Cerner's Q3 revenue grows despite sluggish software sales

Cerner clients bought less licensed software and technology resale than the company expected in the third quarter of 2018, tempering revenue growth for the period.

That's in part due to the relatively loose regulatory environment. Provider organizations have been facing less pressure to buy new software, according to the company. It expects more interoperability regulations in the future, though it didn't specifically name the much-anticipated information-blocking rule the Office of the National Coordinator for Health Information Technology is set to release.

"There isn't anything that's forcing clients to go get deals done," said Cerner Chief Financial Officer Marc Naughton. "The market is still active. We just didn't get much of it in Q3."

Other than its licensed software and technology resale businesses, Cerner had a strong quarter, according to John Peterzalek, , who will take over outgoing Cerner president Zane Burke's duties on Nov. 2 and become chief client officer. Revenue for the quarter was $1.34 billion, up 5% over the third quarter of 2017.

"We continue to have good contributions from our key growth areas," Peterzalek said. Those areas include population health, revenue cycle management and strategic IT outsourcing.

Bookings were also up from a year ago, rising by 43% to $1.59 billion, though they were lower than the second quarter's $1.78 billion. In that quarter, Cerner got a boost from signing the long-delayed contract with the VA to replace its home-grown electronic health record.

The 10-year project is projected to cost $10 billion, though former VA Secretary Dr. David Shulkin put the cost at $16 billion.

Interoperability, which was a sore spot during contract negotiations, is still top of mind. In early October, Cerner assembled a team of people from 24 businesses—including Leidos, the contractor for the Defense Department's Cerner EHR—to help with the project. The team members will help Cerner ensure that data are interoperable among military facilities, VA facilities and community provider organizations.

The newly formed group isn't the only team involved in the VA project. The VA established the Office of Electronic Health Record Modernization to guide deployment and maintenance of the new software.

Cerner has been moving along with the project steadily, according to Peterzalek. He said the company will reach the "first major product milestone" in 2020, when sites will start going live with the software.