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Is Cerner Edging Up On Epic?

Posted on January 7, 2016 I Written By

Anne Zieger is veteran healthcare consultant and analyst with 20 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. Contact her at @ziegerhealth on Twitter or visit her site at Zieger Healthcare.

At Verona, Wisc.-based Epic Systems, growth is a way of life. In fact, the EMR vendor now boasts a workforce of 9,400, which is estimated to be an increase of 1,400 staffers over the past year.

Not only that, Epic is confident enough to build cute. Its Campus 4, dubbed the “Wizards Academy Campus,” is designed to resemble the fictional Hogwarts school of Harry Potter fame — or if you’re academically-minded, England’s Oxford University. When completed this summer, Campus 4 will add 1,508 offices and 2,000 parking spaces to the Epic headquarters.

I could go on with details of the Disneyland Epic is making of its HQ, but you get the picture. Epic leaders are confident that they’re only going to expand their business, and they want to make sure the endless streams of young eggheads they recruit are impressed when they visit. My guess is that the Epic campus is being designed as a, well, campus speaks to the idea of seeing the company as a home. When I was 25, unique surroundings would have worked on me!

In any event, if I was running the place, I’d be pretty confident too. After all, if its own stats are correct, Epic software is either being used by or installed at 360 healthcare organizations in 10 countries. The EMR giant also reports that its platform manages records for 180 million Americans, or about 55 percent of the entire U.S. population. It also reported generating a not-so-shabby $1.8 billion in revenues for 2014.

But a little-noticed report issued by analyst firm KLAS last year raises questions as to whether the Epic steamroller can maintain its momentum. According to the report, which admittedly came out about a year ago, “the competition between Epic and Cerner is closer than it has been in years past as customers determine their future purchasing plans,” analysts wrote.

According to KLAS researchers, potential EMR buyers are largely legacy customers deciding how to upgrade. These potential customers are giving both Cerner and Epic a serous look, with the remainder split between Meditech and McKesson upgrades.

The KLAS summary doesn’t spell out exactly why researchers believe hospital leaders are beginning to take Cerner as seriously as Epic, but some common sense possibilities occur to me:

The price:  I’m not suggesting that Cerner comes cheap, but it’s become clear over the years that even very solvent institutions are struggling to pay for Epic technology. For example, when traditionally flush-with-cash Brigham and Women’s Hospital undershoots its expected surplus by $53 million due (at least in part) to its Epic install, it’s gotta mean something.

Budget overruns: More often than not, it seems that Epic rollouts end up costing a great deal more than expected. For example, when New York City-based Health and Hospital Corp. signed up to implement Epic in 2013, the deal weighed in at $302 million. Since then, the budget has climbed to $764 million, and overall costs could hit $1.4 billion. If I were still on the fence I’d find numbers like those more than a little concerning. And they’re far from unique.

Scarce specialists:  By the company’s own design, Epic specialists are hard to find. (Getting Epic certified seems to take an act of Congress.) It must be quite nerve-wracking to cut a deal with Epic knowing that Epic itself calls the shots on getting qualified help. No doubt this contributes to the high cost of Epic as well.

Despite its control of the U.S. market, Epic seems pretty sure that it has nowhere to go but up. But that’s what Microsoft thought before Google took hold. If that comparison bears any weight, the company that will lap up Epic’s business and reverse its hold on the U.S. market probably already exists. It may not be Cerner, but Epic will face meaningful competition sometime soon.

Background On Cerner’s Capture Of DoD EHR Data Center Biz

Posted on January 6, 2016 I Written By

Anne Zieger is veteran healthcare consultant and analyst with 20 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. Contact her at @ziegerhealth on Twitter or visit her site at Zieger Healthcare.

As many readers will know, the Department of Defense awarded Cerner the $4.3 billion Defense Healthcare Management System Modernization contract this summer, through its partnership with Leidos and Accenture. In doing so the partners beat out some formidable competition, including an Epic/IBM bid and a group, led by Computer Sciences Corp., whose partners included Allscripts and HP.

This is a system integration project on the grandest scale, connecting healthcare systems located at Army hospitals, on Naval vessels, in battlefield clinics across the glove. The idea is to bring all of this data — on active-duty members, reservists and civilian contractors — into a single open, interoperable platform. The new platform should serve 9.5 million military beneficiaries in roughly 1,000 locations.

Now, just six months into the 10-year deal, the DoD has decided to change the rules a bit. Military officials have concluded that the new records system capabilities won’t function at their best unless they’re hosted in a Center datacenter. The new system, officials said, “requires direct access to proprietary Cerner data, which is only available within Cerner-owned-and-operated data centers.”

I’m not sharing this tidbit because it nets the partnership more money — Cerner will take in a comparatively trivial $5 million per year to host the government health data — but for a few other reasons that offer ongoing perspective on this massive deal:

  • While there’s no concrete way to prove this, the buzz around the time of Cerner winning the contract was that it won because it was perceived as more open than Epic. Arguably, if the DoD has to transfer data hosting because it needs access to proprietary algorithms, maybe the whole open thing was a fake-out. Certainly, needing access to Cerner logic locks down the deal even further than a straight ahead contract award.
  • Why couldn’t the DoD anticipate that their own data centers wouldn’t meet the needs of the project?  And why didn’t planners know, in advance, that they’d need access to Cerner’s “quantitative models and strategies” prior to signing on the dotted line? Admittedly, this is a sprawling project, but planning for appropriate network architecture seems pretty basic to me. Did Cerner deliberately raise this issue only after the deal was done?
  • In the notice the DoD issued outlining its intention to shift hosting to Cerner, it noted that while it wasn’t seeking competitive proposals, “any firm believing that they can fulfill the requirement of providing these services may be considered by the Agency.” The key for late entrants would be to prove that they could both meet hosting requirements and connect to proprietary Cerner data.
  • Was the intent always to host the EHR at the Cerner data centers and this was a way to do an end around the bid process and make the initial bid look more attractive (ie. cheaper) so it won the contract? I wonder how many more of these late additions the DoD will have when implementing the Cerner EHR. We’ve seen many hospital EHR implementation budgets have skyrocketed. It’s not hard to imagine the same scenario playing out with the DoD EHR budget. This might be the first of many EHR add-ons that weren’t part of the original contract.