Cerner/Siemens and the future of EHRs

August 11, 2014 in Medical Technology

As the dust settles from this past week’s mammoth $1.3 billion merger, Siemens Health Services CEO John Glaser tells Healthcare IT News what led up to the Cerner deal, how his experience as a health system CIO could help smooth integration challenges and what to expect – from the two companies and electronic health records in general – over the months and years to come.

[See also: Cerner to buy Siemens health IT unit]

Q: What were the factors — both within your respective companies, and across the healthcare landscape in general — that made this the right deal for Siemens and the right deal for Cerner?

A: The basic strategic rationale was that if you look at the pressures that providers are facing, both in the U.S. and also oversees — reimbursement pressures, quality pressures, being asked to create systems of care and manage populations — you look at all that stuff and you realize that if you really want to be a very effective enterprise health IT supplier to them, you’ve got to have substantial resources. Development resources, services resources with the capability to be doing cloud, technical resources to deal with personal devices, all kinds of stuff.

[See also: John Glaser on healthcare transformation]

And you’re also going to be better off if you have a global footprint where you can learn from disease management efforts in Scandinavia, or telehealth efforts in emerging economies. So it’s clearly going to become — if you do it well, at the enterprise level — a game where large numbers of resources are going to be critical. So when we looked at that on the Siemens side, we could do that organically — we’re pretty good size now, but we’d have to get a lot larger if we wanted to to it well. Or we could combine resources with somebody else. And that led to the initial conversation with Cerner about acquiring Health Services. And I think they had similar views. As talented and full of smart people as they are, they’re going to need additional resources if they’re going to do this well.

IT is critical to (Siemens) but the IT we really need is the IT that’s closer to the imaging modalities and the laboratory stuff, the IT that helps with visualization of images, IT that helps with interpreting the genome. So (Siemens) is going to concentrate our resources closer to the technology that is essential to us, and then take the health IT assets we have, combine it with Cerner, which will help collectively achieve the type of resource potency we’d like to have. We’v also put in place this alliance; we still want to explore and do innovative work — bring IT together with imaging, diagnostic equipment, etc. So that was the rationale, fundamentally: this is going to be a much more complex, sophisticated challenge, even harder later than it is now.

Q: So it was Siemens that first approached Cerner to feel them out about a sale?

A: There’s been a relationship between the two organizations over the years. We were having meetings when I first got here (in 2010) with Cerner. There’s been back-and-forth explorations of this idea: how do we work together? I think it’s one of those conversations where it’s hard to know where the idea started. It’s one that had been brewing over time. Certainly it was earlier this calendar year where it started to get more serious.

Q: What’s next? What are the first few items on your to-do list in the coming weeks?

A: The concerns right now are, fundamentally, reaching out to the customer base, letting them know what’s going on, and also reaching out to the staff, telling them what this all means, talking to people about what the plan is. There are limits. Until we clear certain regulatory hurdles there’s only so far in certain conversations we can go. And there still needs to occur — and will occur, later this fall — a deeper product and service conversation, about how we merge the two organizations. But right now a lot of it has been outreach.

The second thing that’s started is that we, as a business, get a lot of support from Siemens Corporate Services — IT, legal, HR, stuff like that. And by closing, which we hope will be Q1 of calendar year 2015, we need to transition that to Cerner. So a lot of work has to go off: moving email accounts, and people’s 401(k)s, etc. That’s the second thing that needs to go on. But later this fall we’ll start the product/service-type planning and see what the combined direction should be.

Q: For existing Siemens clients, what’s in this deal for them? And what sort of early feedback have you heard from customers?

A: They appreciate and understand the scale argument, because it’s parallel to one in healthcare itself: People are creating health systems, hospitals are joining forces and bringing in physician groups … they understand that basic scale or size at which they’ll be able to better serve populations.

They also have a lot of respect for Cerner. A lot of their basic questions are, ‘What does this mean for the product, what are the expectations going forward?’

So what we have, and this was discussed by Neal Patterson, is a commitment to support and advance Soarian for at least 10 years. So that gives people a lot of confidence. Their immediate concern obviously, is, ‘Are we going to have to go hard left in one or two years?’ And the response is, ‘You don’t need to do that at all. … You can continue to move ahead on your implementations.’ So that’s been the conversation, and overall I think people are pleased.

Q: What does the future hold, then? Cerner will support Soarian for the next decade, but the hope is that they’ll eventually move over to Cerner. Knowing your clients, how likely will that be for most of them, if you were to guess? What will be your pitch to prevent them from going somewhere else.

A: It’s hard to know how likely it will be. When this is stuck in front of (clients) you get an initial reaction, but then (they have to weigh) not just features and functions but technical support and services and cost and all that other stuff. And where in their strategies they are. I think they are waiting, and we’ll have some more answers for them by the end of the calendar year. And the hope is that they’ll say, ‘That’s a good plan. We signed up with you guys, and we look forward to doing that.’

But the future of the merged entity, as far as products and services, is yet to be determined. Obviously there’s a core Millennium product. There’s a brand name, and there’s a specific set of technologies. Technologies always evolve and change. Even with the preservation of the Millennium brand, the future will be a fusion of new technologies. Stuff from the field, stuff from us, stuff from the core Cerner platform that we know today. So we’ll see. Like anyone competing in this business you have to work hard on products and services.

Q: How much of a roadmap do you have for where this goes in the next few years? Is it pretty well-thought out, or will it be adjustable depending on other factors?

A: We have, and I know Cerner does too, a roadmap for the next 12 months, 18 months, that’s pretty well locked down. Then we’ll wait for the meaningful use Stage 3 announcement and go from there. It may take some time to figure things out. But the next 12-18 months on both sides is pretty much nailed down.

But we will be holding summits and meetings later this fall to really lay out a combined plan. Not to just react to industry changes or things that occur, but to have a position, a game plan and a direction where (customers would say), ‘I’d buy into that, that’s exactly what I’d like to see.’

Q: The price tag of this deal, $1.3 billion, is exactly the same amount Allscripts paid for Eclipsys back in 2010. There were some integration challenges as a result of that acquisition that caused Allscripts some pretty big headaches a bit further down the road. Recognizing that this is a different deal, with different motivations, different product lines and different strategies, are there any lessons – any what-not-to-dos – you take away from looking at that merger?

A: I think you always learn from the integration efforts of others – certainly, Allscripts and Eclipsys, and others that have gone on outside the industry. We all learn from that. What’s different here, compared to Allscripts and Eclipsys, is that they had to come up with, relatively soon, an integrated inpatient and outpatient EHR, because that’s where the market was moving at the time. So they had different time pressures to bring the product together.

We don’t want to be leisurely, but on the other hand, we don’t have that same time pressure. So we have the luxury, so to speak, of being more methodical, more deliberate, matching our customers’ pace, not just our pace.

Integrations are always hard. But when you put them under a time pressure, they just get a lot harder. (Allscripts and Eclipsys) didn’t have the ability to do this over several years.

Q: You’re a bit of an anomaly: an executive who used to be a pretty big honcho on the provider side. What kind of perspective have your many years as chief information officer at Partners HealthCare given you when it comes to this kind of stuff??

A: Well, I think a couple things. For one, just remind our staff about why we’re here. We’re here because those people deliver care, and they need us to help them be better and more effective. Having lived in hospitals, and gone to a bazillion meetings with doctors and nurses, I know the reality of that context and that culture. There’s just an understanding about the reality of this that you bring to the table, and it’s critical. Also, I know how boards work, and senior level folks, and their though processes, and the things they weigh when they go into decisions. Just a much better understanding of the customer – how they think and what they value.

Q: Having dealt at Partners with different systems, from different vendors, do you think that gives you a leg up on some of the integration challenges that will be facing you in the coming years with this deal?

A: I think so. We have people, and Cerner does too, to deal with not only how do we get these two systems to talk to each other, but you do become quite aware of what the real difficulty is, and you also become aware of the political realities that leads to that happening in the first place. So there’s a lot of understanding of what it takes to run an IT organization – the pressures they face, the constituencies they serve – that are in addition to the things about the technical work of making system A talk to system B.

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