Vince Kuraitis and David C. Kibbe, MD, MBA
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?
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.