Can lose $2.7 bn deal if Centene acquires Health Net: Cognizant

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Published: July 3, 2015 9:41:49 AM

Anticipating a $100 million hit to its incremental revenue in July-December of 2015, IT major Cognizant today said it expects the $2.7 billion 7-year IT services contract with Health Net may not be implemented if the firm is acquired by Centene Corporation.

Anticipating a $100 million hit to its incremental revenue in July-December of 2015, IT major Cognizant today said it expects the $2.7 billion 7-year IT services contract with Health Net may not be implemented if the firm is acquired by Centene Corporation.

However, the New Jersey-based firm retained its revenue forecast for the fiscal 2015 to USD 12.24 billion on the back of strong demand. It follows the January-December fiscal.

US-based healthcare services firm Centene Corporation is in talks with Health Net to acquire the firm, Cognizant said in a statement.

However, the New Jersey-headquartered Cognizant said it remains a strategic technology and operations partner to Health Net, with its another contract being extended to end of 2020 with a total contract value of about USD 520 million.

The planned implementation of a 7-year master services agreement between Cognizant and Health Net, that was announced in August 2014 and scheduled to begin in mid-2015, is being deferred as Health Net and Centene complete the merger review and approval process, it said.

“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,” the firm added.

A Cognizant spokesperson said: “The USD 2.7 billion 7-year master services agreement included our existing revenue from Health Net and was not just incremental revenue.”

The statement added that Cognizant has negotiated the right to license certain Health Net intellectual property for incorporation into its healthcare management solutions and as-a-service platforms.

On the 2015 outlook, the company retained its earlier forecast for the fiscal 2015 to USD 12.24 billion.

“Despite the anticipated loss of approximately USD 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,” Cognizant Chief Financial Officer Karen McLoughlin said.

McLoughlin added, “Today’s announcement by Health Net will not impact our ability to achieve our goals for the year.”

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