What does the acquisition of Oracle-Cerner announced on Monday mean for companies, their customers and healthcare in general? That remains to be seen, but one thing is certain: it’s a big deal.
As CNBC noted, the $ 28.3 billion Oracle paid for the healthcare IT giant is “monumental” – three times the price of the company’s next-largest deal, PeopleSoft’s acquisition in 2005 for $ 10.3 billion Dollar.
In fact, it is “there with the biggest software deals of all time”: only slightly smaller than IBM’s massive $ 34 billion acquisition of Red Hat in 2018 and larger than Microsoft’s $ 20 billion acquisition of Nuance earlier this year .
But there are good reasons for this type of investment.
“The future of enterprise software is in engaging with industry segments,” said IDC analyst Bob Parker The New York Times. “And this brings Oracle deep into an important part of the healthcare business.”
Oracle is obviously very interested in Cerner’s cloud business as the EHR provider has extensive relationships with Amazon Web Services, emphasizes CNBC, and its Project Apollo initiative, which is built on top of the AWS infrastructure.
“Oracle was a late entry into the cloud infrastructure business and is behind AWS, Microsoft and Google in terms of market share,” writes Ari Levy. “Far from admitting defeat, [Larry] Ellison takes every opportunity to promote Oracle’s cloud capabilities, occasionally at the expense of AWS. There is every reason to believe that Ellison will see the Oracle cloud as the ultimate home for much of Cerner’s future migration. “
Meanwhile, Forrester senior analyst Natalie Schibell sees potential for success, but how well Oracle is able to manage this “cloud-first strategy for harnessing the power of data outside of the electronic health record” will be decided.
As indicated in a statement Healthcare IT news“A deal between Oracle and Cerner would require Oracle to drive Cerner’s move to the cloud to drive a new paradigm in data-driven healthcare.”
Oracle will have a lot of work to do as it adapts to a complex healthcare market of which it has little experience.
“When the ONC Final Rule is in place, 2022 will be the year for big data analysis to mature clinical decision support and personalization,” said Schibell. “The rise in consumerism and value-based care will drive data from consumer wearables and remote patient monitoring devices. Electronic health record platforms must support AI and ML to analyze external clinical data sources, balance resources, contain costs and reduce waste. ”And optimize clinical workflows.
“Oracle needs to equip the e-health record for greater use of virtual care, including moving acute care to the home,” she added. “A future-oriented cloud strategy must underpin the shared use of data with interoperable data that is kept in a long-term maintenance file and securely exchanged.
“Using the power of data is just as important as its security. As Oracle seeks greater exposure in the healthcare sector, its cybersecurity investments must grow exponentially. “
“The fact remains that healthcare is one of many industries serving large tech companies and it remains to be seen how much attention management will devote to building the EHR footprint that Cerner brings into the mix,” said Paddy Padmanabhan, Founder and CEO of Damo Consulting, in a statement.
“The obvious question is whether the deal is just about juicing the cloud computing business for Oracle. It’s worth noting that Google and Apple have suffered major setbacks in the healthcare sector of late that no success is predicted. “
In a subsequent interview with HIMSS TV, Padmanabhan said he was taking a wait-and-see approach. See it embedded here and below.
“I’ve spoken to some of our customers, as well as some of my connections in the industry, and there are several things that can be deduced from that,” he said.
“One of the things is that Cerner is in the middle of a migration with AWS. Will this stop now and will this move to Oracle now? And what does that mean for Cerner as an organization and the amount of resources? , Bandwidth and everything else that they have to spend on the job, should that happen and does that mean a loss of focus on their customers?
“The other thing, of course, is what new products and services Oracle will sell to specific customers,” he added. “The press release made at least one thing very clear that Oracle seems to care deeply about trying to sell its speech recognition software.” [Voice Digital Assistant]that Oracle believes will make a world of difference in easing the burden on doctors. And that was everywhere, was mentioned more than once in the press release.
“So customers are expected to look at other traditional Oracle products and set them up on the Cerner platform. They will have a few choices, especially if they are using different software, ”he said.
The obvious that comes to mind is nuance.
“Do you need to switch to Oracle speech recognition technology? And how good is it really? Because when we talk about speech recognition technology, Oracle isn’t the first name that comes to mind, ”he said.
“That’s pretty monumental”
Believe it or not, however, the synergies between Oracle and Cerner are evident enough that some sort of merger has been discussed for years – at least 13 years in fact. John Moore, founder and managing partner of Chilmark Research, wrote a blog post in June 2008 with the title “Oracle + Cerner = Opportunity?”
Much of what I said then applies today. Https://t.co/r4QDa0lc0i
– John Moore (@john_chilmark) December 22, 2021
Of course, Cerner’s founding chief, Neal Patterson, was still the ship’s captain in 2008, and Moore says it’s unlikely he would have gone on to such a deal. “He was a visionary,” Moore said in an interview withHealthcare IT news. “And he had a firm hand on the tiller.”
After Patterson’s death from cancer in 2017, the idea of a takeover became much more likely, says Moore: “It was all about when and who would come up with something.”
And Oracle is a natural candidate, he said, “They’re trying to get this public cloud business off the ground. You and IBM have been really slow to react, and Microsoft, Amazon and, to a lesser extent, Google have really made capital.” because that’s where the trend is. “
Moore recalls a recent conference call where Larry Ellison said “Financial services and healthcare are going to be important industries for their public cloud,” he said. “And I think the acquisition of Cerner will allow that ability to become more industry-specific with the public cloud services that they will be offering, and they could do something similar in finance to build on that.”
This deal is “an example of how to start with an existing customer base and a Cerner-style platform to build on,” he said. “While at Amazon / AWS Anthem created their AWS platform, Anthem developed Health OS. So that worked out pretty well. The partnership between Humana and Epic uses AWS on the side, so to speak. So it’s an interesting market at the moment as everything is moving to cloud environments. This is the next battlefield. “
As for Cerner’s customers, Moore suspects their reaction to the deal largely coincides with other watchers: wait and see. However, he says most of them will certainly hope to avoid large and potentially disruptive cloud transitions in an already busy data management environment.
“It depends on where I am or not at Cerner in terms of delivering their solutions in a cloud environment,” he said. “If I were a Cerner customer using HealtheIntent that is live on AWS I would say, ‘Don’t get fooled with this. Just let it. We use these tools. We use HealtheIntent in this role, and we’ ‘ loaded our data into AWS. Don’t screw up with it. ‘
“I don’t think they got very far with the AWS Millennium move, so I believe the customer base will be less concerned about Millennium, but I think everything will eventually move to Oracle over time. But how does Cerner manage this transition?
“And I think if I were a customer I would say it’s Oracle. You have a lot of experience in the fintech arena. Get that [revenue cycle management] Fixed thing once and for all. RevElate is something a lot of people are hoping for, “said Moore.
And what are Judy Faulkner and her team at Epic currently thinking?
“I’m pretty sure they have very mixed feelings. I think Judy would probably be thinking, ‘I’m glad I built the confidence I have to keep Epic independent,'” said Moore.
“I think another way they will surely cheer it on because it can create a bit of confusion for Cerner’s customer base and further decrease Cerner’s market share,” he added. “But if I were Epic, I’d be a little worried too: ‘With Oracle’s international breadth and depth, is it going to be harder to get accounts overseas?’ Because at least that is where the growth market for EHRs lies.
“It can also be a bit sad that an era is coming to an end,” he said of the competition.
Epic, he said, has “always been very customer-centric, but to keep that urge alive, to continue to excel in innovation beyond what competitors or others are doing to serve their customer base, because now there are no strong competitors left “Can be a challenge.
One thing is certain – this is still “very much an evolutionary story,” said Moore.
“It will be a while before we find out exactly what is going on here. But I think the impact on the broader industry is pretty significant, pretty monumental compared to a lot of the other big acquisitions we’ve seen in the last decade or so. “
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Healthcare IT News is a HIMSS publication.