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August 17, 2005

First Consulting Group shuffles outsourcing contracts

Health and life sciences IT services provider First Consulting Group last month announced that its contract with NewYork-Presbyterian Hospital will be expiring early, but the company softened the blow with the signing of another substantial outsourcing deal in July with Continuum Health Partners in New York.

By CBR Staff Writer

The seven-year, $225m contract with NYP – FCG’s largest – began in 1999 and was set to expire in December 2006. NYP, however, exercised its option to end the deal in December 2005. FCG Chairman and CEO Luther Nussbaum, in the company’s second quarter conference quarter last month, said that FCG is now working to transition IT services back to NYP. The company hopes to continue to provide certain onsite and offsite services for NYP, but such an arrangement is still uncertain.

Myrna Manners, vice president for public affairs at NYP, said the hospital is exploring [its] options regarding future plans for its IT operations, whether that means keeping its IT shop in-house or outsourcing to a different vendor.

FCG this month begins works on its five-year Continuum contract, which includes infrastructure, data center, desktop and help desk services, as well as clinical and financial applications work.

The deal is estimated to bring in about $10.8m for the remainder of this year and some $26.2m in 2006. The value of the following years will be determined by a cost-plus-profit-margin equation that also includes performance-based rebates and.incentives for cost savings. In 2001 Continuum signed an eight-year, $350m IT outsourcing deal with CapGemini, but the hospital group recently terminated the contract early and tapped FCG to takeover.

FCG in July also signed a three-year, $14m deal with Colorado health care system Centura Health for IT implementation and operations support. Together the Centura and Continuum contracts should generate approximately $29m in annual revenue, Nussbaum said. Tom Reep, FCG’s vice president of investor relations, said the company was not providing specifics regarding employee transfers under the NYP contract termination or the two new signings.

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