Cerner Disses Google Health. Surprised?

Vince Kuraitis and David C. Kibbe, MD, MBA

We’re not.

From the Kansas City Business Journal :

Google Inc. has approached Cerner Corp. about a partnership, but Cerner officials don’t sound eager to entangle themselves with the Web-search Goliath.

That’s because the proposed partnership relates to Google Health, the personal health record site launched earlier in May in beta form.

The overture hasn’t led to substantive talks, Cerner President Trace Devanny said, because Cerner doesn’t see much value in Google Health or HealthVault, a similar site that Microsoft Corp. launched in October.

Cerner CEO Neal Patterson referred to the sites during a May 23 shareholders meeting as "electronic shoeboxes," requiring consumers to do much of the data importing and updating.

Why is Cerner dissing Google? Let’s take a look at Cerner’s current business model:

  • Proprietary, non-interoperable software
  • Low volume, high margin sales (there are only about 5,000 hospitals in the country)
  • Customers (hospitals) have high needs for installation support and customization. Customization for individual customers further challenges opportunities for creating interfaces and achieving interoperability.
  • High costs of purchase and installation result in high switching costs and customer lock-in.

As we discussed in our overview of the Personal Health Information Network (PHIN) , Google Health’s and Microsoft HealthVault’s models are built on interoperability and transportability of personal health information.

Is interoperability in Cerner’s economic interests? That’s highly questionable.

  • Interoperability will tend to commoditize data and reduce opportunities for high margin pricing
  • Interoperability will reduce customer needs for software customization
  • Interoperability will reduce switching costs and potential for lock-in
  • Although it might seem contradictory, Cerner’s hospital customers aren’t asking for it

Is Cerner’s current business model sustainable?

Short-term, yes.

Long-term, no.

  • Government, employers and others are being relentless and unwavering in their pursuit of interoperability.
  • Expect low-end disruption of Cerner’s business model, starting with customers in ambulatory health care markets. These low end disruptions are starting with customers using the CCR Standard to create interoperable summary records, which both Google Health and Microsoft HealthVault are supporting.
  • Expect competition from open-source software vendors.
  • Cerner’s customers (hospitals) eventually will demand interoperability from their HIT enterprise vendors. Why? Because hospitals’ customers (patients) will be demanding access to their medical records in standardized, electronic formats. More on how this happens later.

We don’t want to seem to be picking on Cerner. After all, they’re only responding to the wants and needs of their best paying customers, who are among the most profitable hospitals in the country.

The real question in all of this is how long will it take for Cerner’s customers to realize that private and proprietary network architectures are not in their best business or clinical interests, and that not being able to exchange health data with consumers through Google Health or Microsoft HealthVault means that the hospital will be isolated and distanced from its core customers — doctors and patients.

R ight now, it’s apparent that Cerner’s best customers aren’t asking for disruptive technology, and thus Messrs. Patterson and Devanny aren’t either.

13 thoughts on “Cerner Disses Google Health. Surprised?

  1. Pingback: Jeroen de Miranda
  2. Hello Vince,

    “Expect competition from open-source software vendors.” I absolutely agree with you. You also have not mentioned one more important factor, if not most important one, Global Force. “The World is Flat” will be applicable in the healthcare sector as well. Imagine what doctors can do with an open source EMR? OK, hope I did not open a cane of worm here. Good luck with Cerner in the future. I am sure they will eventually have to change and to adapt their model.

    In You-Tube video of Mr. Schmitz, Google’s CEO, he stated that Google is not looking at the EMR sector because it is not their specialty, but rather for hospital and physicians. I knew right away that he was not telling the truth. Similar to Microsoft, Google will step into EMR market.

    LCN

  3. My read is that Google will want access to data coming out of EHRs and going in to EHRs; thus, they need to interface with EHRs, not necessarily provide them directly.

  4. Vince, why not providing both EMR/EHR directly? Cerner disses them. I can imagine the same result from other EHR’s, unless pushed by the hospitals (clients). Please help us read your incredible mind.

    LCN

  5. Linh, you are correct that Google COULD get into the EHR/EMR business. That could happen tomorrow or 5 years from now. It could happen through an acquisition or a decision to build such capabilities.

    For now, I don’t see that it is Google’s interests to do so:

    * Very specialized expertise required
    * Not clear that providing EHR/EMR directly is necessary to support Google’s broader platform development strategy, see, e.g., The Elements of Platform Leadership, MIT Sloan Management Review, Spring 2002 http://www.scribd.com/doc/505385/The-Elements-of-Platform-Leadership. An EHR/EMR is only one of hundreds of potential complements that Google would like to see connected to their platform.
    * Risk of alienation/channel conflict. Google would have a harder time getting data from other EHR/EMR vendors if they were in this business themselves.
    * Not a particularly attractive new business — entrenched competitors, slow uptake of ambulatory EMRs, lack of open standards adoption conflicts with platform strategy, etc.

  6. It would make sense for Cerner to partner with both Google and Microsoft, because it is in the best interest of the patient. People are wanting and needing more control over their health records, and this would be one more way for them to get control. It would behoove hospitals to ask for this service, because it would be one more service they could offer to their patients. The product could be white labeled through Cerner. It is a win-win, Cerner just needs to realize it is not 1999, and that people will get their electronic health information either way. They might as well make it easier for themselves and for the patient.

  7. You say: “Customers (hospitals) have high needs for installation support and customization. Customization for individual customers further challenges opportunities for creating interfaces and achieving interoperability.”

    My experience is _hospitals_ want _no_ customization. It’s their physicians who want the customizations.

    Separating ‘work flow’ issues (legitimate) from ‘layout’ issues (silly), some customization makes sense. But that really has no bearing at all on interoperability, which is based on how data elements are specified. That is a function of the HL7 3.x use cases the application try to fulfill.

    And there is no relationship between interoperability and customized user screens. I’m spending months customizing open source standards based software for an issue tracking system.

    So as SOA and mash-ups chew their way through the 2.0 business web, legacy HIT systems will look very cumbersome. HIT should enable flexible business models; right now they are the gating factor in how fast healthcare business deals can produce value.

    But for the rest: spot on. None of the proprietary HIT vendors want inter-operability. But then again, neither do their customers … they still believe in incremental change.

    When 50% of CABG and 80% of cancer treatment is done on an outpatient basis, HIT will be outsourced to Google/MS mash-up based HIT ASPs.

  8. As healthcare consultants who see all types of different software systems in place nationwide,I would only say that many, many providers are still novices when it comes to knowing what they should expect interoperative ability to do for them….especially in the area of aligning 3 key compoments: health outcomes quality data, patient/consumer information, and financials.
    Our experience has been that many poviders don’t demand anything different from what they have already invested in their software, because they’re not sure what to demand…nor if it’s feasible in the first place…
    AND additional huge expense generally prohibits a request/demand for change; plus most software companies require a certain number of similar requests from customers to warrant a change in their software capability… so many times (but not every time of course)the providers keep what they have and continue on their same path as best they possibly can..

  9. What does anyone think or no of Cerner’s Healthe Iniative aimed at self-insured employers?

  10. google wants to put ‘information in the hands of patients to enable informed buying decisions’. Sounds viable to me. There will always be dissenters. users will have privacy concerns regarding Google obtaining access to medical records but I think this will not last and it will take hold in the long run. Google will provide secure storage and transfer for medical records moving beyond a paper trail and making things more accessible and uniform.

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