Cognizant (NASDAQ: CTSH) hsa provided an update on the status of its relationship with Health Net, Inc. (NYSE: HNT) and reaffirmed its 2015 guidance following the announcement that Health Net has entered into an agreement to be acquired by Centene Corporation (NYSE: CNC).
Health Net Relationship
"The announcement by Health Net and Centene is yet another example of how the healthcare landscape is rapidly changing, with increasing focus on medical costs, consumerization and a changing regulatory environment driving consolidation as well as an ongoing search for solutions that fundamentally change the business model and economics of healthcare management," said Gordon Coburn, President, Cognizant. "As we congratulate Health Net and Centene today, we look forward to continuing to partner with them to support their technology and operations requirements."
Key updates on the relationship include:
- Cognizant remains a key strategic technology and operations partner to Health Net, with the existing relationship being extended through the end of 2020 with a total contract value of approximately $520 million. This will provide ongoing support of critical Health Net applications and processes.
- The planned implementation of a seven-year master services agreement for end-to-end administrative services between Cognizant and Health Net, first announced in August 2014 and scheduled to begin in mid-2015, is being deferred while Health Net and Centene complete the merger review and approval process. Cognizant expects that if the merger of Health Net and Centene is completed, the existing master services agreement will not be implemented as there will likely be overlaps in services and capabilities planned to be provided by Cognizant.
- Cognizant has negotiated the right to license certain Health Net intellectual property for incorporation into its healthcare management solutions and as-a-service platforms.
Coburn, added, "With our extensive healthcare expertise and 2014 acquisition of healthcare software leader TriZetto, Cognizant is well positioned to capitalize on the dynamic healthcare market and offer solutions that help payers and providers evolve as a digital enterprise and change their cost structures to address customer needs and meet regulatory requirements."
Cognizant also reaffirmed its fiscal 2015 guidance, previously stated on May 4, 2015:
- Revenue is expected to be at least $12.24 billion; and
- Non-GAAP diluted EPS is expected to be at least $2.93.
"Despite the anticipated loss of approximately $100 million in incremental revenues during the second half of 2015, we are pleased to reaffirm our guidance for the year due to continued strong demand and projected over-performance in other parts of our business. Today's announcement by Health Net will not impact our ability to achieve our goals for the year," said Karen McLoughlin, Chief Financial Officer, Cognizant.