On December 20, Oracle agreed to acquire Cerner for $28.3 billion, which would be the largest-ever acquisition for Oracle. Cerner focuses on healthcare technologies and services, working with healthcare providers to modernize electronic health records (EHR). For full year 2020 (FY2020) revenues, the company generated $5.5 billion and now has more than 26,000 employees. Cerner has an annual R&D investment of approximately $600 million and more than 600 patents worldwide. Subject to normal regulatory reviews, the acquisition of Cerner would give Oracle access to an arsenal of healthcare tools, data and customers to augment what it has started.
Cerner solutions complement what Oracle already offers via several healthcare-tailored solutions for payers and providers, including policy administration and claims management, insurance revenue management, finance and operations, human capital management (HCM), customer experience, analytics and cloud computing via its Oracle Cloud Infrastructure. Going back to its database roots, the Oracle Healthcare Data Repository is its platform for consolidating data and building custom healthcare applications to enable information exchange using standards including HL7® FHIR®.
Cerner would become a dedicated industry business unit in Oracle. In addition to the EHR focus, Cerner will continue work with clients to improve the caregiver experience and enable more connected, high-quality and efficient patient care. One area of potential improvement for providers moving to digital is recording patient information during visits. In the acquisition announcement, Oracle highlighted that the companies would work together to make Oracle’s hands-free Voice Digital Assistant the primary interface to Cerner’s clinical systems.
Many of the industry trends that ISG continues to cite are reflected in this acquisition. For example, at ISG’s Sourcing Industry Conference in October, Jamie Burke, a Partner in ISG’s Healthcare Practice, highlighted the inevitable disruption in healthcare, including the emerging trends of 1) telehealth, 2) Internet of Medical Things, 3) big data analytics, 4) interoperability and 5) cloud adoption. With this acquisition alone, Oracle now can advance all these trends and positions itself as a lynchpin in this evolving ecosystem.
Coupled with its own internal increased capabilities, the new Oracle also has the advantage of strong existing relationships with other service providers. Most of the service providers in the ISG Provider LensTM Healthcare Digital Transformation Services study have talent to support and partner with Oracle. Many also offer Cerner expertise, while Cerner itself has significantly grown its services business in recent years. For 2020, Cerner’s managed services revenue was 23% of its total while professional services represented 35 percent. Its presence in thousands of hospitals and physician practices, knowledge of individual institutions and domain expertise in the U.S. give it a strong position in the healthcare market.
Cerner is a partner with Oracle Cloud competitor AWS, which Cerner intended to be the software-as-a-service (SaaS) platform of choice for healthcare. The goal was to create a cognitive and more intuitive experience while removing barriers to adoption among clients using AWS. For instance, a hospital in California conducted a project in collaboration with Cerner and AWS, using data science to identify patients at higher risk of readmission, which resulted in a decline in such readmissions.
The most important part of the acquisition could be around data. Inadequate data sharing is a costly risk in healthcare, and the need for interoperability goes well beyond government compliance. Cerner’s Real-World Data solution targeted to researchers includes thousands of data connections across more than 85 connected EHR sources, covering over 88 million patients. The data includes medications and lab results to build longitudinal patient records. Oracle likely sees untapped potential in such data, despite the privacy protections.
With its comprehensive cloud platform plus several applications relevant to healthcare organizations, the Oracle offering should attract more clients and service provider partners. If the Cerner acquisition goes through, Oracle would become a top provider of healthcare technologies, data and services, at least for the time being. ISG remains very bullish on the evolution that is sure to follow in healthcare. As market forces take over and new players expand into this inefficient industry, the patient/member should be the beneficiary. Stay tuned, we expect more disruption is coming.
About the authors
Mr. Exler is a Director and Principal Analyst with the ISG Provider Lens (IPL) service, a part of ISG Research. His focus is on the disruptive and progressive influences on businesses – and the experiences of their customers - of the Internet of Things (IoT), location intelligence, Digital Workplace and application modernization. Ron is lead analyst for the IoT Services 2021 IPL study as well as the Healthcare and Life Sciences Digital Services 2020 and 2021 IPL studies. He is also the owner of the IPL subscriptions services for enterprises and service providers. Ron bridges the gap between business and technology through active analyses and clear communications of issues and opportunities.
Robert “Bob” Krohn is a Partner and Healthcare Practice Lead at ISG. He has an extensive background in business process optimization, organizational design and execution including the direct oversight of numerous outsourcing contract negotiations. Bob is an ISG Digital Expert and a speaker/ blogger on emerging trends in Healthcare.