Cerner acquisition comes amidst rising provider angst

KLAS report details an increasing number of concerns about the company’s direction, going back months before Oracle’s planned purchase.

Sea of change in key execs and strategic direction concerns precluded acquisition apprehension

The planned Cerner acquisition by Oracle, announced late in December, understandably is raising concerns among users of the company's information systems.

The expected $28.3 billion purchase of the Kansas City-based solutions provider by Oracle is of high importance for providers who have poured time and dollars into implementing Cerner’s systems as cornerstones of their digital strategies. As such, a Cerner acquisition raises worries about ongoing support, development and future growth of supporting technology systems.

Those concerns didn’t just begin surfacing after the acquisition announcement – Cerner customers have been raising them for months, reports researchers at KLAS Research, the Orem, Utah, consultancy that reports on customer perceptions of health information technology solutions.

Cerner Flash Insights 2022

The extent of these inquiries has prompted KLAS to develop a series of reports, which it terms “Cerner Flash Insights 2022.”

In its first report, KLAS analysts contend that “Cerner clients, and the industry at large, believe that Cerner is at a crossroads.” The consultancy released its initial report on Cerner last month, and it plans a series of performance, progress and perception reports this year.

The initial report actually predates the announcement of the acquisition – it’s based on customers’ perceptions of the naming of David Feinberg, MD, as its CEO last summer and reactions to a new revenue cycle offering called RevElate.

While these topics are not directly related to the Oracle acquisition, the report highlights growing questions among Cerner customers that stretch back over several months, and the answers provide an early glimpse into the trajectory for customer perception, KLAS contends.

Coray Tate, vice president of core solutions and interoperability, KLAS Research:

'Several [Cerner] clients have been forming contingency plans and say they cannot wait one or two years for more solid information.”

“Cerner was going through significant changes with a new CEO and a new revenue cycle direction,” said Coray Tate, vice president of core solutions and interoperability at KLAS Research and lead author of the Flash Report. “Then, after the Oracle purchase was announced, we had several customers reach out to us asking what their peers were thinking about all of this.”

Other reasons for concerns among customers include the fact that, “over the past two years, an increasing number of long-time Cerner executives have left,” the initial KLAS report notes. “Amidst these changes, several clients have been forming contingency plans and say they cannot wait one or two years for more solid information.”

That’s the impetus behind the series of KLAS reports on Cerner, particularly as healthcare organizations make strategic decisions that hinge on information technology. The first report contains a summary of current Cerner performance data, supplemented by customer perceptions from 26 healthcare organizations that KLAS gathered in the fourth quarter of 2021.

“When there are significant changes like this, healthcare leaders only get to see their own experience and then try to make sense out of that, based on their singular experience,” Tate says. “Understanding how their peers are experiencing the change gives them another point of understanding to assess their own experience from and helps them have better conversations with their vendor, and make the best decisions for their organization as they navigate the changes.”

David Feinberg, MD

There’s been a series of changes “over the course of five years and three CEOs,” the report notes. “Cerner’s overall KLAS performance scores have remained unchanged, and overall confidence in Cerner’s ability to deliver has declined. The customer experience is highly variable, as customers report Cerner has not been a consistent guide.”

The report contends that signs of significant change were evident in Cerner’s recruitment of Feinberg last October and in its addition of a new revenue cycle offering.

 Respondents to the KLAS inquiries generally said they were optimistic about Feinberg’s appointment, believing it would be “fundamentally different than his predecessors’ due to his clinical focus and straight-talking personality.”

Provider VP surveyed by KLAS:

"Bring back usability to the providers and grow the system to match the way healthcare is growing and what we need. "

But then, as now, customers “wonder what products and services Cerner may discontinue as (it refines its focus).”

Prior to the acquisition announcement, Feinberg had hinted that Cerner would be looking to take a strategic look at concentrating on certain product offerings. “In the past, Cerner has simply tried to do too many things by ourselves,” he said. “Going forward, we are going to change our approach and only focus on a small number of important high-value areas — some of which we plan to achieve by partnering with highly capable organizations.”

Usability of products and a renewed customer focus were important considerations for respondents to the KLAS survey pre-acquisition, and KLAS contends that is likely to be amplified now.

One organization’s vice president interviewed by KLAS said, “We are hoping David Feinberg can bring back usability to the providers and grow the system to match the way healthcare is growing and what we need. We need more technology related to the digital front door.”

The all-cash acquisition is expected to close toward the end of this year, subject to regulatory approval and closing conditions. But industry experts note that the disruption after an acquisition usually takes some time to rectify, and this move by Oracle “adds a new layer of complexity to Cerner’s future.”

In particular, M&A within healthcare has caused recalibration among customers, KLAS notes. “In past research, KLAS has collected customer impressions of mergers and acquisitions (see our Strategic M&A report from 2019). Findings show that when acquisitions go well — which happens about 40 percent of the time — it often leads to improved loyalty and evangelism among customers.

“Conversely, when acquisitions go poorly — which happens about 42 percent of the time — customers are twice as likely to leave their vendor.”

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