Cerner Corp. is paying $1.3 billion in cash to acquire the hospital information systems business line of Siemens Healthcare. Large acquisitions usually don't succeed and time will tell on this one.

The acquisition, likely closing in early 2015, was expected as rumors have circulated in the industry for more than a week. The transaction does not include Siemens’ diagnostic imaging products and laboratory equipment lines, although Germany-based Siemens AG and Cerner have a new strategic alliance to combine Cerner’s I.T. products with Siemens’ imaging and medical device products.

Through the acquisition, Cerner gets the products and customers of another major U.S. health information technology vendor with a price tag closely matching annual revenue from the Malvern unit, says Steven Lazarus, president of Boundary Information Group, a Denver-based consultancy. “It’s that size issue, you’ve got that ongoing revenue stream,” he adds. Further, the cost of maintaining Siemens products and customers is much cheaper than the cost of getting new clients.

Cerner has announced that “support for Siemens Health Services core platforms will remain in place. Current implementation will continue and Cerner plans to support and advance the Soarian platform for at least the next decade.”

Right now however, it is not clear the degree to which Cerner will actively sell Siemens products, particularly the Soarian Clinicals electronic health record. But maintaining Soarian EHRs brings in revenue, and Lazarus believes Soarian Financials are more robust than Cerner’s, so there may be a blending of products, such as Cerner Millennium EHRs matched with Soarian Financials. Further, Cerner can sell products that Siemens doesn’t have, such as pharmacy systems, to its new customer base. In total, the acquisition over time can help Cerner become a better competitor against its chief rival, Epic Systems Corp., Lazarus says.

John Moore, managing director of market research firm Chilmark Research, doesn’t see the price tag as a bargain. “The price of $1.3B is quite high for what Cerner is getting, but Cerner is not a company known for wasting money,” he tells Health Data Management. It is also very uncharacteristic of Cerner to make such a large acquisition. However, Cerner sees value here to leverage long-term, and they do look long-term. Much of that future value is likely found in their rapidly growing population health management activities (Healthe Intent).”

Cerner and Siemens both have large market share; Soarian never met Siemens’ market expectations but the company still has many hospitals on its older Invision system, in addition to a modest number of Soarian clients, the specific numbers of which Siemens has never disclosed.

The combined product lines, however, give Cerner “potentially huge up-sell opportunities” if the company does it right, Moore says. “With the acquisition, Cerner now surpasses Epic in the number of hospital clients,” he notes. “Cerner will support Siemens clients on Siemens clinicals, but there will be a time horizon with Cerner's ultimate goal of having them switch to Cerner clinicals. A weak spot for Cerner has been their financials. Siemens brings them a reasonably good financials solution that some existing Millennium sites are already using. The trick here will be to truly integrate the two systems (clinicals of Cerner with financials of Siemens). The acquisition does give Cerner a much stronger international presence, especially in Europe - a target growth area for most acute EHR vendors now that the US market is basically tapped out.”

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