Insurance Exchange Enablement Heats Up as the Clock Ticks Down

Today’s news that Wellpoint and two other Blues (HCSC and BCSB MI) acquired a 78% stake in Health Insurance Exchange vendor Bloom Health is not the first – and won’t be the last – move in what is sure to be a consolidating market.

The Accountable Care Act (ACA or Obamacare) requires each state to establish an online shopping portal, known as a Health Insurance Exchange (HIX) for individuals and small groups to purchase health insurance no later than January 1 2014. We have written and blogged extensively on the topic. In our estimates, HHS and the states will need to spend in the neighborhood of $4-$6 billion dollars on technologies order to create these exchanges. In addition to the ACA HIX, there is perhaps a bigger market opportunity in the private sector to create non-government sponsored insurance exchanges, creating even a bigger market opportunity. Bloom Health is one of many vendors specializing in the private exchange market.

Wellpoint, the Blues, and in fact all health insurance companies are making the individual and small group markets a top priority for new business and growth initiatives. These markets will explode in growth due to the Obamacare legislation and the carriers recognize the opportunity and the challenge with tapping this market.

The insurance exchanges, both public and private, will be the primary vehicles to reach into the individual and small group markets. Wellpoint’s move on Bloom, and Optum’s acquisition of Connextions, is recognition of this fact.

In addition to the Connextions and Bloom transactions, the vendor community is also coming together to help create insurance exchanges. Accenture’s acquisition of Duck Creek, announced partnerships from Oracle, Microsoft, CSC and others such as Maximus’ partnership with Connecture, portend of additional transactions to come in the space.

Insurance companies need help in positioning into the individual market, and also need technology to help them more effectively participate in the public and private exchanges.  Several vendors are positioning into the market but only a few have broad, proven experience with exchanges.

Companies like eHealth and Extend Health, which have consumer engagement and online shopping capabilities from market adjacencies (a leading online brokerage for eHealth and a robust Medicare exchange from Extend) will be important players in the new world of insurance exchanges. Other players like DestinationRx are similarly active in the exchange marketplace, working with HHS and multiple insurance plans, and will have a meaningful impact on the public and private HIX marketplace.  These vendors already have a head start in exchange operations, plan comparison features and tools to help consumers sort through the confusing world of insurance costs and coverage.

TripleTree’s recent HIX research report lays out a number of vendors that are currently engaged in HIX solutions. The report concludes that no vendor provides a complete solution.  Given the importance of the exchanges and the immediate market opportunity, no doubt consolidation will continue.

Have a good week.

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

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Don’t jump to conclusions as Thomson cries “Uncle” on healthcare

In the wake of the Thomson Reuters announcement that it’s exiting its healthcare business, many will point this as an example of why “non healthcare companies” will struggle to be successful in healthcare.  We assert that this knee-jerk reaction is wrong, and strongly believe that innovation in healthcare needs to come from outside the industry.

In recent years, some of the largest companies in the world (whom TripleTree internal labels “master brands” because of their breadth of service) have been verticalizing their solutions.   Topping their list of target areas is the healthcare vertical, which has been especially popular with the technology “stack” vendors who feel they are uniquely qualified to take on traditional healthcare stalwarts (Cerner, Epic, etc.)

Since January 2010, TripleTree has witnessed significant software and services consolidation by the stack vendors and as a gut check at the midpoint of 2011, we thought it made sense to review how four of the better known master brands (Microsoft, IBM, Oracle and SAP) are messaging their respective approaches around verticalization.

• IBM:  Via its “Smarter Healthcare” slogan, is messaging comprehensive and integrated industry solutions addressing healthcare organization needs
• Microsoft:   Is messaging helping to cost-effectively meet new regulations while strengthening patient outcomes
• Oracle:    Is messaging improving the quality of patient care, and enhancing provider operational efficiency
• SAP:  Is messaging lowering the pressure on healthcare organizations

The graphic below summarizes a very simple acquisition roadmap dating back to January ’10.  Each have been acquisitive, and three have made bold moves in healthcare to underscore their seriousness (IBM > Initiate; Microsoft > Sentillion; and Oracle > PhaseForward).

It’s easy to ask ‘what’s missing’ in each stack, but the gaps alone don’t make a massive statement.  Our team is left to opine that these vendors (arguably the largest of the non-traditional healthcare vendors) are focused simply on solution selling, not competing directly on clinical centric solutions.

Solution selling means taking each of their extensive portfolios into vertical specific deployment scenarios, which involves understanding industry problems and proactively pitching purpose-built solutions.  Knowledge comes from experience and these firms are still lacking it in healthcare.  Based on the roadmap above, our team considers the lack-of-acquired-healthcare-expertise a glaring gap and likely areas of focus for them in the quarters ahead.

Let us know what you think.

Chris Hoffmann

Chris Hoffmann is a Senior Director at TripleTree covering Cloud, SaaS and enterprise applications and specializes in CRM, loyalty and collaboration solutions across numerous industries. Follow Chris on Twitter or e-mail him at choffmann@triple-tree.com.

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An Acute Focus on the CFO is Feeding IBM’s Appetite for Analytics – 10/27/10

Last week, IBM expanded upon its business analytics and optimization strategies by acquiring Clarity Systems, a Toronto-based software vendor principally focused on Corporate Performance Management (CPM) and regulatory compliance functions for the CFO’s office.

This acquisition in conjunction with IBM’s recently announced acquisition of OpenPages reaffirms several reoccurring trends by Big Blue and possibly sets in motion other market dynamics:

• Since IBM’s announcement in May, the global technology company has been busily executing its plans to invest $20 billion by 2015 in an acquisition strategy that shift its focus into higher value segments.  The anticipated volume of acquisition activity would double the pace of the preceding five years.  Having utilized around $5 billion of acquisition capital to-date, IBM appears well on track to its 2015 goal.
• IBM’s interest in business analytics & optimization, principally led by acquisitions made by IBM’s Software Group, will continue to be a primary driver.The acquisition of Clarity Systems marks IBM’s 24th related acquisition in the business analytics sector, including noteworthy acquisitions such as Cognos, Coremetrics, Netezza, SPSS, among others.  In fact, according to IBM, “in just four years, IBM has invested more than $14 billion in 24 analytics related acquisitions, dedicated 7,000 consultants and opened eight analytics Centers of Excellence around the world to help clients uncover hidden insights within their data.” We fully anticipate the battle ground for data management and business analytics will remain fierce as big systems vendors like EMC, HP, IBM, Oracle and others are all vying to help organizations deal with the ever-growing influx of (un)structured data and its relevancy to decision-making processes.
• Business analytics and GRC/compliance functions will converge. Interestingly, it was the regulatory compliance and reporting capabilities, not CPM, that sparked IBM’s interest in Clarity Systems.  The acquisition of Clarity Systems extends IBM’s business analytics initiatives, but represents a new level of commitment to address financial governance and risk management challenges faced by financial departments and the CFO’s office.  In particular, its products help address financial governance and risk management faced by automating financial, statutory and regulatory reporting for the close-to-report cycle required the U.S. SEC.

As we assess the marketplace and continue an active briefing schedule with a range of global leaders and emerging innovators, the progression of functional compliance acquisitions into analytical settings is inevitable.

Let us know what you’re seeing the market place. Thanks and have a great week!

Brian Klemenhagen

Brian Klemenhagen is a Director at TripleTree covering enterprise application across numerous industries and specializes in Software as a Service. You can email Brian at bklemenhagen@triple-tree.com.

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Seven Considerations for the Impact of Open Source on Healthcare – 10/18/10

There has been much written by TripleTree and others on the influence of cloud technologies on healthcare, but what about open source as a transformative technology?

No doubt open source technologies will make their way into and have an impact on healthcare in some way, but we’re of the mindset that it will take a long time to get here, and the size of the impact could be minimal. Here are seven considerations for healthcare CIOs and their technology partners:

1. Commercial open source vendors are small and unsophisticated in the ways of healthcare IT. So with little investment and large barriers to entry (slow buying cycles, antiquated architectures, compliance, etc.), healthcare will be a hard sell. There will probably be some experiments, trial runs, and partnerships with early stage ISV’s looking to triangulate around the trend of SaaS/Cloud/Open Source; but in reality it will take a few years to get efforts ramped up into large commercially viable solutions.
2. Virtualization will have a bigger impact on HCIT operational efficiency than simply open source. Sure, where virtualization and open source intersect (specifically at the Xen hypervisor), there may be some impact, but I think open source gets overshadowed by virtualization investments.
3. The IT “master brands” vendors with expressed interest in healthcare (MSFT, IBM, HP, etc) are pushing their proprietary stacks.  Deeper pockets will prevail and the only new entrant that can make an impact is probably Google (and their HC commitment is questionable). Will they push ChromeOS into HC and make a meaningful impact?  Not likely as ChromeOS is too new and Google Health is too consumer (rather than system) focused. Plus with Oracle taking out Sun, another open source proponent will move to a proprietary stack (Fusion)
4. Workflow and process integration in HC systems are mostly manual. Before open source has a meaningful impact on data integration a process automation evolution within healthcare is needed…and process automation in healthcare is nascent.
5. Open source has had a good seven year run of enterprise acceptance. Given that healthcare is lagging about 10 years behind in IT innovation, we likely have two plus years before HC starts thinking about open source more widely. In smaller pockets, we could see early open source efforts where a few innovative vendors expose limited/departmental use cases or in public sector instances where states try to be innovative with alternative procurement (e.g.  HIE may see open source experimentation).
6. The mainstreaming of SaaS and other alternate delivery/licensing/outsourcing models from groups like Athena provide a better value proposition.  This is relevant to the likely adopters – small and mid-size doctor’s offices – who want to avoid on-premise open source systems and related complexities of specialized IT knowledge and a willingness to go-it-alone with limited vendor support.  SaaS wasn’t mainstream when enterprises began to embrace open source; but now that SaaS (and cloud) is prevalent the same drivers of open source adoption don’t exist.
7. Open source will probably have more of an impact in research/government/university settings where a healthcare focus and established open source culture (around longer running projects) can coexist.  Within healthcare, open source will emerge more readily with health plans where large data centers and processing make it an interesting operating system.

The list of technology issues confronting healthcare is considerable, and it’s unclear that open source would have impact given other innovative tools.  We’re watching the likes of Citrix and RedHat as vendors that could step forward and we’ll continue to update this blog with our latest thinking.

Thanks and have a great week!

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

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Feeding the Giants – 09/24/10

It’s official. The recession is over and has been for some time. According to the folks who track this at the National Bureau of Economic Research (NBER), the recession ended in June 2009. While most folks on main street may not have heard this news yet, a few of the global software master brands have been busy delivering the good news to a fairly large group of software shareholders over the last 16 months in the form of aggressive acquisitions.

Among the corporate development groups at IBM, HP, Microsoft, Oracle, SAP, and Cisco, a total of 57 deals have been transacted since the recession ended. Throw in Intel, EMC, Google, and Dell – all of whom are active in targeting software acquisitions – and the total deal count passes 100!

Software is not only hot, but it’s a market that is consolidating quickly. There is clearly an active race to shore up enterprise spend on software and related IT technologies. With hundreds of billions in cash lying around corporate balance sheets of the largest master brands, the fevered pace of software acquisitions will continue.

Just look at Oracle’s statements within the last couple weeks. In explaining why they hired Mark Hurd, Oracle Co-president Safra Catz stated “… we need people experienced in operating a $100 billion business”. Hurd ran the largest technology company in the world at just about $125 billion in annual sales. For Oracle to almost quadruple in size to hit the revenue target Catz mentions, the company will have to step-up its already aggressive acquisition pace.

So the race is on. The tech giants will continue their acquisition spree with sights set on filling portfolio gaps and entering net-new areas. With literally thousands of software vendors, the landscape is on one hand a target rich environment. However, in considering sale, size, solution uniqueness, profitability, architectural and cultural fit and a host of other factors that go into acquisition decisions, the universe of highly attractive targets which are large enough to move the needle for these behemoths is limited. Aggressive competitive bidding will become the norm.

Case in point is the much publicized bidding war between Dell and HP for 3Par which saw the acquisition price more than double from $1.13 billion to $2.4 billion in a matter of a few days. While 3Par may seem an anomaly and extreme case, competitive bidding is a fairly common occurrence, especially for the best assets in the market.

Even though the recession does not feel over for the folks on Main Street, the corporate development groups in some of the largest master brands have never been busier. Oracle, HP, IBM, and others mentioned will continue to target best properties in the race to round out their stacks and become the dominant players in enterprise IT.

Have a great week!

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

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Uncommon Clarity – 05/24/10

Following our co-hosting of last weeks’ fifth annual Wireless-Life Sciences Investor Day & Summit with our partners Qualcomm and Johnson & Johnson, we couldn’t be more bullish about the healthcare innovations on display.

The recurring theme of the event was improving healthcare access, quality and affordability – which was echoed by presenter Dr. Hyung Kim, MD; Vice President of Research for Ascension Health as he talked through Ascension’s key initiatives including:

• Operating more effectively in terms of cost and quality
• Remaining focused on serving the poorest and most vulnerable people in the communities they serve
• Getting physicians closer their patients
• Managing the uncertainty of reform

Here are some news stories we’re watching this week:

• CMS awards $73.2mn web optimization contract to CGI Federal in effort to improve online communication channels:  more here

• California Telemedine and eHealth Center launches telehealth initiative:  more here

• Software M&A is on a tear…in addition to IBM’s acquisitions of Sterling Commerce and Cast Iron Systems; SAP acquired Sybase, HP acquired Palm, and Oracle made a smaller but meaningful acquisition, (in healthcare/life sciences  software) by picking up PhaseForward.

• Early peak at upcoming SaaS/Cloud earnings picture?  Salesforce.com reports early and disappoints:  more here

• Economist Larry Kudlow likes the rising US Dollar as harbinger of price stability amid concerns about Euro:  more here

Read our most recent research on Healthcare Compliance and mHealth, and if your schedule aligns catch up with us next week at AHIP in Las Vegas.

To learn more, contact us at 952-253-5300…have a great week!

Chris Hoffmann

Chris Hoffmann is Research Director at TripleTree covering Cloud, SaaS and enterprise applications and specializes in CRM, loyalty and collaboration solutions across numerous industries. Follow Chris on Twitter or e-mail him at choffmann@triple-tree.com.

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