 |
|
 |
 |
|
|||||||||||||
|
|
In the year 2000, we experienced the highs of an Olympic gold medallist and the
lows of sprinter who loses the race by less than a hundredth of a second.
Early in the year we watched in disbelief as our stock price soared into the
stratosphere along with other technology companies ($93 a share!), only to
experience the fierce gravitational pull of the downward slide a few weeks
later. TriZetto was grouped in the minds of investors with e-health and Application Services Providers, and the hype surrounding those sectors reached a crescendo during 2000. By year’s end, however, dire predictions were being made about the viability of both sectors, and TriZetto was one of just a handful of companies trading above its initial public offering price.
Well, as Winston Churchill once said after a key battle in World War II - "It is not the end, nor even the beginning of the end, but it is the end of the beginning." Our mission is as valid today as it was when we were founded in 1997—to provide complete information technology solutions to our healthcare customers. That goal is disarmingly simple and at the same time, remarkably complex. An acquaintance of mine is the Chief Information Officer of one of the largest, most sophisticated health plans in the country, not currently a TriZetto customer. As he puts it - "I would rank our health plan an 8 or 9 in terms of our information technology capabilities—but unfortunately, that's on a scale of 100." TriZetto is a single powerful source for the technology solutions needed to move healthcare organizations much closer to "100." In our Application Services Provider business, we host over 80 of the best software programs available—both "engines" that are essential to the core operations of a business, and "satellites" that are integrated with the engines to add valuable, complementary functions. We also develop and provide premium brand software engines on a licensed basis. Our HealthWeb e-business portal and supporting technology can allow virtually any health plan—no matter how antiquated its systems—to communicate directly with physicians, employers and enrollees over the Internet. It's one thing to offer advanced technology - it's another to have customers buy it. Healthcare is incredibly complicated, highly fragmented and has been notoriously slow to adopt new technologies. But we believe the industry will increase its investment in information technology for three main reasons: the need to compete, the need to reduce costs while maintaining or improving customer service, and new federal regulations like the Health Insurance Portability and Accountability Act (HIPAA). According to published sources, over the next five years payers are expected to spend over 11 billion new dollars on information technology, and providers are expected to spend over $10 billion. HIPAA alone is expected to consume one out of three dollars spent on healthcare information technology services. Given our comprehensive range of products and services, we plan to capture our fair share of those new dollars.
Year 2000 Highlights Our gross profit margins continued to improve during the year, increasing from 12.9% in the first quarter of 2000 to 19.2% in the fourth quarter. We balanced our drive toward profitability with needed investments in people, software and hardware, and believe we will begin to benefit from those investments in 2001. We are committed to producing positive cash flow from operations by the middle of the year. |
|
|
In March 2000, we attempted to merge with IMS Health Incorporated,
the venerable pharmacy information supplier. We currently focus on
three target markets-payers, providers and benefits administrators,
and our goal in merging with IMS was to add a fourth market—pharmaceutical.
We thought that rationale was fairly straightforward. As soon as the
deal was announced, however, both TriZetto and IMS investors—confused
by our strategy and the complicated deal structure—began to voice
objections. After unsuccessfully trying to convince investors of the
merits of the transaction, we terminated the proposed merger in May.
Even though the merger did not work out, we did end up acquiring a jewel from IMS—Erisco Managed Care Technologies, Inc. The Erisco acquisition closed on October 2, 2000, giving us the largest (non-governmental) share of the healthcare payer market for administrative software in the country. As an added bonus, Erisco came with very capable management, including an experienced marketing and sales organization that has enhanced TriZetto's sales force nationwide. In December 2000, we completed the acquisition of another market leader, Resource Information Management Systems, Inc., better known as RIMS. RIMS software processes 125 million claims annually—that's over 7% of all non-pharmacy claims processed in the country. With over 300 customers, RIMS has a large share of the benefits administration market—another of our three target markets. Between Erisco, RIMS and the rest of our business, we believe our software touches over 40% of the insured population in the United States. The integration of Erisco and RIMS into the TriZetto organization is going smoothly. Our software engines business—HealtheWare, houses Erisco and RIMS. RIMS had ASP customers that became part of our ASP business, and RIMS Internet technology is being integrated with HealthWeb. We now have three complementary businesses, diverse sources of revenue, and abundant cross-selling opportunities. A final accomplishment of note in 2000 was that we developed a "process model" for our ASP business. We broke the business down into eight key processes and defined in complete detail how those processes need to work and how they relate to each other. That means we can add new business without re-inventing the wheel each time, and that's what will help ensure that we can become a much larger company. Despite the gyrations of our stock price, we are pleased to be one of the elite technology stocks that has gone public since 1999 that has consistently traded well above its offering price. Given our unique business strategy and unrivaled healthcare industry expertise, we are confident that we will continue to create shareholder value. Our many accomplishments of the past year would not have been possible without the hard work and determination of our 1,700 employees. As we say around the company, we are inventing an industry—and it isn't easy. We also appreciate the confidence and support of our investors, and look forward to sharing our progress with you as 2001 unfolds. Sincerely,
Jeffrey H. Margolis March 30, 2001
  
|
