Enterprise

Under scrutiny by Congress and losing customers, Cerner could give Oracle a $28.3 billion headache

Cerner’s advancements in AI and data could help nurses save lives, but the company has been shedding customers dissatisfied with the basic tech that hospitals need to stay afloat.

MU Health Care employee looking at data.

For Oracle, buying Cerner is about getting a leg up in the evolving health care tech arena.

Photo: MU Health

Indiana Democrat Rep. Frank Mrvan did not have good things to say in November about Cerner, the health records software provider Oracle acquired last month for $28.3 billion.

“We are beating our heads against the wall to make Cerner function and it is an aggregation of inefficiencies,” Mrvan said during a House subcommittee hearing, rattling off a series of damning comments about Cerner that leaders and staff at a VA hospital in Spokane, Washington, shared with him in October. They were talking about the slow and clunky rollout of Cerner’s patient health records software at the Mann-Grandstaff VA Medical Center, the topic the House subcommittee had convened to discuss.

Cerner scored a $10 billion contract in 2018 to update the electronic health and financial records system used by the Department of Veterans Affairs to deliver care to 9 million VA patients annually. But the project has encountered so many setbacks and problems that it spurred an investigation and incriminating report published in July by the VA’s Office of Inspector General, which called Cerner’s system a “complicated product” and cited “significant deficiencies in training content,” among other issues.

The hearing served as a very public signal that, if approved, Oracle’s purchase of Cerner could bring with it some negative side effects when it comes to satisfying big government and other private sector hospital customers.

“Cerner is committed to getting this right for our VA and importantly our nation’s Veterans. We have remained on site at Mann-Grandstaff to gather feedback and implement change requests as directed by VA to improve care delivery,” said Brian Sandager, general manager and senior vice president of Cerner Government Services, in a statement sent to Protocol.

For Oracle, buying Cerner is about getting a leg up in the evolving health care tech arena through Cerner’s hospital client relationships and its industry-specific technologies, including its electronic health records data system, software for emergency room and hospital bed management, nursing workflow tools and cloud-based data analytics and AI tools. Yet, despite Cerner’s advancements in AI and data services that could help nurses save lives, Cerner has struggled to compete when it comes to the less-exciting reason most hospitals purchase electronic health records technologies – to manage accounting, billing and revenue cycles.

The staff of Mann-Grandstaff are not alone in their dissatisfaction with Cerner. Health care industry research company KLAS reported in May that Cerner had lost a total of seven large customers representing over 28,000 hospital beds in the prior six years. Becker Hospital Review reported that Cerner lost 11 hospital clients between 2015 and 2020.

Some of Cerner’s largest customers have left Cerner for its closest U.S. competitor, EPIC. Hospital giant Mayo Clinic ditched Cerner in some of its facilities in 2015, eventually moving 22 of its hospitals and 76 clinics to EPIC’s electronic health record and revenue cycle management system. AdventHealth, which operates nearly 50 hospitals and hundreds of care centers in nine states, left Cerner for EPIC in 2020.

Making the move to a new records platform is no simple decision; these migrations can be expensive, years-long slogs. When Mayo Clinic shifted from Cerner to Epic, it said the multiyear project involved 52,000 staff members and included over 171,000 end-user devices. In the end, the nonprofit health care provider said it retired 287 legacy systems in the changeover. The AdventHealth refresh is expected to take three years and cost $660 million.

Cerner has gained smaller, independent and community hospital customers in recent years, according to KLAS. And Cerner dominated the global electronic medical records market with 2,406 hospital customers worldwide as of December 2020. Still, EPIC had more hospital customers in the U.S. – 1,713 compared to Cerner’s 1,354.

Oracle declined to comment for this story.

Cerner’s billing software wild card

In many cases, decisions about adopting hospital tech focus on the bottom line. Hospital and physicians’ group customers tend to make electronic health records software purchase decisions based on how well they integrate the financial side of their businesses with the clinical side and patient care, said Cory Tate, vice president of Core Solutions and Interoperability at KLAS. That’s where revenue cycle management, which is used to manage patient accounting and billing, comes in.

“The main reason for most of [Cerner’s] departures has been the revenue cycle solution,” he said, adding that larger customers with more complex needs have “struggled” with Cerner’s revenue management system.

When asked about client departures and its revenue cycle management technology, Cerner pointed to a company announcement from October stating its plans to transition existing customers over to a new revenue cycle management system called RevElate. The technology was built from software Cerner acquired in 2014 when it bought Siemens Health Services for a reported $1.3 billion.

“That move is their attempt to address that missing [revenue management] piece, but it introduces a new wild card,” said Tate. He said Cerner customers might be reluctant to make the move to the new revenue management system, in part because it is not fully integrated with the company’s patient and clinical data records-management platform, Millennium. Cerner did not respond to a question about the status of RevElate’s integration with Millennium.

Tate said it is unclear at this early stage the impact that taking Cerner under the Oracle umbrella could have on the success of the revenue cycle platform or other Cerner tech. Oracle will likely operate Cerner as an independent business, he said, but added that Oracle’s acquisition “has the potential to be disruptive” as Cerner attempts to shift customers to the new accounting platform.

Cerner’s VA tech trainers: “Just warm bodies”

The VA is one of Cerner’s revenue cycle system customers. However, the company’s Millennium technology, which deals with data related to patient care, has created transition woes at the agency. The VA’s OIG report showed the main problems stemmed from Cerner’s approach to training VA hospital staff on using the system. It cited “significant gaps in training for business and clinical workflows” and a “lack of clinical knowledge” among Cerner trainers.

According to the report, one VA hospital staffer said that a group of Cerner trainers dubbed “adoption coaches” are “just warm bodies showing that they are here to help us but they really don’t know the details.” The federal Government Accountability Office also found problems with the deployment of Cerner’s system and recommended in February that the VA wait to set up the system at other hospitals until they were addressed.

During the November House hearing about the VA project, Donald Remy, the VA’s deputy secretary, said he recognized the concerns associated with getting staff trained up on the Cerner system, particularly if problems using the software could affect the health and safety of patients. However, he expressed confidence in Cerner’s technology and said the shift toward a standardized process away from the VA’s legacy records management system, where workflows differ from hospital to hospital, “is a difficult transition — one that goes beyond just the technology of the system itself.”

The VA project is part of a much bigger effort at the Department of Defense, and Cerner’s technology is expected to be a key component. Ultimately, as part of a massive overhaul known as the Defense Healthcare Management Systems Modernization program, the DoD aims to integrate the VA’s patient records system with the systems used by the DoD and U.S. Coast Guard.

For Cerner and its partners, Accenture and government contractor Leidos, the project is a big win over Epic. The group beat out Epic and its partners, IBM and Impact Advisors, in winning the coveted DoD contract, valued at $9 billion.

Meanwhile, despite delays, the VA changeover to Cerner’s Millennium system is still underway. The VA announced a revised schedule in December, which will include deployment at additional health facilities, including a joint VA-DoD site in North Chicago.

AI may not save the day for Cerner

While serving its demanding military clients today, Cerner is betting on a future that revolves around cutting-edge data products and AI.

The company bought Kantar Health for $375 million in April in an effort to enhance its pool of real-world clinical evidence data — the sort of information used by pharmaceutical clients such as Pfizer, Johnson and Johnson, AstraZeneca and Novartis. In a January 2021 presentation at JP Morgan's health care conference, Cerner declared its mission is to “create health care’s leading data business.” Buying Kantar Health would help it get there, the company said.

Complex machine learning algorithmic systems are usually built from massive datasets. And when Oracle and Cerner announced their deal, they pointed to the potential benefits of their combined cloud, AI and machine learning tech.

Benjamin Wax, a Cerner employee who works as a nurse and clinical informaticist with the Tiger Institute, a health care tech research partnership between Cerner and the University of Missouri, told Protocol he sees AI as transformative for nurses like him when it comes to saving patients’ lives. He helped fine-tune algorithms used in conjunction with Cerner’s Rapid Response system, which keeps track of vital-sign data like heart and respiration rates to assist nurses in clinical decision-making. That includes alerting them when patients are at risk of deterioration, such as when they show signs of contracting sepsis, a deadly response to infection.

The use of AI in hospitals can “really level the playing field” for younger, less-experienced nurses, said Wax. “It picks up on patients who are deteriorating before a nurse with not-as-much experience would be able to pick up on it themselves,” he said.

In his comments sent to Protocol, Cerner’s Sandager spotlighted the company’s use of AI at the VA hospital in Spokane as a bright spot in the beleaguered effort. At the facility, he said, “Algorithms in our solutions triggered alerts to opioid prescriptions, which resulted in alternative treatments for those at higher risk of use disorders.”

But Tate said many hospitals are not using AI to help make clinical decisions yet, in part because incorporating them into the day-to-day process of caring for patients “takes a lot of work and know-how to adopt that in a health system.” In the end, he said, advancements in AI and data analytics might not be enough to satisfy customers simply looking for a reliable records system to manage the basic nuts and bolts of running a hospital business.

“The AI piece is what gets a lot of talk, and I think that’s the future,” said Tate. But for Cerner, he said, “They’ve got to answer the revenue cycle question.”

This story was updated to clarify Tate's view of how hospitals and physician's groups make software purchasing decisions.

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