Sign in Subscribe
Information technology services industry

Perot Systems and Blue Cross & Blue Shield of Rhode Island Announce Contract Modification

Strategic Insights

— 1 min read

Perot Systems, a worldwide provider of information technology services and business solutions, and Blue Cross & Blue Shield of Rhode Island (BCBSRI) have modified their 10-year outsourcing contract signed in 2003. The contract change gives BCBSRI control over the selection, customization, and implementation of a system to replace its current LRSP claims processing software, while obtaining a license to Perot Systems' Payer PERADIGM Enterprise Software. Perot Systems will write down approximately $40 million of deferred costs in the third quarter of 2006, and pay $12 million to BCBSRI over four years.

Key Takeaways:

  • The contract modification gives BCBSRI control over the selection, customization, and implementation of a system to replace its current LRSP claims processing software.
  • BCBSRI will obtain a license to Perot Systems' Payer PERADIGM Enterprise Software.
  • Perot Systems will write down approximately $40 million of deferred costs in the third quarter of 2006.
  • Perot Systems will pay $12 million to BCBSRI over four years, which is a portion of the $19 million implementation fee collected in advance of the implementation but never recognized as revenue.
  • The contract modification eliminates certain deliverables, allowing Perot Systems to adjust its business approach.
  • Perot Systems and BCBSRI have ended the prior fixed price arrangement, moving towards a time and materials contract arrangement.
  • Revenue will not be materially impacted by the contract modification, and the contract is expected to be profitable in the fourth quarter of 2006.
  • The contract modification reflects Perot Systems' commitment to providing outstanding service to BCBSRI for many years to come.

Statistics:

  • $40 million: The amount Perot Systems will write down as deferred costs in the third quarter of 2006.
  • $12 million: The amount Perot Systems will pay to BCBSRI over four years.
  • $19 million: The implementation fee collected in advance of the implementation, but never recognized as revenue.
  • $50 million: The approximate amount of deferred costs expected to be amortized over the remaining term of the contract, which will no longer be necessary due to the contract modification.

Sources:

  • NewsRx.com
  • Health & Medicine Week
  • Perot Systems Corporation
  • Blue Cross & Blue Shield of Rhode Island (BCBSRI)
  • Health & Medicine Week editors

Read more