What Oracle’s acquisition of Cerner means for healthcare

Oracle’s $28 billion purchase of Cerner figures to have big implications for the healthcare industry.

By acquiring Cerner, the digital health company, Oracle aims to command an even larger presence in the healthcare market. Analysts said it could offer the potential for healthcare providers to access and share electronic health records more easily. Oracle and Cerner announced the deal Monday.

Holger Mueller, vice president and principal analyst for Constellation Research, said the deal makes sense for Oracle. The healthcare industry is the nation’s largest employer. With the COVID-19 pandemic continuing, healthcare figures to remain a big chunk of the domestic economy.

“I think it’s a very smart move for Oracle,” Mueller said.

Oracle has never undertaken a deal this large before, Mueller said. But he characterized it as an offensive and defensive strategy in terms of gaining a bigger presence in healthcare and expanding cloud technology, especially in the face of growing competition.

“The goal is to move healthcare to the cloud,” Mueller said.

For healthcare organizations to truly gain easy access to patients’ electronic records, Mueller said, “it can only happen in the cloud.”

Oracle has to catch up a bit to other tech firms that have moved more quickly toward cloud technology, some analysts said. The acquisition of Cerner should enable Oracle to accelerate its efforts. “It’s a very good fit,” Mueller said. “It’s a bold move."

• Related story: Now that Oracle has bought Cerner, will other tech giants make bigger moves in healthcare?

Natalie Schibell, a senior analyst at Forrester, said the Oracle purchase of Cerner offers “tremendous potential.” But she said via email the success will be determined by Oracle’s ability to harness “the power of data that sits outside of the electronic health record.”

Hospitals typically have a host of different electronic health record vendors. The industry still is plagued by vast amounts of data sitting in silos.

“There is also a lack of interoperability frameworks across the industry that prevents clinicians from getting a 360-degree view of patients throughout the care continuum,” Schibell said. “This is an unsolved dilemma that continues to cripple workflow efficiency. It ultimately escalates healthcare spend and impedes data-driven healthcare.”

“An Oracle-Cerner deal would require Oracle to push the throttle on Cerner’s move to the cloud to drive a new paradigm of data-driven healthcare,” she said.

In announcing the deal, Larry Ellison, chairman and chief technology officer with Oracle, said the acquisition would pay dividends for healthcare professionals.

Oracle and Cerner cited a 2020 Mayo Clinic study that found doctors are spending an hour or two on electronic health records or desk work for every hour they spend caring for patients. The study found the hassles of navigating electronic health records contributed to burnout among doctors.

With the deal, Oracle and Cerner said they aim to offer better technologies to enable doctors to spend more time on their patients.

"Working together, Cerner and Oracle have the capacity to transform healthcare delivery by providing medical professionals with better information — enabling them to make better treatment decisions resulting in better patient outcomes," Ellison said in the news announcement.

"With this acquisition, Oracle's corporate mission expands to assume the responsibility to provide our overworked medical professionals with a new generation of easier-to-use digital tools that enable access to information via a hands-free voice interface to secure cloud applications,” Ellison said. “This new generation of medical information systems promises to lower the administrative workload burdening our medical professionals, improve patient privacy and outcomes, and lower overall healthcare costs."

Cerner’s largest business and clinical system already runs on the Oracle database, Mike Sicilia, Oracle’s executive vice president for vertical industries, said in the news release. With the merger, Cerner’s systems will become easier to learn because they will make Oracle’s 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,” Sicilia said in the news release.

The deal is expected to close in 2022, pending the approval of federal regulators. Mueller did not anticipate the deal raising red flags with regulators and expected the acquisition to be approved without major issues.

It’s the latest move as software companies aim to claim a bigger piece of the healthcare industry. Earlier this year, Microsoft acquired Nuance, which is known for its voice recognition technology, in a deal worth $19.7 billion. Microsoft said at the time the deal doubles its market in the healthcare provider space.

Oracle and Cerner touted the importance of the healthcare market in the release. "Healthcare is the largest and most important vertical market in the world—$3.8 trillion last year in the United States alone,” Safra Catz, Oracle’s CEO, said in the news release.

Investors have cheered Oracle’s performance in 2021. The company’s stock price has risen more than 40% since the beginning of the year, although it dipped a bit since the announcement of the Cerner acquisition.

As Oracle aims to expand its presence in healthcare, the company is going to need to invest more in cybersecurity to protect electronic health records, Schibell said.

“Oracle will need to equip the electronic health record for greater utilization of virtual care including the shift of acute care into the home. A forward-thinking cloud strategy must underpin data-sharing with interoperable data that is maintained on a longitudinal care record and exchanged securely,” she said.