On Aug. 5, 2014, the healthcare IT world was stood on its head when Cerner bought the health IT division of Siemens for $1.3 billion.
Cerner’s buy was one of the largest acquisitions in the history of the industry. For some, it was a clear signal that the vendor wouldn’t go quietly into the night and let a certain rival dominate the industry unopposed. But while rumors circulated that Cerner was making a defensive play against Epic, the company’s executives denied that motive outright.
“Cerner is doing incredibly well today. We didn’t need to make an acquisition, nor were we even looking for one,” Zane Burke, Cerner President, told HCI at the time. Another higher-up, former Siemens CEO and current senior vice president at Siemens, John Glaser, Ph.D., said the same thing in a separate interview with HCI, stating that “It’s not a competitive response, it’s an industry response.”
Rather, Burke says in a recent interview, the move came about because Cerner felt Siemens’ entire product lineup, specifically its revenue cycle software, would strengthen its overall offering. Siemens approached Cerner first he notes, and after careful consideration and analysis, the latter determined the acquisition wouldn’t disrupt any momentum Cerner had already accumulated.
Regardless of the motive, the move made sense to Beth Anderson, hospital administrator at the University of South Alabama Health System, which was a Siemens customer at the time of the acquisition. “We thought it was a good move for us. We have a proactive CIO who started making calls to fellow institutions that had Cerner. We were getting positive comments back,” Anderson says.
The move has had major ramifications. There is the obvious: it made Cerner the second highest revenue-earning company in healthcare IT last year and the market share leader for acute-care hospitals. More so, it has sent Cerner down an interesting path to blend and support differing systems—a path that has been somewhat rocky for a few of its rivals. For this reason, Cerner is one of Healthcare Informatics´ Most Interesting Vendors for an unprecedented second straight year.
The deal bringing together Cerner and Siemens’ health IT division officially closed on the second of February. It was on that day, says Burke, that more than 5,000 former Siemens associates joined Cerner. Since then, Cerner has worked to transition as many elements of Siemens’ health IT division as possible, including call centers, support services, billing, and various other departments. Naturally, as Dick Flanigan, president of Cerner HS, notes, “Siemens was a large company with hundreds and hundreds of operations…not everything could transition on day one.”
Along with transitioning employees, Cerner reached out to the clients as well during the first few months of the marriage. Through these meetings, Burke says the company has gotten a chance to introduce themselves.
“It’s interesting because you think that everyone knows who you are, and that’s not from a lack of humility, it’s just you think people know about Cerner. What’s been great is that while that’s generally been the case, we had an opportunity to introduce ourselves,” Flanigan says. Burke adds that conversations have been reciprocal, with Cerner hearing the specific client’s journeys and where they want to go. “Some are thinking about integrated ambulatory and rev cycle (products) and those clients have been very receptive to us,” he says.
While many may have assumed, and still may assume, Cerner would push Siemens’ Soarian clients towards its Millennium platform, Flanigan says that won’t be the case. He says they will advance and support Soarian for ten years. “It’s a clear message to the client base that you don’t have to make a quick decision,” he says. Other product lineups, such as MedSeries, will be supported but not advanced. He does say that clients looking for an “end-to-end platform,” would be likely migrated towards Millennium.
University of South Alabama
For University of South Alabama (USA) Health System, a Soarian customer for the last four or five years, the move to Millennium was a bit of a no brainer. The organization had a conglomeration of different IT systems and a desire to become more integrated with the shift towards value-based care accelerating in Alabama. “Siemens didn’t have a lot of solutions. They were partnering with a lot of people which meant a lot of interfacing,” says Anderson.
Thus, the Cerner acquisition came along at a good time. After doing the aforementioned prospective research, Mark Lauteren, CIO at USA Health System, reached out to Cerner and was subsequently invited to Kansas City for a user meeting. Anderson, who attended the meeting, was blown away by Cerner’s integration offerings. Once they saw it first hand, they calculated the financials and realized it made sense to migrate.
“We started comparing what it would cost to [migrate everything to Millennium] and what it would cost to stay on Soarian – knowing that at some point it wouldn’t be supported – and we conducted a financial analysis. In the end, working with Cerner and getting more functionality and integration would save us millions of dollars over a seven year period, if we could swallow the cost of a big-bang conversation,” Anderson says. She adds in the past, the health system didn’t think it could afford Cerner.
One Year from Now
Cerner is approaching the one-year anniversary from when the deal was first announced. While the transition isn’t finished, Burke and Flanigan are looking ahead to August of 2016. By then, they predict the different platforms will “indistinguishable” and Siemens’ revenue cycle products and talents will be infused into Cerner. As some have noted, this is easier said than done. Companies like Allscripts struggled with large-scale mergers and were arguably worse off from their attempts at trying.
Cerner is confident though, that it can execute on this strategy, all while maintaining a level of nimbleness for a company of its size and staying competitive with its chief rival. “I don’t know who the underdog or the heavyweight is, but we like where we’re positioned, we like the level of investment we have here, we think this is a great place to be for the combination of healthcare and technology, and we’re delivering this at a time where our clients need solutions to be better. I’m excited about our trajectory,” Burke says.