leaders Measures success achieved in the market. Captured through a combination of ACV/TCV/number of contracts, renewals, etc. Major Contenders Emerging Players Delivery capability Measures ability to deliver services successfully. Captured through four subdimensions Scale Scope Enabling capabilities Delivery footprint Measures the scale of operations (Revenues, Number of FTEs, etc.) Measures the scope of services provided across segments, processes, industries, geographies, etc. Measures the capability and investment in the enabling areas that help deliver better services Measures the delivery footprint and the global sourcing mix 15

16 Market success Everest Group designates the Star Performers title to providers that demonstrate the strongest forward movement over time on the PEAK Matrix Methodology Everest Group selects Market Star Performers based on the relative YoY movement of each service provider, on the PEAK Matrix Year 1 Service provider Year 0 Capability In order to assess advancements on capability, we evaluate the performance of each service provider on the PEAK Matrix across a number of parameters including: Annual growth in scale Increase in scope of services Expansion of delivery footprint Technology / domain-specific investments In order to assess advancements on market success, we evaluate the performance of each of the service providers on the PEAK Matrix across a number of parameters including: Yearly ACV growth Number of new contract signings Yearly growth in total payer ITO TCV Success with large payers Payer ITO revenue CAGR The top-quartile performers on each of the identified parameters are identified and the Star Performer rating is awarded to the service providers with: The maximum number of top-quartile performances across all of the above / left-listed parameters and At least one area of top-quartile performance in both market success and capability advancement Market Star Performers The Star Performers designation relates to YoY performance for a given service provider and does not reflect the overall market leadership position. Those identified as Star Performers may include Leaders, Major Contenders, or Emerging Players 16

17 FAQs (page 1 of 2) Does the PEAK Matrix assessment incorporate any subjective criteria? Everest Group s PEAK Matrix assessment adopts an objective and fact-based approach (leveraging service provider RFIs and Everest Group s proprietary databases containing providers deals and operational capability information). In addition, these results are validated / fine-tuned based on our market experience, buyer interaction, and provider briefings Is being a Major Contender or Emerging Player on the PEAK Matrix, an unfavorable outcome? No. PEAK Matrix highlights and positions only the best-in-class service providers in a particular functional/vertical services area. There are a number of providers from the broader universe that are assessed and do not make it to the PEAK Matrix at all. Therefore, being represented on the PEAK Matrix is itself a favorable recognition What other aspects of PEAK Matrix assessment are relevant to buyers and providers besides the PEAK Matrix position? PEAK Matrix position is only one aspect of Everest Group s overall assessment. In addition to assigning a Leader, Major Contender, or Emerging Player title, Everest Group highlights the distinctive capabilities and unique attributes of all the PEAK Matrix providers assessed in its report. The detailed metric level assessment and associated commentary is helpful for buyers in selecting particular providers for their specific requirements. It also helps providers showcase their strengths in specific areas What are the incentives for buyers and providers to participate/provide input to PEAK Matrix research? Participation incentives for buyers include a summary of key findings from the PEAK Matrix assessment Participation incentives for providers include adequate representation and recognition of their capabilities/success in the market place, and a copy of their own profile that is published by Everest Group as part of the compendium of PEAK Matrix providers profiles 17

18 FAQs (page 2 of 2) What is the process for a service provider to leverage their PEAK Matrix positioning status? Providers can use their PEAK Matrix positioning rating in multiple ways including: Issue a press release declaring their positioning/rating Customized PEAK Matrix profile for circulation (with clients, prospects, etc.) Quotes from Everest Group analysts could be disseminated to the media Leverage PEAK Matrix branding across communications ( signatures, marketing brochures, credential packs, client presentations, etc.) The provider must obtain the requisite licensing and distribution rights for the above activities through an agreement with the designated POC at Everest Group 18

19 Everest Group Leading clients from insight to action Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research, and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies, and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations, and private equity firms in six continents across all industry categories. For more information, please visit and research.everestgrp.com. Dallas (Corporate Headquarters) info@everestgrp.com Toronto canada@everestgrp.com India / Middle East india@everestgrp.com New York info@everestgrp.com London unitedkingdom@everestgrp.com Stay connected Websites Blogs