- EHR giant Cerner plans to narrow its services and partnerships in order to focus on high-value areas, CEO David Feinberg, who joined the company earlier this month, told investors on Friday.
- The Kansas City, Missouri-based vendor will work to make its software more usable and its billing processes more reliable, while integrating more analytics for clinical decision support and ensuring information flows freely, Feinberg, who took over the reins at Cerner after leaving Google Health, said.
- Meanwhile, Cerner beat Wall Street expectations on both earnings and revenue in the third quarter with a topline of $1.5 billion, up 7% year over year. Revenue was driven in large part by growth in Cerner's federal business and incremental revenue from its acquisition of data analytics company Kantar Health completed earlier this year, CFO Mark Erceg said.
Cerner and other EHR vendors have succeeded by automating and digitizing records, but "it's very important we acknowledge the fact that we haven't reached our true potential," Feinberg told investors on the Friday morning call. "Improving the usability of Cerner's solutions is at the top of my list of things to get done."
Along with enhancing its revenue cycle management capabilities, Cerner will focus on driving insights from multiple data sources and real-world evidence, management said. It's a further narrowing of Cerner's strategy to expand its data-as-a-service offerings while pivoting away from its legacy EHR business.
Kantar, which Cerner bought in December for $375 million in cash, is a key building block of that data monetization strategy.
On Wednesday, Cerner launched a new business unit, called Enviza, focused on developing new approaches to data management for developing new treatments and therapies and other life sciences research. Enviza capitalizes on the hundreds of millions of patient records Cerner shares with its healthcare provider partners, and should meaningfully contribute to future revenue, Erceg said.
"From a financial standpoint, this thing is playing out really well," Erceg said.
As part of its reorientation, Cerner is systematically reviewing its hundreds of partnerships with, and services for, healthcare organizations, and plans to reduce or eliminate some that don't add concrete value.
The four-decade-old vendor also plans to jettison any side pursuits that have proven to be nothing but "resource drains and distractions," Erceg said.
Cerner's financial performance was pressured heavily by COVID-19 in 2020, as hospitals reallocated their budgets for pandemic response, leaving less leftover for beefing up data and IT infrastructures, and the vendor scrambled to a greater number of virtual software implementations. But that pressure may be in the rearview, even as the pandemic slogs on in the U.S.
Some clients are still not taking onsite visitors. "However, it seems much better than it was 60 days ago. It seems like it's going in the right direction with the exception of the new hotspots," Feinberg said.
The quarter was stronger than Cerner's initial expectations, driven by a bookings upside stemming from some large transactions wrapping up in the third quarter that the vendor expected to close in the fourth.
Cerner's federal business was a major driver of revenue, management said, with the U.S. Coast Guard and Department of Defense each deploying new waves of Cerner-powered EHRs in August and September, respectively. The vendor is on track and on budget to finish the DOD's implementation by the end of 2023, Erceg said.
But Cerner's rollout of the Department of Veterans Affairs' EHR launched in 2018 has been plagued by delays, snowballing spending and concerns about patient safety. In July, a VA official told a House subcommittee the agency was pausing new deployments of the EHR for six months, following watchdog reports slamming the record's first go-live at a VA medical center in Spokane, Washington.
Since then, Cerner has implemented additional capabilities at that Mann-Grandstaff facility, and just last month secured additional VA funding to assist future deployments at other locations, Erceg said.
Cerner brought in a profit of $175.8 million in the quarter — half that recorded in same time last year. But organizational restructuring and productivity measures implemented earlier this year, along with its product focus and cost-control measures, should strengthen the business, leadership told investors.
Cerner has been reducing its workforce amid its ongoing restructuring. The vendor laid off about 500 employees in June and plans to eliminate about 150 more positions in early November, Feinberg told staff in an email to associates earlier this month.
On Friday's call, Feinberg stressed he was supportive of the measures, but "they don't fit my philosophy moving forward," the CEO said. "There's no way we're going to shrink our way to greatness."
Cerner expects its revenue in the fourth quarter to grow in the upper to mid-single digits compared to the fourth quarter last year, which would bring full-year revenue growth to about 5%. However, the vendor warned that — while the company expects project and sales activity to continue improving — the pandemic could still impact future performance unexpectedly.
Cerner's shares rose almost 4% in morning trading Friday following the results.