Cerner Corp. posted weaker than expected revenue in the first quarter, following its $1.3 billion purchase of health information technology rival Siemens Health Services. Meanwhile, what may be the biggest healthcare IT deal of the decade—a contract with the U.S. Department of Defense—continues to loom over Cerner and its two major competitors among electronic health records systems vendors.
Cerner's revenue increased 27% in the first quarter of 2015 to $996.1 million, which included revenue from the Malvern, Pa.-based unit of Siemens, the German industrial conglomerate. Cerner closed on the purchase in early February. In same period last year, without Siemens, Cerner posted revenue of $784.8 million.
The company fell short of its revenue estimate “due to a combination of lower than expected revenue from the recently closed acquisition (of the Siemens unit) and lower revenue in our existing business,” Cerner said in a news release.
Net income dipped by 7% in the first quarter of 2015 to $110.9 million, from $119.5 million in the same period last year.
In a call with investors and analysts, Cerner President Zane Burke said the company saw several encouraging developments during the quarter. Three Siemens clients that operate five hospitals have decided to convert to Cerner software, he said, and other unnamed health IT companies lost customers to Cerner.
“Every piece of our pipeline picked up,” Burke said. “We see approximately 50% more decisions in the U.S. than we saw all last year.”
The Department of Defense decision, on which one group of bidders will get a multibillion-dollar contract to replace a hodgepodge of EHRs across the Military Health System, may be delayed until midsummer. Cerner teamed up for the bid with defense- and national-security contractor Leidos and consultant and systems-integrator Accenture.
“Obviously, it's in the government's hands,” Burke said. “Our understanding is they're looking to make a decision on the first phase of that work at the end of our second quarter.”
Both Epic Systems Corp. (paired with IBM) and Allscripts (joining Hewlett-Packard Co. and Computer Sciences Corp.) are also still in the hunt to supply the military's 56 hospitals and 360 clinics with a single EHR.