Q&A with ST Advisors on whether the Oracle-Cerner tie-up will be another Big Tech-healthcare failure

Editor’s note: This interview took place just before Oracle’s acquisition of Cerner was announced on Dec. 20.

Insider Intelligence (II): An Oracle-Cerner M&A deal could certainly shake up the healthcare cloud/EHR space. What were your first thoughts when you heard about the acquisition plans?

Ben Rooks (BR): There is the expression, “Those who cannot remember the past are condemned to repeat it.” [Well], those of us who do remember the past are forced to watch other people repeat it. I think this could be really good for Cerner shareholders, but for Oracle shareholders, there’s a long list of tech companies that have tried to come into healthcare IT and sort of died on the beaches.

For example, IBM bought [healthcare analytics company] Truven [in 2016] and is now going to sell it off [at a loss]. GE Healthcare bought [health IT company] IDX [in 2006] and they showed negative growth during the biggest boom times of healthcare IT the world has ever seen… if I were an Oracle shareholder or board member, I would have significant concerns about entering a space where so many smart folks have not just stubbed their toes, but smashed themselves full in the face.

Michelle Mattson-Hamilton (MMH): What Ben [is saying] is true, but in the last three years with Amazon, Google, and Apple moving into this space, you can see that those companies have started to be successful within their narrow lanes. Amazon's lane is obviously bigger than most. That has created an opportunity in the market for Oracle to be here, too.

There are real reasons why they want to acquire Cerner, which has 25% of the US hospital EHR market share and almost 20% of the international market share…but as Ben mentioned, there are a lot of examples of folks that have been unsuccessful with this strategy. Will Oracle be able to take advantage of the opportunity that supercharging the EHR workflow would provide? Can they leverage all of the data to then grow their AI platform?

Also, in the last five years, you've seen health systems actively try to consolidate vendors. When you think about where the key strategic information is and where the data flows, you want to be where Cerner is. If you can consolidate AI, machine learning (ML), and additional key services around the EHR workflow—which is what everyone's trying to do—and do that successfully, it's a real opportunity. Cerner has been trying to do this with Amazon via AWS since 2019, and they’re only partially ready to be fully on the cloud.

II: What impact could this deal have on the EHR marketplace?

BR: It’s hard to speculate, but if I were a salesperson working for Epic or Allscripts, I would be cackling with joy. If I were either of those companies, the only thing I’d worry about is if Oracle decides they're just going to buy business and start pricing really aggressively.

MMH: This is a big bet Oracle is making in healthcare. It could triple down on [that bet] and make some significant investments, post-acquisition, such as making internal R&D resources for additional AI and ML investments or accelerating the transition to cloud.

II: What do you believe was the impetus behind this deal, from both sides?