TriZetto Group's ambitions are soaring after the announcement of its planned $5 billion stock-swap purchase of IMS Health: The company plans to offer a fully integrated Internet healthcare management product to customers around the world.
The merging firms say they will be able to make up for each other's shortcomings: Westport, Conn.-based IMS has global outreach but lacks Internet products, and Newport Beach, Calif.-based TriZetto has strong Internet offerings but a primarily U.S. client base. And TriZetto's systems, which are geared toward health plan administration, such as referrals and claims submission, would dovetail nicely with IMS' specialty, which is pharmaceutical database management.
Officials at both companies say they will launch joint products any healthcare venture can use to track enrollees from the moment they seek services to the resolution of their case. And instead of monitoring such individuals through a bulky proprietary computer system, tracking would be accomplished through an Internet-based subscription service.
"When you look at healthcare from a supplier chain standpoint, a lot of things happen in the middle," says Lu Kabir, TriZetto's senior vice president of marketing and business development. "This deal allows us to tell everyone what's going on."
Moreover, Kabir notes, still-evolving practices such as disease management could be fine-tuned through the merged companies' future applications. "Outcomes will be better understood because they will be tied into more information," he adds. The merged companies are expected to offer some 35 new products over the next several years, Kabir says, although he could not immediately provide specifics.
But some industry observers are skeptical of any company's ability to offer a wholly integrated product in the near term. "That would be the equivalent of actually creating all of the translation equipment on the (Starship) Enterprise," says a Los Angeles-based healthcare information consultant who asked not to be identified. He added that many hospitals use incompatible storage data and tracking systems, and that many patient records are still on paper. Thus, transferring such a vast amount of data would be nearly impossible.
And the fledgling TriZetto, which went public only last fall, remains largely an unknown quantity, with a 1999 net loss of $3.4 million on revenue of only $35 million. That compares with IMS' 1999 net income of $250 million on revenue of $1.4 billion. Although industry experts lauded IMS' abilities to track pharmaceutical information, none was able to comment on TriZetto or its products. Since the deal was announced, the value of the stock TriZetto is using to buy IMS dropped in value from about $8.2 billion to less than $5 billion.
The deal is expected to close Oct. 1.
Elaine Remmlinger, a principal with the Hamilton HMC consulting firm in New York, gives TriZetto "an A-plus for vision, but whether or not they can pull it off remains to be seen. Most of the healthcare Internet vendors in this market are doing a stretch with what they're promising."