Healthcare News of Note: Oracle-Cerner deal has the potential to transform healthcare

• Oracle’s acquisition of Cerner for $28.3 billion has garnered a good deal of news coverage, given its potential to transform the healthcare industry.
• There was a decline of 14% in 2020 Medicare spending on physician services relative to pre-pandemic expectations, according to a report by the American Medical Association.
• Two-thirds of consumers report they would leave a healthcare provider if their payment or personal information was compromised in a data breach due to the provider’s lack of security measures.

Over the last few weeks, I have found these industry news stories that should be of interest to healthcare finance professionals.

1. What does Oracle’s purchase of Cerner mean for the healthcare industry?

Oracle Corporation’s acquisition of Cerner Corporation through an all-cash tender offer of approximately $28.3 billion in equity value has garnered a good deal of news coverage, given its potential to transform the healthcare industry.

In a Dec. 20 news release, Larry Ellison, Oracle’s chairman and chief technology officer, said: “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.

“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. 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.”

News and industry media insight

Here is a sample of media coverage of the deal.

1. Healthcare IT News called the Oracle-Cerner deal a  “seismic acquisition” in a Dec. 22 article, which provided reactions by industry analysts.  Below are samples of what analysts had to say, according to author Mike Miliard.

Paddy Padmanabhan, founder and CEO of Damo Consulting, said in a statement: “The fact remains that healthcare is one of many industry sectors that big tech firms serve, and it remains to be seen how much management attention will go into building out the EHR footprint that Cerner brings into the mix.

“The obvious question is whether the deal is just about juicing the cloud computing business for Oracle. It’s worth noting that Google and Apple had major setbacks recently in the healthcare space, so success isn’t foretold.”

According to Miliard, “In a subsequent interview with HIMSS TV Padmanabhan said he’s taking a wait-and-see approach.”

John Moore, founder and managing partner of Chilmark Research, who is quoted extensively, said in part: “It’s going to be a while before we figure out exactly what’s going on here. But I think the repercussions to the broader industry are pretty significant compared to a lot of other big acquisitions we’ve seen in the past decade or so. This one’s pretty monumental.”

2. A Dec. 21 Wall Street Journal article reported, “[The deal] could address a major challenge in healthcare, that of datasets that can’t communicate with one another, analysts said.”

WSJ reporters Suman Bhattacharyya and Angus Loten also summarized insight from Forrester Research Senior Analyst Natalie Schibell regarding interoperability: “In the U.S., medical records and information are hosted on a range of platforms, which can make it difficult for one provider to collaborate with others, or for patients to get easy access to their data.”

The authors added, “The Oracle-Cerner deal would create a cloud-based platform that has the potential to help solve that problem, according to analysts.”

3. A Dec. 23 Bloomberg  article, reported,  “For Larry Ellison, the $28.3 billion deal for Cerner Corp. was 18 years in the making,” given that Oracle first considered the acquisition in 2003.

“Oracle’s long waiting game for Cerner gave Ellison the leeway to watch on the sidelines while others failed,” author Joe Williams wrote. “But it also allowed Oracle’s chairman and co-founder to hold out for a counterpart that would buy in to the vision ahead. When [David] Feinberg came onboard as Cerner’s chief executive officer in October, he pitched a goal to push along the tech transformation in health care by making electronic medical records more user-friendly to the vast majority of physicians and doubling down on the role of data in decision-making. Those objectives align nearly identical with Oracle’s stated ambitions for the deal.”

2. Medicare spending on physician services in 2020 declined across the board, AMA says

There was a decline of 14% in 2020 Medicare spending on physician services relative to pre-pandemic expectations, according to a report by the American Medical Association (AMA). That percentage translated to $13.9 billion.

“Despite a mid-year rebound after sharp declines early in the year, Medicare spending on physician services during 2020 never recovered to its pre-pandemic trend,” according to an AMA news release.

Report highlights

“When compared to expected Medicare spending on physician services, the AMA report found that actual Medicare spending on physician services for 2020 declined regardless of service type, setting or specialty, and state or region,” according to the release.

Spending by service type

1. Evaluation and management spending fell nearly 50% by late March of 2020.
2. Spending for imaging, procedures and tests continued to drop until mid-April, falling as much as roughly 65% to 70% below expected 2020 spending.

Spending by setting or specialty

All major settings saw spending lows in April 2020, ranging from a 26% decline for skilled nursing facilities to a 90% decline for ambulatory surgical centers.

1. Spending rebounded for all major settings in the second half of 2020 but remained 4% to 15% below expected 2020 spending.
2. The hardest hit specialties in 2020 — all low utilizers of telehealth — saw the following decreases in spending:

• Physical therapy: 28%
• Otolaryngology: 24%
• Cardiac surgery: 20%
• Ophthalmology: 19%

3. Majority of consumers would leave a healthcare provider if their personal and payment information was compromised in a data breach, survey finds

Two-thirds of consumers (66%) report they would leave a healthcare provider if their payment or personal information (PII) was compromised in a data breach due to the provider’s lack of security measures, according to a Dec. 14 news release from Semafone, a data security and compliance solutions company.

“Further, nearly 90% of consumers believe healthcare providers should face financial penalties for not having proper safeguards in place to protect their personal or sensitive information in case of a data breach,” according to findings from Semafone’s “2021 State of Healthcare Payment Experience and Security Survey.” 

The survey of 1,000 U.S. consumers (ages 18-65+) was conducted by Dynata.

Gary E. Barnett, CEO of Semafone, said in the release: “No organization will ever be able to predict or prevent every potential breach, but it is crucial to take steps to reduce risk and protect PII.”

Payment preferences change

According to the survey, consumers have changed the way they pay medical expenses and bills. Of those surveyed:

• 28% are transitioning away from in-person payments
• 17% no longer mail payments
• 23% prefer to use a mobile app to make payments
• 15% indicate they use online systems via the provider or website
• 8% indicate they make payments over the telephone

HFMA bonus content

• It’s time to submit applications for HFMA’s MAP Award for High Performance in Revenue Cycle. The award recognizes organizations whose innovative and effective strategies have enabled them to achieve excellence in revenue cycle performance.
• With new surprise billing regulations in place, providers should ensure they have efficient processes for gauging whether a patient is in-network. Read the latest on this topic by Nick Hut, senior editor.
• Listen to HFMA’s latest Voices in Healthcare Finance podcast — What would you do if your best employee quit tomorrow? Anton Gunn shares the secrets to effective succession planning.