I have had doubts about this acquisition. However, after attending OCHC, those doubts have turned themselves around. Having spoken to several of the Oracle executives overseeing the Oracle-Cerner transition at OCHC, I am now far more bullish on this acquisition – this is likely the best outcome for Cerner.

Cerner was Floundering

Upon the passing of former CEO & co-founder, Neil Patterson, the Cerner Board went outside of Cerner to recruit Brent Shafer. While Brent was formerly head of North American operations for Philips, he had never actually run a company, let alone a software company the size of Cerner. This inexperience showed from nearly the first day onward.

Early in his tenure, Shafer gave away a number of Board seats to an activist investor that had bought an extremely low percentage of Cerner shares; Neil would likely have told that activist investor to go pound sand.

Shafer’s leadership, or lack thereof, was also felt across the mid and upper management of Cerner. This led to an exodus of extremely talented individuals with deep institutional knowledge.

Then there is the massive DoD/VA EHR modernization project that Cerner won back in 2017, prior to Shafer’s hiring. This project has become all-consuming for Cerner and its internal resources. Unfortunately, this has left Cerner’s traditional base of hospital systems high and dry not only in fixing known problems, but also making critical advances to improve their product offerings, especially regarding revenue cycle management (RCM).

Yes, Cerner does have a new RCM in RevElate, that is expected to go GA by early 2023, but it’s been quite the wait. Cerner’s RCM has been a known problem for as long as I’ve known this company and only now, well over a decade later, are they introducing a substantial (and hopefully broadly adopted) upgrade.

Then there was the appointment of David Feinberg as the next CEO of Cerner. Now David is a fine, warm person and he did leadership stints at both UCLA and Geisinger, but he has no experience (unless you count his short tenure at Google Health) in running a publicly traded software company of the depth and breadth of Cerner. He is a good figurehead for the company.

Enter Oracle

Within months of Dr. Feinberg taking the helm at Cerner, Oracle swooped in to acquire the company. This was not a widely welcomed acquisition by Oracle’s investors, who thought the money would be better spent on Oracle’s nascent cloud capabilities – Oracle Cloud Infrastructure (OCI). Oracle’s founder and CTO Larry Ellison had long sought Cerner – in the past, Patterson had not been interested – and made the move, countering that this will create a compelling value proposition by verticalizing OCI to serve the healthcare sector.

Now, I have been very circumspect of this acquisition. Having been an industry analyst now for over 25 years, I have come to know Oracle and how it operates fairly well. Past enterprise acquisitions that Oracle has made have quite a checkered history; existing clients of those acquired enterprise solutions were often treated poorly via lack of continuing support, slow to nonexistent improvements to the software, and a jump in maintenance fees.

I feared that the same fate would befall Cerner, a company I have deep respect for, despite its recent shortcomings. But the game plan I was introduced to by Oracle executives at OCHC turned that fear into hope. Finally, Cerner would get what it needed, provided Oracle executes on the plan revealed.

Oracle’s Plans for Cerner

During OCHC, I was provided an opportunity to meet with several Oracle executives, including Mike Sicilia, Oracle EVP, Global Business Units, and Don Johnson, who was brought out of recent retirement to be CTO for Oracle-Cerner. Both executives were quite clear that this acquisition was extremely important to Ellison – who may see this as his last, great act.

The calling to serve society through Cerner was also a calling that brought Johnson back to work. Johnson worked many years at Amazon, helping to build AWS. He was then recruited to Oracle to build OCI. He’s referred to internally as simply “the cloud guy.” I was very impressed with both his humble demeanor and credentials; he is exactly what Cerner needed.

Future Product Priorities

Johnson’s priorities for Oracle-Cerner are simple yet profound for what has been a rudderless company for several years.

• In the short-term: address basic operational issues associated with Cerner’s suite of solutions, including improving resiliency and usability. They also will leverage some of Oracle’s existing assets to improve back-office functionality, including labor and RCM.
• Mid-term (next 18-24 months): get Cerner’s full solution suite up onto OCI and convert it into a SaaS operating/revenue model. We will likely see tighter linkages between the Cerner suite and those of other Oracle enterprise solutions, including human capital management (HCM), enterprise resource planning (ERP), and supply chain management (SCM).
• Longer-term vision: have the Cerner suite running in a browser-like environment to further improve usability and search. Ultimately, Oracle wishes to have a healthcare PaaS/SaaS solution, leveraging APIs along with third party solutions to create a dynamic healthcare IT platform.

Lofty goals all, but Johnson seems to be the type of person who knows exactly how to tackle them, and Oracle is a massive company with the resources to support him. For example, during that briefing, Johnson made the offhand remark that he has 1,000 AI specialists dedicated to this effort.

Market Goals

Sicilia, the business leader and face of the new Oracle-Cerner, was quite clear in stating the priorities for the organization going forward. Surprisingly, going head-to-head with Epic in the U.S. market is not one of them. They will certainly strive to maintain their existing base of customers, expanding client IT wallet-share by offering a complete enterprise software solution suite (EHR, ERP, HCM & SCM). However, their primary focus is to target global greenfield opportunities.

Of the U.S.-based EHR companies, Cerner has the largest international presence, much of it coming from Cerner’s acquisition of Siemens’s health IT group several years ago. Today, Cerner has a presence in 30 countries; Oracle rightly sees a huge opportunity to tap.

And why not? The US market is fully tapped-out with growth only coming from taking market share from an incumbent vendor, which is rarely easy. The international market is the path of least resistance.

In addition to already having a presence in nearly every country, Oracle has a world-class sales organization to take Cerner to market. Oracle also has a card up its sleeve which no other EHR vendor can match – “Sovereign Cloud”.

Sovereign Cloud is a full data center (Infrastructure as a Service – IaaS) that can be set up in any country. The Sovereign Cloud adheres to all rights, rules, and regulations of the host nation and will support all of Oracle’s vertical industry market plays, including healthcare. Having such a capability to serve the health sector is extremely important, as most countries have strict data privacy regulations for patient health information (PHI) – typically, any PHI has to be stored within the country’s borders.

It is No Slam Dunk

Oracle’s plans for Cerner are quite logical and welcomed. It is good to see strong leadership take the reins of Cerner, and although that leadership is new to healthcare, it is a refreshing change for a company that has been poorly led for years. If anyone can return Cerner to its former glory, this Oracle executive team has what it takes.

That’s not to say it will be easy.

First, Oracle needs to ensure that the DoD/VA project hits target deadlines and is executed flawlessly. Granted, this is a huge and highly visible project that would bring any EHR vendor to its knees. Regardless, Cerner – now Oracle – owns it. Oracle has plenty of experience working with the Feds and that should buy them some time.

Secondly, Oracle needs to change the narrative of Cerner and what it can deliver to market. It needs to minimize future defections of clients to Epic by delivering a compelling offering and the services to support it. The forthcoming launch of Cerner’s new RCM, RevElate, and client feedback will speak volumes on this point.

Third, Cerner has lost most of its institutional knowledge, and morale across the employee base needs a strong shot of adrenaline. Combining the previously outlined aggressive product development roadmap with a strong leadership team should help, as Oracle needs that healthcare expertise to achieve its stated goals for Cerner.

The Close

Over my 25-plus years as an industry analyst, I have had many an opportunity to view Oracle in action. It has been a company known for ruthless tactics in search of financial gains. It may be just business, but at what point does it tip into morally questionable behavior? That is something I have struggled with in assessing this company’s actions over my analyst tenure.

After spending several days at OCHC, I have a more nuanced view of the company. When it comes to entering the provider/healthcare sector, Oracle and its executive team are genuinely sincere in their desire to make a positive contribution to this critical sector that affects just about every single person on the planet. They recognize their ignorance of this sector and are willing listeners of others who have greater expertise. This is nearly always a good sign.

Oracle certainly has the resources at its disposal to right the listing Cerner ship. These resources can both leverage a number of Oracle developed technologies – such as Apex and Redwood – that can re-imagine the entire data->EHR->provider/patient interface, all in a SaaS environment. There are few other companies in the market capable of this feat.

I am now feeling much more bullish for this new combined entity Oracle-Cerner; it is the best possible outcome for a floundering Cerner.

Looking to 2030 and beyond, do not be surprised when once Oracle reinvigorates and remakes the entire Cerner platform into a highly compelling, infinitely scalable SaaS solution, it re-enters the US market with a vengeance. Epic take heed.