Software giant Oracle is acquiring EHR vendor Cerner for $28.3 billion, the two companies announced Monday. The deal is expected to close sometime next year.
It will be Oracle's largest acquisition to date, with the next highest being the 2005 purchase of PeopleSoft Inc. for $10 billion. The deal further pushes Oracle into the healthcare market, where its presence is mostly in data use efficiency for payers and providers. Oracle's areas of focus include database software and cloud systems.
Cerner will be a dedicated business unit within Oracle, according to the Monday press release. Voice-enabled user interfaces will be a key focus with a goal to "deliver zero unplanned downtime in the medical environment."
"Oracle's focus on usability and voice enabled user interfaces will dramatically reduce the amount of time that medical providers spend dealing with systems and increase the time they spend directly caring for patients," according to the press release.
Evercore analysts on Friday — after The Wall Street Journal first reported on a potential $30 billion buy — noted that Oracle could push Cerner further into the cloud.
SVB Leerink said Friday a deal would be positive for Cerner, as "it will allow the company to undergo its transition from an EHR to a healthcare platform within the cover of a far larger organization, and with the benefit of a premium takeout valuation."
A buyout of Kansas City, Missouri-based Cerner has long been rumored, with Oracle often popping up as among the possibilities. Oracle, which has annual revenues of about $40 billion, moved its headquarters from Silicon Valley to Austin about a year ago.
But they and other analysts noted the pricetag would probably require using stocks to fund and could lead Oracle shareholders to push back on the valuation.
Cerner's stock was up slightly in Monday morning trading following the news. Oracle, however, was trending down.
Cerner has been in the midst of tightening its focus away from the legacy EHR business under the helm of David Feinberg, who left Google to join the company in October. He told investors during a third-quarter conference call that he wants to focus on improving usability and "it's very important we acknowledge the fact that we haven't reached our true potential."
In a press release Monday, Mike Sicilia, EVP for vertical industries at Oracle, said Cerner will move to Oracle's Gen2 cloud, and that the change should happen quickly because of the two companies earlier integrations. "We will make Cerner's systems much easier to learn and use by making Oracle's hands-free Voice Digital Assistant the primary interface to Cerner's clinical systems. This will allow medical professionals to spend less time typing on computer keyboards and more time caring for patients," he said.
The EHR vendor has also been beleaguered by a shaky rollout of its EHR for Veterans Affairs facilities. The $16 billion project, which began in 2018, was put on pause in July following complaints of insufficient training and soaring costs. VA said earlier this month it plans to resume implementation in the new year.
The potential tie-up comes amid a flurry of M&A in the HIT sector. Last month, EHR vendor Athenahealth was bought out by two private equity companies in a $17 billion deal.
In 2020, Cerner saw its second consecutive year of net market share decrease, but saw wins in pursuing community hospitals and other smaller organizations, according to Klas Research. The company now has about a quarter of the hospital market share.
