I had a chance to talk to Larry Bridge, SVP Healthcare Strategy at Cognizant about the sector and how healthcare vertical solutions have evolved in his 30+ year career.
Every industry is unique, but it would seem the healthcare vertical, particularly in the US, is truly unique. Is that why mainstream technology vendors struggle to get much traction here?
We always say the healthcare market has evolved rather than engineered. I think that brings a lot of the complexity to it that everybody who plays in it deals with.
We get this, I'll bet, 20 times a year where one of our big partners from banking and financial services, says, "Hey, healthcare is a big, growing business. We've got a play to make," and they can't wait to have a meeting. They want to end the two-hour meeting with a go-to-market plan. Five meetings later, almost the glassy-eyed, overwhelmed look that you get from the, "I didn't know it was this complex," "I didn't know it changed so often."
They walked in day one saying, "This will be a great two-hour meeting, and we're going to walk away with access to a $3 trillion market," and in fact, a dozen meetings later, well, not only are they no further than they were, but it's kind of stymied based on the complexity.
Whether it's Oracle, whether it's Salesforce which has invested a lot in healthcare, whether it's Google and Apple - a lot of investment in healthcare is taking place. The nontraditional vendors certainly are building healthcare specific solutions but, in every case, what we have found is they lack depth of industry specificity, knowledge, subject matter expertise, compliance. Compliance is huge in healthcare, CMS security rules, HIPAA, the new CMS interoperability rules that just got published. Well, they actually aren't even published. The rule just got passed and now they're determining the details around it for implementation in 2020.
The complexity of healthcare, I think, has kept some of the more generic platform solutions from really gaining traction in healthcare. It's not that they don't have good assets and we use all of them in combination with our core systems, but it's still the industry-specific cores that are ruling the day.
Remember the Affordable Care Act came back several years ago? Then it was all going to be done away with and we were going to repeal and replace. Well, that didn't happen. Now there are the new CMS transparency rules. All of these changes require changes to the underlying platforms and services
What you have to put into these systems from a regulatory and compliance perspective is huge and to keep up with it, the new rules, making sure you're HIPAA compliant. The whole security side of things when you're dealing with healthcare data. The chain of control and the sign-offs that you have from people that can access certain types of data at certain times. All very complex and evolving; I think that's one of the unique things that applies across all three of those customer groups.
How do you segment the large industry opportunities?
I break it into, generally, three big client groups. Each one of those client groups has a core platform, and it's very specific to what they do
In the hospital and health systems, it's the big EHRs, the electronic health records. Cerner and Epic Systems are the top two. Allscripts is number three. They're the ones that really dominate in that area. Now, we will help install Epic and Cerner and other EHRs and we sell services into that segment, but we don't own a software platform there.
If you move to the other side, payers, insurance companies, that's where we dominate with our Facets and QNXT solutions. Epic does have a payer core system offering that's tied into its EHR called Tapestry, but the only place that really wins is if the health plan is part of a big health system that is already on Epic. Then they'll use Tapestry to extend into the insurance side of the business, but it's much less functional than what you would get from our core payer systems.
Then there are office-based physicians. Their core system would be the practice management system. You may have heard of, and maybe you're familiar with, eClinicalWorks, Greenway Health and companies like that. They are all PM vendors. There are literally hundreds of them that are out there. In fact, 300+ of the PM vendors are our partners. If you think about a provider practice with anywhere from two to, let's call it, 50 physicians, everything around not only having your practice management system but submitting your claims, reconciling to your accounts receivable system, what comes back, handing rejections, things like that. Almost everybody is buying a revenue cycle management and EDI service to go with it. These are things we (Cognizant) sell using those channel partners.
We also do revenue cycle management in hospitals and health systems. That is pure services as opposed to the software. We work with the software they have and provide those services around it.
How has Cognizant's healthcare business and market evolved?
When you think of Cognizant's healthcare business, particularly when it comes to some of these core platforms, the real driver here was the acquisition of TriZetto (5 years ago) and the use of TriZetto's platforms as core operating systems for health insurance companies.
TriZetto's platforms, two big ones, Facets and QNXT, are like SAP would be to a manufacturing company. It's essentially the core engine that the company runs on. Selling software in that area was TriZetto's history. We still do that as part of Cognizant.
Now, we're bringing them to market increasingly with Cognizant, as part of Cognizant and its platform-based solutions. It is the TriZetto software platforms, but it's services around it as well. I would say that probably our new clients are probably evenly split between those who want to license the software to those that want it as part of a more comprehensive, end-to-end platform-based solution. It's definitely trending toward the latter, particularly for specialized lines of business like Medicare Advantage where people are really looking for a business outcome, as opposed to just the software.
The place where Cognizant has the software that really dominates is in the payer and health insurance market. The larger payers, the larger health insurance companies--Aetna, United, Cigna, companies like that--by and large are software buyers. They will also buy a lot of services, but they generally don't buy the complete end-to-end solution whereas, when you move down the line to the midsized and smaller buyers, it's just the opposite. They're almost always buying an integrated platform-based solution, and especially when they get into things like a new line of business like Medicare Advantage.
If I were a midsized insurer and I sold generally to employer groups, employer-based insurance, and I decided to get into the Medicare business, which, for insurers, it's called Medicare Advantage, it's Medicare Part C, there is a whole new host of rules, regulations, reporting, compliance, submissions, reconciliations, everything you would have to learn to get into that business and perform successfully. For anybody smaller than the largest companies out there, to figure that out, to build up the department, the compliance team, to go through the work, I mean they would pay double compared to having somebody like us bring an integrated solution to them.
When we bring an end-to-end client on, on one of our Medicare Advantage platform-based solutions, right off the bat we save them about 30% to 40% compared to them doing it themselves. Then, over time, say over a five- to seven-year contract, they'd end up paying about half having us do it as opposed to them trying to do it themselves just because there's so much that you have to do in terms of rules, regs, subject matter expertise, configuration, submission back and forth to the government, and so on. In that market, it is very much an integrated services and software play in the middle to small plan size. It's still a software play up at the larger side.
What's it like to be a software company like TriZetto inside a big services company like Cognizant?
TriZetto was a fairly large software company - about $800 million of revenue when it was acquired. There was enough heft to the company that allowed the software business to sustain
It's been a blending of cultures. Software brings you repeatability, scale, but you have a lot less opportunity to customize your solutions than you would if you're a pure services company. I think that finding the balance between the two was a key part of a successful integration.
What we found out, I think, is that we're well positioned to bring the best of both markets. We can serve all the segments, and it really allows us to go in and tailor the solution based on their need. If you're one of those larger companies, if you have an IT shop of 2,000 people, and you're really buying 50 software products and then knitting them together yourself to develop what you think is the best solution, fantastic. We're happy to sell you the software and support you in doing that.
If you're a mid or a small company and you're trying to get into a line of business or you're trying to figure out your business going forward and you don't have the scale, you don't have the subject matter expertise, you don't have the infrastructure, then our integrated software and service solutions, our platform-based solutions, as how we refer to them, are the best. We can serve both, so I think it's been a very positive combination for Cognizant, but also for TriZetto as well.
It depends on who you look at, but I think everybody -- the larger -- if you take the largest players and probably the biggest competitors in the healthcare market, you'd be looking at Cognizant, you'd be looking at Accenture, and you'd probably be looking at Optum, which is the software and services arm of UnitedHealthCare. If you look at all three of us, Cognizant is very much invested in that software, services, integrated solution type model where we can do everything we've been talking about. Optum is very similar. They don't have the core platform that we have, but they have so many of the surround software pieces and the consulting and the things like that. They're coming in very much with that, "I've got software. I've got services." We find Optum does a lot of work around our platform and the things that augment.
Optum is a partner of ours. They're a client. They're a competitor. We partner with Optum on certain pieces of software that enhance the services we offer. Optum is definitely investing in that software, services, consulting type combination, as we are.
Accenture leads with consulting services and strategy. They partner with a number of different software vendors. I haven't seen the investment from them in healthcare software that either Optum or Cognizant has made but, in the end, through partnerships, they're still trying to deliver across that spectrum.
We think we have an advantage because we own the entire suite, including the core systems on the payer side that gives us that edge. But I think you'd find us very similar to the others, for instance, in the provider and health system market. None of the three of us that I mentioned owns a core health system software asset, but we're all building services around software around capabilities and consulting around the provider market.
What disruptive changes do you foresee?
If you think of healthcare broadly, and this is at the highest level, for every dollar spent on healthcare, $0.85 goes to actually providing care, so the doctors, the hospitals, the drugs, the treatment, and $0.15 goes to administering care, managing the provider office, running the health insurance company, things like that.
Almost everything that we've done in the past has been focused on that $0.15. How do you make the administration more efficient? How do you make it more seamless? How do you help the day-to-day operations run differently?
We are pivoting to expand into the cost of care area. How do we bring value-based care models or bundled payment models to market efficiently? What technology? Think of us as taking technology and applying it to the care side.
Companies like Optum are also expanding into this area. Optum is buying up provider practices. For us, we probably, at least right now, do not want to be in the “Hands-on patient” services, but there are a lot of things we can do to help that care delivery process take place more efficiently.
We can help bring these new care models to market. We can provide the tools that allow for digital engagement. A member using their mobile phone to stay active and involved in their healthcare. How that mobile phone connects to a connected device that measures lung function and heart function and breathing and exercise and things like that. There are a lot of technology-based solutions we can do on that cost of care side.
The second thing is looking at the real impact of newer forms of technology and what it can do to deliver a better healthcare model. Two big ones that come to mind: AI and Blockchain. Artificial intelligence; we all read about it every day. We hear about it. A lot of hype.
Well, there's a handful of use cases in there, virtual clinical assistants for the providers as an example. If I'm a doctor, I'm at the point of care, and I'm diagnosing a patient with a specific disease, do I need to rely 100% on my medical knowledge to tell that patient what to do? What if I had a real-time virtual clinical assistant that could tell me what the best practice is around this type of disease, what kind of drugs, what type of follow-up, what type of specialist might want to be involved? That concept, even to the point that they act as chatbots and are learning and consulting with the doctor, if you will, at the point of care, that's just one tiny example of a very valid use case in healthcare.
The second is blockchain. It's probably the most overhyped technology out there. Out of the hundred use cases that might apply to healthcare, there's probably four or five that make sense. But - those four or five can be game-changers. The way they change the way workflow happens within healthcare, what it can do to dramatically reduce cost or to improve security or to improve accuracy.
There are two key examples. We've got teams focused on both of these areas, healthcare AI and healthcare blockchain, that have done well and scaled, have the potential to really define some key things going on. Emerging technology, as it applies to healthcare, as well as addressing technology-based solutions for the cost of care, those are two big areas of expansion that we see opportunity and are investing in.
