Late last December, as most folks settled into the holidays and a slow business news cycle, Oracle spiced things up. It announced the acquisition of medical-records systems provider Cerner Corp. for $28.3 billion. An Oracle Cerner acquisition was – and is – big news that deserves revisiting.
Cerner is among the top EHR vendors in the world, competing with market leader Epic Systems, Allscripts and a handful of others. Cerner has its own history of strategic acquisitions, most notably its 2014 purchase of rival Siemens AG Healthcare for $1.3 billion. That acquisition was intended to help Cerner better compete with then-emerging Epic Systems.
In recent years, however, Cerner has been losing market share, falling 20% in 2017 to 16.6% in 2021. Meanwhile, the market leader, Epic Systems, has overtaken Cerner as its market share grew from 19.5% in 2017 to 23.6% in 2021.
So Why Did Oracle Acquire Cerner?
The acquisition of Cerner is intended to help Oracle boost its presence in electronic healthcare delivery by bringing a vast amount of health data to its cloud services that will support gaining more ground in cloud computing. To date, Oracle has been a very small player in the healthcare space behind the market leaders Amazon and Microsoft.
But, like many industries, the healthcare sector has experienced accelerated digital transformation in the last two years. Unprecedented pressure on healthcare systems has also exposed critical weaknesses and challenges in how the healthcare industry responds to spikes in demand – for care as well as for more seamless collaboration across providers, patients, researchers and the rest of the healthcare delivery ecosystem.
Oracle says its goal is to deliver “zero unplanned downtime in the medical environment and to capture opportunities to expand cloud, AI and machine learning applications for Cerner’s healthcare clients.” Oracle states that a major goal will be to use data as a diagnostic tool to help doctors and nurses improve patient care.
Cerner’s goal is to accelerate their work, modernizing Cerner’s EHR to improve the caregiver experience and enable a more connected, higher quality and efficient patient care system. Oracle’s focus on usability and voice-enabled user interfaces will help to reduce the amount of time that medical providers spend dealing with health IT systems and increase the time they spend on patient care delivery.
The Oracle Cerner acquisition also gives the combined entity leverage as it tries to displace Epic. David Lareau, CEO of Medicomp Systems, recently penned a great perspective over at Forbes. Here’s an excerpt:
Epic currently holds the top position in enterprise solutions for healthcare delivery systems and is the “safe choice” of CIOs — much in the same way that IBM was the safe choice in the mainframe era of computing. Ultimately, IBM’s dominance was first challenged by the advent of the minicomputer and then the PC. Today, with the Cerner acquisition, Oracle has an opportunity to challenge Epic in the new world of cloud-based systems that deliver usable clinical data insights at the point of need.
Epic’s dominance was built in an era when electronic health record (EHR) systems were focused on processing transactions to support billing and reimbursement in the world of fee-for-service care. The transition to value-based (or outcomes-based) care will require the delivery of data-driven clinical insights to providers across the entire continuum of care. On paper, Oracle’s expertise in database technology, combined with Cerner’s experience in healthcare systems, provides the raw materials for a new approach. This transformation, however, is not without risk.
In short, if Oracle sees its mission through, it could not only become a more formidable competitor to Epic, it could redefine the role and value of EHR solutions altogether. Instead of merely transforming billing and transaction processing, Oracle’s version of Cerner could transform the way clinical data is acquired, monitored, shared and integrated across all clinical workflows and all points of patient care. And, to Oracle, that’s worth something – $28.3B, in fact, which is the vendor’s largest-ever acquisition.
What Does an Oracle Cerner Acquisition Mean for Cerner Customers?
While Oracle’s acquisition is not yet complete (its tender offer has been extended until March 16, 2022), there are some considerations and concerns Cerner customers should take into account – particularly if they are renewing or negotiating with Cerner anytime soon.
NPI sees several challenges resulting from this acquisition:
- Many Cerner customers already utilize Oracle products in corporate datacenters, but Oracle may find it challenging to get them to move to the more modern cloud-based applications based on the promise of more tailored healthcare offerings in the upcoming years. On the flipside, this is where an Oracle-owned Cerner is going and customers should prepare (and maximize negotiation leverage) accordingly.
- Such an aggressive extension into the healthcare sector will necessitate that Oracle make significant investments in cybersecurity. Kronos’s recent ransomware attack is causing some organizations to put a pause on cloud migrations, so Oracle will need to demonstrate the highest measures of security for sensitive healthcare data. Cerner customers will need to keep an inquisitive eye on Oracle’s security posturing.
- There are Cerner solutions that currently sit on AWS. These will still need to be supported until contractual obligations expire.
- Although Cerner’s core product, Millennium, is built on Oracle’s database, it could still take years to migrate it to the cloud.
It is NPI’s understanding that Cerner will continue as a stand-alone division within Oracle. This is important because Oracle’s depth of experience in healthcare isn’t as strong as some of its competitors, and it will need to rely on Cerner personnel to make things work.
As for pricing, it’s too early to tell how the acquisition will affect Cerner pricing. NPI will be monitoring this closely and will keep our customers up to date on any developments that may impact their Oracle and Cerner spend in both the short- and long-term. Meanwhile, it’s important for Cerner customers to perform IT price benchmark analysis on all Cerner purchases and renewals to ensure they’re paying (and locking in) the lowest possible price.
Have questions about how Oracle’s acquisition of Cerner may impact your Cerner purchases? Let’s talk.
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