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Cerner buys Siemens Health Services, could top market leader Epic

Cerner Corp.'s $1.3 billion purchase of Siemens' healthcare IT unit could make Cerner the new dominant force in the EHR business, ahead of current market leader Epic Systems Corp.

Cerner Corporation will acquire Siemens AG's health information technology business unit, Siemens Health Services, for $1.3 billion in cash, according to an announcement by the two companies.

The move will likely create a new dominant force in the electronic health records sector, said industry analyst John Moore, founder and managing partner of Chilmark Research in Cambridge, Massachusetts.

Cerner is currently second in EHR market share, but could pass Epic Systems Corp. for the top spot by joining forces with the German conglomerate's EHR unit.

"Now you look bigger than Epic," Moore said. "It does make a statement."

For Cerner, the deal complements its own strong offerings on the clinical side in big hospital settings by adding Siemens' well-regarded financial and scheduling software, an area in which Cerner has been relatively weak, Moore said.

Also, Cerner gains access to Siemens' approximately 200 hospital customers, which would now conceivably migrate to the Cerner platform.

With Siemens' technology, Cerner is also well-positioned to move down-market to smaller community hospitals now that many big system buying decisions have been settled for about five years, Moore said. Now Cerner could go after market share currently held by mid-sized EHR companies such as Meditech and McKesson, he said.

"There's a technology play and there's a market play," Moore said.

As for merging the two companies' cultures and technologies, one open question is how well Cerner will be able to integrate its clinicals with Siemens' financials, Moore said.

The knowledge and strength of our combined resources opens up great possibilities for future collaboration.
John GlaserHealth Services business unit CEO, Siemens Healthcare

"We believe this is an all-win situation for the clients of both organizations and all of our associates and shareholders," Neal Patterson, Cerner chairman, CEO and co-founder, said in a release announcing the sale. "Through more than $4 billion of cumulative investments in R&D [research and development], Cerner has established a strong market standing and is positioned for continued growth.

"Siemens' health care IT assets provide additional scale, R&D, an impressive client base, and knowledgeable and experienced associates who will help Cerner achieve our plans for the next decade," Patterson continued. "In addition, the alliance we're creating will drive the next generation of innovations that embed information from the EMR inside advanced diagnostic and therapeutic technologies, benefitting our shared clients."

John Glaser, CEO of the Health Services business unit of Siemens Healthcare, said in the release: "We are excited to join with one of the most competitive companies in health IT today, and a recognized leader in innovation."

"Siemens cares deeply about its clients and believes Cerner is the best organization to fully support their health IT needs going forward," he said. "The knowledge and strength of our combined resources opens up great possibilities for future collaboration and development, which is exciting for all of us. And our clients will benefit from our alignment with a company that has such a strong historical and future commitment to rapid innovation."

Based on 2014 estimates, Cerner and Siemens Health Services said they have combined totals of more than 20,000 associates in more than 30 countries and 18,000 client facilities, including some of the largest healthcare organizations in their respective countries. They also reported $4.5 billion of annual revenue and $650 million of annual R&D investment.

Let us know what you think about the story; email Shaun Sutner, news and features writeror contact @SSutner on Twitter.

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