The next round of health IT consolidation is on. Today, Cerner confirmed the rumor that had been swirling for a couple of weeks, that it will acquire Siemens Health Services, the health IT business of Siemens AG, for $1.3 billion in cash.
Cerner and Siemens also announced a strategic alliance to, according to the press release, ” jointly invest in innovative projects that integrate health IT with medical technologies for the purpose of enhancing workflows and improving clinical outcomes.” Each company will commit as much as $50 million to the alliance over the next three years, with an initial focus on integrating images and medical devices with EHR data in cardiology, Cerner says.
The device integration should come as no surprise. In healthcare, Siemens has always been, first and foremost, a medical device company. Health IT came later, by virtue of Siemens’ acquisition of Shared Medical Systems in 2000 for 2.1 billion. (Adjusting for inflation, that deal would cost $2.9 billion today, meaning that either Siemens overpaid in 2000 or the health IT assets lost more than half their value in the past 14 years.) Cerner has been selling medical devices for integration with its EHR products for several years, but nobody has confused Cerner for a device company. The two companies should complement each other well in this regard.
It’s no surprise that Siemens wanted out of the health IT business, either. Cerner and Epic have been dominating the enterprise EHR market in recent years, winning all kinds of replacement and upgrade business from health systems that previously had used Siemens, GE Healthcare, Meditech and Eclipsys technology.
Eclipsys, of course, merged with Allscripts in 2010, in a deal also worth $1.3 billion, and the combined company struggled to the point that the board forced out several top executives two years later. That was the last major acquisition in enterprise health IT until today. I don’t expect it to be the last, though I won’t predict anything other than that Epic will continue its strategy of growing organically and that many companies, particularly ambulatory vendors, will drop out rather than pursuing federal certification to the 2014 standards.
The market has been shaping up to be a battle between Cerner and Epic for a while, though the formation of the CommonWell Health Alliance a year and a half ago — now including Cerner, Allscripts, Athenahealth, Greenway Health, McKesson, Sunquest and CPSI — shows that Epic is everybody else’s No. 1 competitor.
Cerner and Siemens say the deal should close early next year.