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Cerner-Siemens merger big 2015 story to watch

Cerner Corp.’s $1.3 billion acquisition of Siemens AG’s EHR unit was one of the big health IT stories of 2014.

Now, how the merged entity will fare in the turbulent EHR marketplace is one of the great anticipatory stories of 2015.

In the meantime, some prognosticators from KLAS Enterprises LLC, the health IT market research firm, have looked at the merger’s effects on both parties.

KLAS’ Colin Buckley noted in a post on KLAS’ “… from the research desk” blog that while Cerner has been second — to longtime market leader Epic Systems Corp. — in the competition to win new hospital customers, Cerner has been narrowing the gap.

In 2013, Epic added 107 new hospitals, while Cerner snagged 87. Epic’s 20-customer margin was much smaller than the 137 more hospitals it signed up in 2010.

Buckley also notes Cerner reeled in Utah’s Intermountain Healthcare, a hospital system colossus with which Cerner is bidding on the $11 billion Department of Defense EHR contract.

On the other hand, Intermountain was one of only three big hospital systems Cerner signed up in 2013. At the same time, among Epic’s new customers that year were 15 integrated delivery networks, or major regional healthcare systems  that previously were served by other vendors.

Meanwhile, Siemens added 12 new hospital customers in 2013. Adding those to Cerner’s total, the Cerner-Siemens combo was only eight behind Epic in 2013, the year before the merger.

And if you tally the numbers now, Buckley reported, Cerner-Siemens boasts the biggest U.S. market share of any EHR vendor, with 1,132 acute care hospitals. It tops Epic, which surpassed Meditech (Medical Information Technology, Inc.) in 2013.

However, when Buckley considers the pluses and minuses, he projects a mixed outlook for Cerner-Siemens.

Siemens had been losing market share and even under the Cerner umbrella that trend is unlikely to slow, Buckley said. But Cerner could also win some Siemens customers that were looking to switch to other vendors. Buckley listed the ways Cerner could do that:

  1. “Larger Siemens customers might find some appeal in the flexibility of Cerner’s offerings. Both vendors have a reputation for more open, mainstream technology.
  1. Recent Siemens buyers tend to be smaller and more cost conscious. Two-thirds of current Siemens hospitals are under 200 beds. Cerner has successfully appealed to these types of organizations in the last few years.
  2. Cerner’s customer satisfaction has risen steadily over the past few years. Most scores are far from industry leading, but they tend to be above average and often rate higher than the solutions Siemens customers are using today.”

In the end, both Buckley and his KLAS colleague Jonathan Christensen think Cerner faces a tough battle against the seemingly indomitable Epic.

KLAS is now working on a larger research project about the expectations and plans of Cerner and Siemens customers.

A lot of people will be watching how this drama plays out.

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