As Donald Trump's government remains indecisive on healthcare legislation even after eight months of assuming office, IT services companies remain cautious on growth from the healthcare segment.
Trump has made repeated efforts to push for the repeal or overhaul of the Affordable Care Act or the "Obamacare", which brought in millions of poor people under health insurance benefit.
IT services major Accenture saw its H&PS segment reporting sluggish growth at a time when the company posted better than average overall industry growth. Accenture reported 8 per cent growth in revenue in the fourth quarter of FY17 at $9.1 billion, while its H&PS segment grew 4 per cent.
The healthcare business segment consists of three major technology service categories-- pharma or life sciences, payer or the health insurance service and provider or the networks of hospitals and doctors. The payer category, analysts said, has been most affected due to uncertainty in concrete plans of the current administration.
Accenture last week told analysts that though it "saw some improvement in North America (but) health business continues to be impacted by uncertainty in US healthcare legislation".
"We shared results showing growth in the US didn't match expectations in the past few quarters and our clients were also expecting some reforms that have not come off yet, thereby, creating a kind of wait and watch situation for our clients, especially in the health and public sector amid uncertainties around healthcare reforms," said Pierre Nanterme, Chairman and CEO, Accenture.
This could have an impact on Indian IT firms too. Indian IT services companies have equally spoken of an uncertainty over delayed decision-making in the US for proposed repeal of the Obamacare. While some of the back office companies and mid-size Indian IT firms unofficially said they have not been able to finalise on service deals as they seek further clarity on legislation, third largest software exporter Wipro claimed it lost revenues worth nearly $120 million on a run rate basis in the past four quarters.
In July, Wipro chief executive Abidali Neemuchwala said there should be more clarity by November. Trump's administration has, however, faced rejection in their efforts to overhaul Obamacare.
Wipro earns close to 15 per cent of its revenues from healthcare services in the US, some of the back-office service providers look to tap a bigger opportunity in the healthcare payer services market, pegged to reach worth $4-5 billion by 2020. Cognizant earns a little less than a third 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 act given its complexity.
"There is a possibility that subsidies that underpin the ACA may be eliminated or deemed illegal and if this were to happen, it would increase uncertainty and may postpone new investments. It looks like it will be business as usual for the foreseeable future. However, as I stated before we have investment fatigue across both payer and provider which is contributing to slower growth," said Peter Bendor Samuel, chief executive, Everest Group, which is a global IT research firm. Samuel further added that the cancellation of IT service deals cannot be completely attributed to decision-making in healthcare legislation.
IT firms will probably not have a clarity before three two to three months.
"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. Trump's administration is trying to work on the proposed tax reforms and see the impact of that on the treasury and accordingly, make changes. 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.