Cerner's compensation package for new CEO Dr. David Feinberg will total roughly $34.5 million through 2022, according to a federal filing.
Feinberg—who currently serves as vice president of Google Health, a division that Google plans to disband after he leaves—will join Cerner in October.
Under an executive employment agreement approved by the Cerner board of directors, Feinberg's initial annual base salary will be $900,000, according to an 8-K form that Cerner filed with the Securities and Exchange Commission last week. He'll receive a one-time cash bonus of $375,000 to replace annual incentives he had accrued with Google.
Feinberg also will receive a one-time new hire award of $15 million in Cerner restricted stock units to replace equity compensation he forfeits after leaving Google, as well as $3.375 million in restricted stock units for 2021's fourth quarter and $13.5 million in restricted stock units for 2022. Feinberg's annual targeted cash bonus is $1.35 million, according to the filing.
Cerner named Feinberg, a former health system CEO who led Geisinger Health and UCLA Health, as its new CEO last week—closing out a CEO search that the Kansas City, Missouri-based electronic health records company kicked off in May. His appointment comes amid speculation that Cerner may be considering a sale.
But Feinberg's hiring suggests Cerner may not be contemplating a sale, said Glen Tullman, executive chairman and CEO of Transcarent, an employee health navigation startup that launched this year.
"I can't imagine that Cerner would make the investment that I'm sure they've made to get David there if they were actually thinking that an acquisition was likely," Tullman said. Speculation that EHR providers like Epic Systems and Allscripts would be bought up never bore out, he said. Tullman previously served as Allscripts CEO and founded Livongo, which merged with Teladoc Health last year.
Cerner is "doubling down" and investing in leadership that will promote innovation by bringing Feinberg aboard, Tullman said. EHR developers need to improve their products so that they're easier to use and more interoperable, he said.
"David has hands-on experience with both of those from running one of the country's leading health systems," Tullman said. "He will be well-positioned to now help navigate Cerner to where they need to be."
EHR companies must expand their offerings, since most healthcare organizations have already implemented records systems, said Michael Abrams, managing partner at healthcare consultancy Numerof & Associates. More than 90% of acute-care hospitals and 85% of office-based physicians have adopted EHRs, according to the HHS Office of the National Coordinator for Health Information Technology.
"There's not a lot of growth left in that market," Abrams said. "They need to find a next act."
Cerner has been redefining its business, shifting from a company focused on EHRs to one focused on data and data systems—notably, with a goal of creating a $1 billion "data-as-a-service" business. The effort has also involved a cloud partnership with Amazon Web Services, Amazon's cloud arm that competes with Google Cloud and Microsoft's Azure.
And Cerner in 2019 deployed a new "operating model" designed to make the company more efficient and profitable. The company restructured its board of directors and launched a set of more than 100 cost cutting, portfolio management and business simplification efforts to improve its adjusted operating margin.
Hiring a former health system executive and from Google Health is yet another indication that the company recognizes it needs to "reinvent their business model," Abrams said.
Feinberg succeeds Brent Shafer, who has served as Cerner's chairman and CEO for three years.
Shafer will continue to serve as a senior advisor for one year to ease the transition, according to Cerner, but will step down from the board. Feinberg will fill his vacancy as a member of the board, but will not serve as chairman, as the board decided to split the role of chairman and CEO when Feinberg joins the company.
Cerner posted $1.5 billion in quarterly revenue, up 9.5% from the year-ago quarter, for 2021's second quarter. The company reported $49.6 million in operating earnings, down 66%, and an adjusted operating margin of 21%, compared to 18% a year ago. As part of its new operating model, Cerner is targeting an adjusted operating margin in the mid-20% range by 2024.
