Professional services company Cognizant has acquired TMG Health, a subsidiary of US insurance giant Health Care Service Corporation (HCSC), for an undisclosed price, drilling deeper into the lucrative American healthcare sector.
This is Cognizant’s second major purchase in the healthcare IT sector after it acquired Colorado-based TriZetto for $2.7 billion.
With offices in Pennsylvania and Texas, TMG provides IT and back-office services to insurance firms selling Medicare and Medicaid health plans.
Managing the IT infrastructure of healthcare providers has long been a profitable business for traditional outsourcing firms, largely because of the cost of healthcare, which accounts for 17% of the country’s GDP.
Thanks to former President Barack Obama’s Affordable Healthcare program, the American insurance sector is booming.
“Government business lines are expanding, and more payers, big and small, are entering the market,” said Susan Rawlings Molina, President and CEO of TMG Health.
“We believe there is a growing opportunity for our experienced teams to work together to help current and future clients succeed in highly regulated, cost- and compliance-driven markets.”
Two years ago, Cognizant had 200 clients in the healthcare sector. TriZetto added 245,000 clients to this roster, making the Teaneck, New Jersey-based IT firm one of the largest IT service vendors in North America.
Today, healthcare accounts for more than 25% of Cognizant’s revenue.
“Cognizant’s TriZetto Facets and QNXT healthcare claims and administration software and systems process more than 30% of the nation’s managed Medicare lives and over 60% of Medicaid lives,” said Kaushik Bhaumik, Executive Vice President at Cognizant.
Although headquartered in the US, Cognizant was founded by a Kenya-born Indian businessman Francisco D’Souza. A majority of its employees are working at its delivery centers across India.
The transaction is expected to close in the third quarter of 2017.