Dive Brief:
- Health IT business Cerner won’t drag on tech giant Oracle’s growth after this fiscal year, management said on an earnings call Monday.
- Cerner has faced “near-term headwinds” to its growth rate as Oracle moves customers from licensed purchases to cloud subscriptions, which means less revenue upfront and more cash rolling in over time.
- Half of Cerner’s Millennium electronic health record customers will be on Oracle’s cloud infrastructure by February, said Oracle chairman and chief technology officer Larry Ellison on a call for its second quarter earnings of fiscal year 2024.
Dive Insight:
Oracle closed its $28.3 billion acquisition of EHR vendor Cerner in the summer last year, expanding its presence in the healthcare sector.
Management has warned that Cerner will face some headwinds as it makes the cloud transition. But the move will add new features and capabilities as Oracle upgrades and modernizes Millennium, Ellison said.
New products include public health management tools, inventory and workforce management products for hospitals as well as tools for pharmaceutical companies, he said.
“So we have products for the entire healthcare ecosystem, which has a much larger footprint than Cerner ever had. So we are going after a much larger market than Cerner was,” Ellison said.
Oracle’s total revenue for the quarter was $12.9 billion, up 4% year over year in constant currency. The health IT business pulled down revenue slightly. Revenue was up 6%, excluding Cerner, CEO Safra Catz said during the call.
But Oracle management said they expected Cerner’s performance to improve soon.
“For the full fiscal year, Cerner will be sort of negative one to two points. But that will be it. It'll end this fiscal year, and from then on, it will be a growth story,” she said. “So it will no longer be a drag on Oracle growth.”
The tech giant reportedly laid off hundreds of employees and rescinded job offers from the Cerner unit this summer, largely due to missteps in its contract with the Department of Veterans Affairs to modernize its EHR, according to reporting by Insider.
The VA contract, which was first signed in 2018 before the acquisition, has been slow and more expensive than planned. Deal terms were renegotiated this summer to add stronger performance expectations. Leaders from the VA and the Department of Defense in November said system reliability had been improving, but there’s still work to be done.
Oracle and the federal government are also facing a lawsuit from an army veteran and his wife, which alleges errors in the new EHR delayed his cancer diagnosis.
