Making the Most of Digitized Healthcare Data

TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

Making the most of digitized healthcare

Insights from TBR’s 1Q14 Healthcare IT Services Benchmark

July 17, 2014

TBR

2 TBR HITS Benchmark Webinar | 1Q14 | www.tbri.com | ©2014 Technology Business Research Inc.

Healthcare IT Services Quarterly Benchmark Readout: Presenter

Joseph WalentLead Analyst, Healthcare IT ServicesProfessional Services Practice

Email: [email protected] Twitter: @JDWalent

mailto:[email protected]

TBR


TBR’s healthcare IT services reports deliver unique insight and value through in-depth analysis in a concise, consumable format

TBR Healthcare IT Services Overview

Clients gain advantages and a better understanding of revenue opportunities through our reports and their personal relationships with TBR

• TBR continually covers 20 vendors in its Healthcare IT Services Benchmark.• Of those vendors, we publish five healthcare IT services (HITS) company reports, focusing on the

HITS businesses of Accenture, CSC, Dell Services, HP Services and IBM Global Services.• The healthcare activities of eight other firms are covered in TBR’s overall IT services quarterly and

semiannual reports on CGI, Cognizant, Deloitte, General Dynamics, HCL, Infosys, Leidos and Xerox.• TBR’s Healthcare IT Services Benchmark includes the activities of Allscripts, Cerner, CPSI, Epic,

Harris, McKesson and NextGen.o TBR reports are unique due to their deep, holistic analysis of leading vendor businesses.o Financial modeling and TBR insights help customers build a better understanding of vendor

business models.o TBR reports and webinars are designed to be responsive to client time lines, to be clear and

concise, and to provide insights across multiple layers of an organization.o TBR’s strategic assessment provides an impartial reality check on how vendors are performing in

their strategic objectives and the overall market.

TBR


Healthcare IT Services Quarterly Benchmark Readout: Agenda and Format

Today’s Agenda

1. Key fiscal results from the 1Q14 benchmark

2. Strategic actions: M&As, alliances, portfolios

3. Where is the market headed? 2014 outlook

4. Q&A

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Healthcare IT Services Quarterly Benchmark Research Highlights

Healthcare IT Services Benchmark Highlights for 1Q14

Balancing portfolios: M&As, alliances, internal

Around the bend: HITS market focus areas

Solid vertical demand: Recent fiscal results

Continued evolution of demand in the various segments of the HITS marketplace expanded the scope of opportunities for vendors in 1Q14

SOURCE: WWW.THINKWITHGOOGLE.COM

SOURCE: WWW.INETU.NET

SOURCE: WWW.TREKEARTH.COM

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The healthcare provider segment will remain the central revenue engine in the majority of HITS vendors’ business models in 2014

Declining federal subsidies for IT implementation in healthcare contributed to softening demand for HITS solutions


8.8% 8.9%8.6%

8.0%

6.0%

9.7% 9.3% 9.4%

8.6%

7.9%

0%

2%

4%

6%

8%

10%

12%

1Q13 2Q13 3Q13 4Q13 1Q14

Gro

wth

%

Calendar Quarter

Average Growth (YTY TTM Revenue & YTY Quarterly Revenue) for HITS Vendors

Average YTY Growth Average TTM YTY Growth

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SOURCE: TBR ESTIMATES AND COMPANY DATA

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A maturing market encouraged HITS vendors to develop and implement mission-specific solutions to secure market share

Vendors that focused on niche HITS solution delivery fared better than their generalist counterparts in 1Q14


Accenture CGI

Cognizant

Harris

Cerner

Allscripts

Infosys

Leidos

Deloitte Epic

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-20% -10% 0% 10% 20% 30% 40%

Ope

rati

ng M

argi

n TT

M

Healthcare IT Services Revenue TTM Growth YTY

1Q14 HITS TTM Operating Margin and Revenue Growth

NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE. SOURCE: TBR ESTIMATES AND COMPANY DATA

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9.4% Avg. Healthcare IT Vendor TTM Growth YTY 13.2% Avg. Healthcare IT Vendor TTM Operating Margin

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HITS revenue growth leaders are expanding their presence in new segments and pursuing international opportunities to drive growth


Healthcare IT Services TTM Revenue Growth Leaders in 1Q14

• Logica acquisition masked the negative impact of loss of HealthCare.gov and Massachusetts Health Connector engagements.

• Opportunities captured in Europe offset setbacks in the U.S. public sector.

• Focus on systems for large-scale U.S. provider market continued to generate leading growth rates.

• Expanded presence in federal and consumer healthcare IT markets in 1Q14.

26.3% in 1Q14

25.7% in 1Q14

29.9% in 1Q14

• Internal development of proprietary solutions for business process outsourcing (BPO) and IT outsourcing (ITO)

• Aggressive pursuit of engagements in public sector, payer and life sciences segments

Other vendor revenue growth leaders in 1Q14: Deloitte (23.1%), Cognizant (19.9%), Cerner (17.7%)

Infosys

CGI

Epic

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HITS operating margin leaders employed a variety of strategies to secure top spots for profitability


Healthcare IT Services Operating Margin Leaders in 1Q14

• Expanding offshore labor pools • Introduction of automated service delivery to maximize resource utilization

• Near-exclusive focus on the small and midsize provider community combined with efficient use of technology helped preserve profits.

• Expiration of federal incentive payments for HITS adoption will weigh on CPSI’s business in coming quarters.

25.6% in 1Q14

23% in 1Q14

24.7% in 1Q14

• Strong market position with premium price points coupled with exclusivity on customization of systems

• Leverage of C&SI firms for lower-value implementation and integration work• Epic’s push to generate additional analytical insights for clients will increase

value and improve profitability.

Other operating margin leaders in 1Q14: Cerner (22.3%), Cognizant (19.4%), Infosys (17.8%)

HCLT

Epic

CPSI

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HITS vendors are adjusting their offerings as healthcare industry clients widen their use of IT-enabled solutions


Healthcare IT Services Segment Trends in 1Q14

Payer: HITS vendors are supporting payer clients with patient engagement solutions such as patient portals and population health management tools that help members make positive healthcare decisions.

Provider: Healthcare providers are moving to a collaborative healthcare system where IT system interoperability is critical to improving quality of care and patient outcomes.

Life Sciences: Life sciences IT vendors are generating analytics offerings that provide capabilities to help drive insights around drug discovery or biological manufacturing.

Federal: Growth of the federal healthcare segment decelerated as financial outlays for the implementation of the Affordable Care Act (ACA)-mandated health insurance exchanges diminished.State and Local: As part of the ACA, states are revamping Medicaid Information Management Systems, creating opportunities for vendors such as Xerox and HP.

SOURCE: WWW.DAC-LAW.COM

SOURCE: WWW. CPRNETWORK.CA

SOURCE: WWW. XCONOMY.COM

SOURCE: WWW. OCCASIONALPLANET.COM

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Balancing portfolios: M&As, alliances, internal



Broader access to HITS solutions affords HITS vendors opportunity to secure wallet share from clients




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Gaining IP to facilitate the delivery of a wider range of HITS services and capabilities influenced 1Q14 acquisitions


Healthcare IT Services Vendors: Key Mergers and Acquisitions in 1Q14

Cloudant: As healthcare becomes increasingly personalized, access to Cloudant’s Database as a Service (DBaaS) capabilities will provide IBM GS an attractive offering that caters to developers creating mobile and Web apps.

ISG Holdings: Xerox’s acquisition of ISG’s established medical bill review, care management services and analytics solutions will enhance Xerox’s healthcare provider BPO portfolio. Xerox

IBM

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HITS vendors engaged in alliances to deepen portfolios and extend market reach


Healthcare IT Services Vendors: Key Alliances and Partnerships in 1Q14

Texas A&M Health Science Center: Dell and Texas A&M partnered to create a health technology academy that will provide healthcare professionals specialized information technology education.

Amazon Web Services: The partnership will result in the development of healthcare cloud solutions that leverage Amazon’s public cloud offerings and CSC’s cybersecurity, cloud management and electronic health record (EHR) system integration capabilities.

Apple: Epic’s MyChart will integrate with Apple’s HealthKit, allowing consumers to feed their biometric information into the application, increasing Epic’s direct exposure to the healthcare consumer.

CSC

Dell Services

Epic

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Healthcare IT services vendors focused internal development efforts on improving efficiency and security of healthcare organization operations


Healthcare IT Services Vendors: Key Service Announcements in 1Q14

FusionFX: Harris released its long-awaited EHR integration platform enabling the efficient exchange of patient information through its patient portal interface.

ConvergeHealth: Deloitte launched a transformational business unit focused on delivery of outcome-based solutions by providing data-driven consulting services.

Managed Mobile Services: The expansion of McKesson’s HITS portfolio to include a mobile device management solution addresses the security concerns of provider IT departments that are stretched thin.

Deloitte

Harris

McKesson

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Balancing portfolios: M&A, alliances, internal



Changes in how healthcare is delivered and results are measured will spur solution development for HITS vendors in 2014




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Healthcare IT Services Vendor Trends for 2014 — Patient Engagement

HITS vendors will enhance patient and member communication solutions to deliver more personalized medical treatment


Challenges• Shift to outcome-based remuneration, placing more risk

with providers.• Personalization of healthcare plans and strategies

requires flexibility and interoperability in healthcare data exchange.

Opportunity• HITS vendors with experience in development and

implementation of retail customer contact solutions will translate offerings to healthcare patient case management strategies and solutions.

• Integration of security within solutions across platforms and access points will stand out in the marketplace.

SOURCE: WWW.SNAPCOMMS.COM

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Healthcare IT Services Vendor Trends for 2014 — Convergence and Consolidation

Expanding regulatory requirements and demand for more coordinated care are changing the payer and provider landscape


Challenges• Expansion of the payer and provider model across

various states with varying insurance regulatory structures and requirements

• Maintaining protected health information (PHI) while simultaneously improving information liquidity

Opportunity• Consumer-oriented healthcare delivery will encourage

leverage of economies of scale.• Improved population health data enables improved

preventive healthcare delivery.• Solutions limiting internal sharing of certain healthcare

data in converged organizations

SOURCE: WWW.WORKLIFECHAMPIONS.COM.AU

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Healthcare IT Services Vendor Trends for 2014 — Management of Chronic Conditions

Solutions for managing secure communication across accountable care organizations will be in demand from HITS vendors in 2014


Challenges• Chronic conditions such as diabetes, asthma and

heart disease consume the majority of healthcare delivery spend globally.

• Expansion of healthcare coverage in the U.S. increases demand for healthcare infrastructure for chronic condition management.

Opportunity• Development and implementation of remote

monitoring and telemedicine delivery capabilities via cloud and mobility solutions

• Vendors with international HITS delivery have greater exposure to in-home medical delivery models effective in chronic condition management.

SOURCE: WWW.DIABETESMINE.COM

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Questions?

Healthcare IT Services Quarterly Benchmark Research: Questions

TBR


Joseph WalentLead Analyst, Healthcare IT ServicesProfessional Services Practice

Email: [email protected] Twitter: @JDWalent

James McIlroy Vice President of SalesEmail: [email protected]: 603.929.1166

Twitter: @TBRincSlideShare: www.slideshare.net/TBR_Market_InsightYouTube: www.youtube.com/user/TBRIChannelLinkedIn: www.linkedin.com/company/technology-business-research

Healthcare IT Services Quarterly Benchmark Research: Contact Information



https://twitter.com/TBRinc

http://www.slideshare.net/TBR_Market_Insight

http://www.youtube.com/user/TBRIChannel

https://www.linkedin.com/company/technology-business-research

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Healthcare IT Services Quarterly Benchmark Research: Appendix

Accenture CGI

Cognizant

CSCHarris

CernerIBM GS

HP Services

Allscripts

Infosys

Dell Services

Xerox

Leidos

NextGen

McKesson

Deloitte

General Dynamics

EpicHCL

CPSI

-20%

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0%

10%

20%

30%

40%

50%

60%

-20% -10% 0% 10% 20% 30% 40%

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Healthcare IT Services Revenue TTM Growth YTY

1Q14 HITS TTM Operating Margin and Revenue Growth

NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE. SOURCE: TBR ESTIMATES AND COMPANY DATA

TBR

9.4% Avg. Healthcare IT Vendor TTM Growth YTY 13.2% Avg. Healthcare IT Vendor TTM Operating Margin

TBR


PSP Syndicated Research CoverageIT Services Vendors Public Sector Vendors Benchmarks

(Benchmark XLS data also available)• Accenture• Atos• Capgemini• CGI*• Cisco Services• Cognizant• CSC• Dell Services• Fujitsu• HCL Technologies• HP Services• IBM Global Services• Infosys• T-Systems• Tata Consultancy Services• Unisys• Wipro IT Services• Xerox Services

• Booz Allen Hamilton*• CACI International*• General Dynamics IS&T*• L-3 Communications*• Leidos*• Lockheed Martin IS&GS*• ManTech*• Northrop Grumman IS&TS*• Raytheon Intelligence, Information & Services*• SAIC*

• Global Delivery Market Landscape • Healthcare IT Services Vendor Benchmark• IT Services Vendor Benchmark • Management Consulting Benchmark• Public Sector IT Services Vendor

Benchmark• Software Alliance Benchmark

Healthcare IT Services Vendors

• Accenture HITS*• CSC HITS*• Dell HITS*• HP HITS*• IBM HITS*

Management Consulting Vendors

• Bain & Company*• Booz & Company*• Boston Consulting Group*• Deloitte Consulting*• McKinsey & Co.*

TBR Professional Services Practice Syndicated Coverage

*Semiannual publication

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