Cognizant’s healthcare counter-offensive with segmentation and GenAI a likely winner

Cognizant’s recrafted strategy, solutions connecting the healthcare ecosystem, and technology investments will drive its offensive to succeed in countering the disruptive demands of the emerging range of healthcare vertical integrations (see Exhibit 1).

Exhibit 1: Healthcare vertical integrations will be a critical vehicle to meaningfully change the current southward trend across the triple aim of care

Source: HFS Research, 2023

Healthcare vertical integrations are accelerating, exacerbating legacy challenges such as convoluted administrative processes and diminished clinical care while opening new opportunities such as streamlined administration, effective use of health data, and increased access to care to address a shifting healthcare delivery paradigm. As health plans acquire health systems and merge with pharmacy benefits managers or create new health IT and services companies, the potential of vertical integrations to positively impact the triple aim of care (i.e., reduce costs, enhance experiences, and improve health outcomes) will be enormous.

Healthcare enterprises and service providers must collaborate to realize value from an evolving landscape

Vertical integrations will pressure and disrupt the legacy health plan or provider businesses, creating opportunities for their partners and service providers. These opportunities include reimagining the value chain and business processes, enabling technologies to create new value, and creating an environment to drive outcomes instead of delivering services.

To embrace the opportunities, service providers must go back to the drawing board to understand the evolving landscape and market segments and rethink their value proposition. Additionally, buying behaviors (outcomes vs. services) and buyers (business vs. technology) are also changing, which can have a material impact on service providers.

Service providers must be bold to solve new problems, adopt new technologies beyond the marketing narrative, and explore new market segments; this will likely be the recipe for success going into the next decade and a half. Success will be reversing the trend we see in the deteriorating triple aim of care, as the cost of care continues to increase faster than inflation, six in 10 in the US have a chronic condition, and life expectancy has regressed to the levels of 1996.

We expect healthcare enterprises to drive unprecedented transformation internally and externally as they increase the adoption of technologies like generative artificial intelligence (GenA), Web3, and industry cloud with partners such as Cognizant.

Big tech, digital health, and self-insurance are driving disruption

Cognizant’s approach of the last decade and a half—addressing payer needs through TriZetto, digital transformation, and domain consulting—has led to significant growth and market presence. However, as it looks forward, it recognizes it must build on the success of the past by exploring new markets, innovating with emerging tech like GenAI, and being unafraid of solving new problems.

Market pressure, evolving consumer expectations, and the possibilities driven by emerging technologies are changing the healthcare landscape. Changes are manifesting in vertical integration (see Exhibit 1), the entry of big tech firms (such as Amazon, Walmart, and Apple), the creation of digital health (such as telehealth, remote monitoring, and primary care), and the growth of self-insured employers, to name a few. Each of these segments offers opportunities, and Cognizant has made some key strategic segment choices in addition to its legacy markets.

Recognizing the evolving healthcare market segmentation is critical to future bets

Cognizant’s segmentation strategy is to protect and preserve its presence with payers and grow faster into traditional provider markets while expanding with enablers (including PBMs, EMRs, digital health), specialty healthcare (such as IDNs and blues aggregators), and vertically integrated conglomerate. Its refreshed solution suite will strategically target its markets with next-generation platforms (including TriZetto and BPaaS), data as a service, bespoke package solutions, and IT services.

Cognizant is making material investments in GenAI by piloting it to address payer-provider friction in contract management and provider services and leveraging partnerships with Google Cloud’s Vertex AI platform to drive innovation. It is developing a construct that may, on the surface, appear to be a solution for a legacy challenge but is essentially using first principles to readdress the causes so GenAI can create new value in healthcare.

The Bottom Line: Cognizant’s healthcare business is one of its largest, and it must defend its market share and be on the offensive to win new and emerging markets.

Cognizant is differentiated by its meaningful participation across multiple segments of the healthcare ecosystems, including payers, providers, and life sciences, and it can connect that ecosystem around a health consumer. It can also leverage its deep expertise across the healthcare ecosystem to address vertical integration and big tech in healthcare while continuing to address the legacy payers and providers. Investing and innovating with GenAI and the strong portfolio of technology solutions positions Cognizant strongly for the “new” of the future and “tried and tested” of the legacy.