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December 21, 2021 News 7 Comments

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Several investment firms and bond raters downgraded Oracle’s shares and debt Tuesday following its announced intention to acquire Cerner. They worry that the cash payout is large and Cerner’s offerings aren’t strategic to those areas where Oracle should focus.

Oracle has $23 billion in cash and will likely need financing to complete the Cerner acquisition for its offer of $28 billion in cash.

ORCL shares dropped 5% on the announcement Monday and were flat Tuesday.

Oracle’s biggest previous acquisition was PeopleSoft, which it acquired for $10 billion in 2004.


Reader Comments

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From Change of Control: “Re: Cerner. Could CEO David Feinberg really have been key to the Oracle acquisition given that he’s been on the job for less than three months?” That was my immediate question as some seemed to give him credit for the deal. Either way, he’s even more fabulously wealthy than when he started on October 1 – shares in his $35 million compensation package have jumped in price. He is also protected by a change-of-control employment clause if Oracle fires him within 12 months of closing the deal (two years of base salary, 24 months of benefits, immediate vesting of shares, and his initial $1.35 million cash bonus). It seems from the cheap seats that Oracle would have pursued its long-rumored acquisition regardless of who was sitting in the CEO chair, and the fact that it was the new guy Feinberg is very good for him. I doubt Oracle based its plans on his ongoing involvement or found Cerner to be a more attractive target because the CEO spent less than three years working for Google. It may well be that 77-year-old Larry Ellison’s testosterone kicked in (a common tech punch line: “God doesn’t think he’s Larry Ellison”) at the chance to steal an AWS client and to match Microsoft’s acquisition of Nuance by rather wildly claiming that Oracle will make its voice assistant the primary clinician interface to Millennium.

From On-Demand: “Re: Cerner. Oracle is buying into healthcare, not buying into a sexy acquisition.” I agree. CERN revenue and shares haven’t budged much in years, the company lost a lot of its executive talent (to the benefit of other health IT vendors) while Brent Shafer kept the CEO chair warm for his short and generally forgettable three years, and Cerner is #2 and losing ground in its primary business. Oracle’s history involves milking database customers hard while missing trends such as cloud, AI, and voice assistants, but revenue from the former lets them belatedly buy their way in. Tech analysts raised interesting questions: are more Oracle acquisitions imminent since the company historically plays aggressive catch-up, and will Salesforce be pushed into broadening its modest healthcare presence?

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From Bob Loblaw Law Blog: “Re: Cerner. Oracle triggers more customer complaints than any software vendor I’ve seen.” A class action suit that was filed in early 2020 claims that Oracle’s shares were tanking because it failed to predict cloud-based competitive threats, so the company boosted its numbers by forcing customers to buy its flawed cloud offerings by using a strategy called “Audit, Bargain, and Close.” The lawsuit claims that Oracle intentionally installed on-premises software that boosted the customer’s license usage without their knowledge, then threatened to impose large license agreement penalties unless the customer accepted a cloud subscription that they didn’t want and wouldn’t use. The lawsuit quotes a company executive who said that up to 95% of the company’s cloud sales involved these “financially engineered deals” that were designed to mislead investors into thinking that Oracle’s cloud strategy was working.


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I’m curious about what you think about Oracle’s planned acquisition of Cerner. Let me know. I’m thinking of these themes:

  • How does Oracle perform as a health system vendor (database, HR, ERP, EMPI, etc.)
  • How well does Oracle’s Voice Digital Assistant work? Could it really be suitable as Millennium’s primary user interface for clinicians?
  • What is the customer impact of Cerner moving from AWS, which is already complete for some systems and in process for others, to do an about-face move to Oracle’s Gen2 cloud services?
  • How will Cerner’s VA and DoD business be affected?
  • How many on-the-fence Cerner customers and prospects will be spooked by uncertainty and will instead make a quick Epic decision?
  • What will Oracle’s strategy be given that much of healthcare, including Epic, uses InterSystems Cache’ rather than relational databases like Oracle’s?

Speaking of the acquisition, let’s give credit to some HIStalk readers who called it early (July 25, 2021). Eddie T. Head stated confidently that Oracle will be the top general technology firm in healthcare “after they buy Cerner,” which he expected because Cerner is a heavy Oracle user (databases and Java), Oracle is desperately late to the cloud, and Cerner seemed primed for sale. IANAL added that Oracle has acquired other sector-specific application vendors such as NetSuite and predicted accurately that it would be a $30 billion acquisition.

I’m always happy to see December 21 even though it’s the first day of winter (and another COVID one at that) because at least daylight hours start increasing.


An Anonymous Health System CIO’s Initial Thoughts About Oracle Acquiring Cerner

We’ve been a Cerner customer on the acute EHR side for quite a while and have further implemented both ambulatory and rev cycle. On the acute side, we’ve been generally pleased with the product, services, and support. However, we saw Cerner challenges with the ambulatory and rev cycle implementations. From my viewpoint, Cerner’s biggest problems today are:

  • Revenue cycle functionality. Millennium still has challenges to get it to work well. I’m hoping the RevElate strategy pans out.
  • Ambulatory functionality. We’re seeing improvements made, but they lack the product maturity other vendors have. Generally, we are able to make it work.
  • People and process. This is actually their biggest problem. Cerner has struggled to maintain competent staff that understand healthcare and individual customer workflows. Throughout our implementations, we had major challenges with project management, availability of experienced staff, and the ability to help us make informed decisions.

Here are my thoughts on Oracle acquiring them:

  • If Oracle is going to help reduce the cost of healthcare, they also need to help find savings for their customers.
  • One of the things mentioned in their announcement was the use of Oracle’s voice assistant product. Our Physicians use Dragon and are very pleased with it. I don’t believe Oracle understands how difficult it is going to be to get physicians to give up something they like and benefit from.
  • Oracle should be able to bring more technical resources to bear to help with Cerner’s products. However, I hope Oracle isn’t going to distract Cerner to move from their AWS strategy to an Oracle cloud strategy immediately. While this would be favorable to Oracle, I fail to find any immediate value to customers.
  • Oracle is not going to be able to help bring additional healthcare resources initially.
  • I hope Oracle can help improve Cerner’s service delivery through more mature processes. However, not knowing the healthcare space or Cerner products, I’m not sure what they can do initially to bring value for customers.

Webinars

None schedule soon. Previous webinars are on our YouTube channel. Contact Lorre to present your own.


Acquisitions, Funding, Business, and Stock

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Bloomberg reports that activist investor Elliott Investment Management and Vista Equity Partners are considering making a joint bid for Citrix Systems, whose shares are down 36% this year and the company has been exploring its options.

Huron will acquire healthcare analytics vendor Perception Health.

Patient financial solutions vendor AccessOne acquires CueSquared, which offers a mobile payment platform for patient self-pay balances.

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The executive director of the World Privacy Forum is concerned that the acquisition of Cerner will give Oracle – which runs the world’s largest third-party data marketplace – access to Cerner-stored patient data. She says that business associate rules might allow Oracle to use Cerner’s EHR patient data to train AI systems.


People

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ZeOmega hires Andy Arends, MBA, MSc (NTT Data) as chief growth officer.


Other

KHN finds that small-town pharmacists are opening independent drugstores to replace big-box chains that pull out and leave those areas without pharmacy services. The article notes that the number of pharmacists employed by big-box stores peaked at 31,800 in 2012, but online and mail-order sales dropped that number to 18,000 by 2019. Experts say that people do less “roaming shopping” now, meaning that running a loss-leading pharmacy in the back of a retail or grocery store is not necessarily the most profitable use of the square footage. Rite Aid announced Tuesday that it will close another 63 stories, which follows CVS Health’s announcement that it will close 900 stores in the next three years.

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The BMJ complains to Facebook that its peer-reviewed COVID-19 articles are being flagged as “false information” by Facebook’s fact-checking contractor Lead Stories. Lead Stories responds by saying that BMJ’s article “COVID-19: Researcher blows the whistle on data integrity issues in Pfizer’s vaccine trial” and its “scare headline” were adopted by anti-vaxxers to prove that the clinical trial was fraudulent. Lead Stories says the allegation actually involves just three of 153 research sites, the whistleblower Brook Jackson is an EHR auditor rather than a scientist and had worked in the lab for just two weeks, and her Twitter account shows her support for misinformation spreader Robert F. Kennedy, Jr. It also notes that it flagged the article only as being potentially misleading without additional context. Jackson filed an FDA complaint about the clinical trial and was fired by her research contractor employer the same day.

HIMSS announces featured HIMSS22 speakers, none of whom I’ve heard of other than former Olympic swimmer Michael Phelps — the CEO of a children’s education organization, the guy who ran Disney’s ABC Television group for a short time, a couple of former Air Force pilots turned consultants (they sound pretty interesting), an audit firm’s economist, the CEO of the Society for Human Resource Management, and a “60 Minutes” correspondent (those last three are co-presenting a single session on workforce). Exhibitor count is at 550 and Oracle isn’t among them.

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Oracle says it will expand non-US sales of Cerner software. The above from KLAS’s “Global (Non-US) EMR Market Share 2021” report shows where Cerner stands.

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Weird News Andy, this is my holiday gift for you. In England, the bomb squad is called to a hospital ED when a patient presents with “munition in his rectum.” The patient showed little originality in claiming that he fell on the World War II-era armor-piercing projectile.


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Currently there are "7 comments" on this Article:

  1. Oracle bought Cerner so it could sell more licenses and services to a captive audience and fake their numbers higher.

    Nothing innovative is going to come from this and those folks on LinkedIn who screamed in the comments of this announcement with excitement are like watching the drunk homeless guy at the gas station hit the Million dollar scratch off at the counter. Congratulations, you can keep drinking!

  2. COVID has been very beneficial to RFK Jr’s anti-vaccination charity, Children’s Health Defense, which doubled in 2020 to $6.8 million. I’m sure 2021 was even better.

    Now he is taking his act on the road next year (Europe, Canada, Australia), translating his content into multiple additional languages, and creating an Internet TV channel and broadcasting channel to create content for it.

    https://apnews.com/article/coronavirus-pandemic-business-health-pandemics-race-and-ethnicity-d140be878b1ef0c5a5cce3cfde71e69c

    I did notice that the Children’s Health Defense isn’t planning on translating their content in Russian, Chinese, or Arabic. Can’t imagine the GRU would take too kindly to a Children’s Health Defense office in St. Petersburg or Moscow publicly announcing that the Sputnik V vaccine posed significant health risks and/or wasn’t efficacious vs. COVID.

    • RFK Children’s Health Defense actually tried to open an office in central Moscow, but all 3 employees fell mysteriously on armor piercing projectiles on their first day at work…

      In contrast to the patient mentioned above (…amateur…) – all projectiles have actually exploded, causing them to lose the last 12-18 points of their high IQ…

      BTW – the office is still open and it is on Incontinentia Culi street, number 17, just off the Kremlin Square.

      • I’m not sure if this is a bad attempt at humor. Actual violence is used exclusively against Russian opponents of Putin especially opposing media opposition.

        A Western NGO like this would be shut down by chronic excessive fines and other forms of harassment. If need be, the Russian government could get the courts to rubberstamp & give Russian authorities the power under the 2015 law to deem this organization a threat to national security & shut it down.

  3. The Kennedys have had a lot of success. I’ve spent most of the years they’ve been a thing thinking it would be nice if they could show their gratitude for that success by not being public drunks, crashing cars, preying on women, and abusing power. I never thought I’d add “not helping promote the death of millions worldwide” to that list. But apparently that’s where we are.

  4. Lots of older or larger Epic customers use Oracle databases for analytics. The Epic customer purchases these Oracle licenses at deep discounts likely up to 50% and renegotiate them maybe every few years. I’m sure they won’t get a good discount again and will start to migrate to Microsoft.

  5. Re: Oracle Buys Cerner

    I don’t know how valuable this will be. There was an interesting set of activities Oracle performed some years ago. Oracle acquired several major companies, like PeopleSoft and Seibel Systems. Everyone just assumed that Oracle would do their usual thing:

    – cast aspersions on the acquired technologies and companies;
    – claim that Oracle could do it all;
    – mandate a forced march of customers to Oracle Applications;

    That didn’t happen though. Under the leadership of Charles Phillips, the acquired product lines continued to receive regular upgrades. Even more startling, Charles Phillips made some statements to the effect that “these companies knew some things and had some tech that Oracle didn’t, and doesn’t, have, in our in-house developed systems”.

    In a seemingly related move, Larry Ellison stopping making his regular (and distinctly controversial) public statements. Charles Phillips became the public face of Oracle.

    The bad news? Charles Phillips left Oracle back in 2010. I know that PeopleSoft and Skyre continues motoring along, but I know little about the other product lines.







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