During the company’s quarterly earnings call on August 4, Zane Burke, president of the Kansas City-based Cerner Corporation, made a statement regarding Cerner’s having won a highly coveted contract to implement a core electronic health record (EHR) in hospitals and ambulatory clinics across the Department of Defense (DoD) healthcare system and the Veterans Health Administration system. It was the first extensive comment made by a senior Cerner executive since the DoD had announced the awarding of that contract to the consortium of Cerner, Leidos, and Accenture Federal, on July 29. (The consortium of Cerner, Leidos, and Accenture Federal won the contract over two rival consortia: Epic Systems/IBM Corp./Impact Advisors, et al; and Allscripts/Computer Sciences Coproration/Hewlett-Packard.)
After members of Cerner’s executive team had explained the numbers to journalists and members of the investor community (bookings in the second quarter of 2015 were $1.29 billion, an all-time high and an increase of 20 percent compared to $1.08 billion in second quarter 2014, while second-quarter 2015 revenue was $1.126 billion, an increase of 32 percent compared to $851.8 million in the year-ago period, though it came in lower than anticipated by the company), Burke said to those listening into the call, “I’d like to comment on the recent announcement on the Defense Healthcare Management System Modernization project, referred to as dim sum (DHMSM). We are pleased that last week the Department of Defense announced its decision to award the contract to Leidos, Inc.,” Burke said “As you know, the Leidos Partnership for Defense Health includes Cerner as the core EHR supplier. We are honored, humbled, and excited to be a part of the team that won what we believe was the most objective and comprehensive evaluation of technology platforms and solutions ever conducted. We now have the opportunity for Cerner’s suite of integrated solutions to replace the DoD’s legacy health IT system in its 55 hospitals and more than 350 clinics worldwide, as well as in ships, submarines and other locations in the theater of military operations.”
Burke added that “We’re pleased to be partners with Leidos, Accenture, Henry Schein and a number of small business partners in making this important transition for our military health system and its 9.6 million beneficiaries. Intermountain Healthcare is also a strategic partner and is providing clinical governance of solutions and workflow.”
Burke went on to say that “The Partnership is fully prepared to meet the staffing requirements of DHMSM, and our globally deployed team stands ready to support the DoD and the DHMSM Mission. We believe this is a positive development for our clients, and they should have confidence that Cerner will continue to execute to meet all of our current and future commitments.”
Burke added that, “As many of you saw in the announcement, Leidos was awarded a contract for $4.3 billion over 10 years, consisting of a 2-year initial ordering period, two 3-year option periods, and another 2-year option period. We are not able to comment on Cerner’s portion of this, but note that we do not expect this to have a material impact on bookings, revenue, or earnings in the near term since the project will have several phases and will start with a small initial rollout. I know many of you also saw an $11 billion figure cited in regard to the contract before it was announced. As noted in the DoD’s press release, this estimate is now approximately $9 billion and represents the total estimated program costs over 18 years, not the value of the contract awarded. In summary,” he said, “we believe this selection by the Defense Department reflects positively on the achievements of Cerner, our partners, and all of our clients. The Department of Defense is already in the Cerner family as a lab client, and we’re excited to expand our relationship.”
In response to a follow-up question from Healthcare Informatics, Burke replied via e-mail, stating that “We’ve been working for the past 12 months to build a model system that incorporates functionality already included in our IP roadmap, and we just finished the last of four rounds of integration testing this past weekend. The partnership is fully prepared to meet the staffing requirements of DHMSM, and our clients should expect to benefit from the thought leadership and innovation that results from this industry-defining project.”
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