IT firms stay cautious on healthcare business from US
As the Donald Trump administration remains indecisive on healthcare legislation even after eight months in power, IT services companies are cautious on growth from the healthcare segment.
Trump has made repeated efforts to push for repeal or overhaul of the Affordable Care Act, or Obamacare,which offered health insurance benefits to millions of poor people.
IT services major Accenture saw its H&PS segment reporting sluggish growth at a time when the company posted better results than the average overall industry growth. Accenture reported 8 per cent growth in revenue in the fourth quarter of (fiscal 2017) at $9.1 billion, while its H&PS segment grew 4 per cent.
The company last week told analysts that though it “saw some improvement in North America, (but) the health business continues to be impacted by uncertainty in US healthcare legislation”.
“...to be serious again, we shared with you the results of a few quarters that indeed the growth in the US didn’t come exactly as expected ...and our clients were expecting some reforms and these reforms have not come as expected, creating a kind of wait-and-see positioning with our clients, especially in health and public sector with all the uncertainties around the healthcare reforms,” Pierre Nanterme, Chairman and Accenture, said.
This could have an impact on Indian IT firms too. Indian IT services companies have equally spoken of uncertainty over delayed decision making in the US for the proposed repeal of Obamacare. While some of the back-office companies and mid-sized Indian IT firms unofficially said they have not been able to finalise CEO, service deals as they seek further clarity on legislation, the country’s third largest software exporter Wipro claimed it lost revenues worth nearly$120 million on a run rate basis in the last four quarters.
In July, Wipro chief executive Abidali Neemuchwala said there should be more clarity by November. The Trump administration has, however, faced rejection of its efforts to overhaul Obamacare by the US Senate. Wipro counts close to 15 per cent of its revenue from healthcare services in the US. Some of the back-office service providers are planning to tap a bigger opportunity in the healthcare payer services market that is pegged to reach $45 billion by 2020. Cognizant earns a fifth of its revenue from the healthcare business.
Industry analysts said it would not be an easy task for the US administration to pronounce a complete overhaul of the healthcare law, given its complexity.
“Clarity (on healthcare legislation) is still not there. The administration has not been able to come up with a better plan. It is going to take another couple of months. The Trump administration is trying to work on proposed tax reforms and see the impact of that on the treasury and, accordingly, he will make changes. At least it will take two to three months. It may disrupt the whole economy if the healthcare legislation is completely changed. There may be changes in some components of the Act,” said Rajesh Gupta, India partner at IT consultancy firm ISG.
Gupta believes the US administration would probably look at a linking its proposed tax reform with healthcare reform. “If there is a costly healthcare service regime, there will be a balancing act with tax reform.”
It may disrupt the whole economy if the healthcare legislation is completely changed