Type: Public Company
Address: 2800 Rockcreek Parkway, Kansas City, Missouri, 64117-2551, U.S.A.
Telephone: (816) 221-1024
Fax: (816) 474-1742
Web: http://www.cerner.com
Employees: 7,419
Sales: $1.5 billion (2007)
Stock Exchanges: NASDAQ
Ticker Symbol: CERN
Incorporated: 1979
NAIC: 541511 Custom Computer Programming Services; 334611 Software Publishers; 541512 Computer Systems Design Services
SIC: 7371 Computer Programming Services; 7373 Computer Integrated Systems Design; 7379 Computer Related Services Nec
Cerner Corporation is a leading global designer and provider of information systems for the healthcare industry. Founded in 1979 and headquartered in Kansas City, Missouri, Cerner's products are utilized by over 6,000 clients worldwide including hospitals, physician groups, HMO's, laboratories, pharmacies and other health clinics. The company packages its information solutions as a single platform, Cerner Millennium 2007, encompassing clinical, financial, and administrative data in a single system. The company also designs and manufactures software systems for applications ranging from records management to advanced document imaging, and customers are able to purchase all or part of Cerner's software package as needed to meet their specific needs. Cerner also provides installation, training, and consultation for its products, with in-house specialists on call to aid in implementation.
With 11 offices in the United States and 11 abroad, Cerner employs more than 7,000 full-time professionals and posts annual revenues in excess of $1.5 billion. Since 1980, Cerner has consistently been ranked among the nation's leading information technology providers and the company's healthcare products have won numerous awards. Cerner was ranked among Forbes magazine's 400 best big companies in America (2006 and 2007) and appeared on Computerworld magazine's top places to work during the same years. In the 21st century Cerner has expanded its services both nationally and internationally and, through strategic mergers, has emerged as a billion-dollar company.
Company Beginnings
In 1979 Neal Patterson, Clifford Illig, and Paul Gorup left the management information systems consulting division of Arthur Andersen's Kansas City office to found Cerner as a developer of laboratory information systems. Cerner was incorporated in 1980, as the company worked to perfect its first product.
By 1984 Cerner was ready to roll out its first application, the PathNet laboratory information system. PathNet provided a comprehensive information system for laboratory clinicians, allowing laboratories to automate their processes. PathNet, which grew to combine applications for general laboratory information, microbiology, blood bank transfusion and blood bank donation, and anatomic pathology, broke away not only from the traditional paper-based sharing of information, but also from the prevailing financial focus of data gathering systems.
PathNet proved to be an early success. First-year revenues were just under $2 million, with a net loss of $1.5 million. However, by the following year, Cerner turned a profit on $10.3 million in sales and was establishing itself as a leading provider of laboratory information systems. By 1986 PathNet became the market leader, with more than 30 client site placements generating $17.5 million in revenues for a $2.3 million net profit. In that year, Patterson and Illig took Cerner public, offering one million shares at $16 per share.
Redefining Medical Records Processing
Through the end of the decade, PathNet remained Cerner's primary source of revenue, but by 1985 the company had begun to define what would become its Health Network Architecture (HNA). Cerner's goal was to automate the healthcare process by focusing all aspects of the process--from registration to clinical care to pharmacy services to outcomes measurement--around the individual patient.
With access to records across the continuum of a patient's care, the HNA system would achieve higher quality care, from prevention to treatment, as well as improved cost-effectiveness. Unlike paper-based medical charts, the medical records of a patient within Cerner's automated system could be made instantly available to each member of a healthcare network, including laboratory clinicians, nurses, general physicians, and such specialists as radiologists and surgeons, while also providing resources for patient input and information.
Cerner's vision of an HNA-based system would allow total management of a patient's care, including alerts and reminders to the patient of scheduled checkups, information to providers on patient clinical history, and medication allergies, and a means to provide routine and emergency care based on information uploaded by the patient. In this, Cerner anticipated the changing focus of the healthcare system, from a fee-for-service system, to the largely managed care-based system of the 1990s. Equally, Cerner's vision anticipated the mid-1990s trend toward integration that would sweep the healthcare system, as more and more hospitals, clinics, and other providers moved toward providing vertically integrated, complete healthcare services.
Adding Software Components
Cerner's research and development (R&D) efforts began to show results as early as 1987, when it introduced two more components of its future HNA system: MedNet and Discern. MedNet joined PathNet in the clinical management family of Cerner products, offering support for pulmonary medicine, respiratory care, and other internal medicine departments. Discern formed the basis of Cerner's knowledge systems applications, offering retrospective and prospective databases and services that enabled providers to monitor patient care regimens and institute treatment and preventive protocols.
In 1988 Cerner added the next component of its clinical management system, RadNet, which focused on automating radiology department functions. The following year, pharmacy support was added with the PharmNet application. As with PathNet, each new component was based on the same application architecture, allowing applications to be seamlessly combined to share information across applications.
The flexibility of Cerner's HNA set it apart from its competitors as well. Through the 1980s and into the 1990s, hospitals, clinics, and their various departments typically purchased "best of breed" applications--individual products from many different vendors. As more and more hospitals and their departments began to forge the healthcare networks that slowly came to dominate the healthcare industry in the 1990s, they were faced with the task of forcing integration of their disparate information systems and products. This created not only confusion within each system but also the need to maintain costly support personnel to integrate the systems and maintain their functionality. With all of their applications based on a single architecture, Cerner offered advantages in functionality as well as cost-effective operation.
Expansion and Acquisition
Cerner's client base grew steadily in the late 1980s, reaching 70 sites in 1987, 120 sites in 1988, 170 sites in 1989, and 250 sites in 1990. Installations were primarily of PathNet systems, and sales of systems made up the bulk of Cerner's revenues, which topped $57 million in 1990. However, recurring revenues, especially from support services and also from add-on applications sales, began to form an increasing share of Cerner's annual sales. Meanwhile, R&D spending grew from $4.2 million in 1987 to $10 million in 1990.
By 1990 more than 200 PathNet sites had been installed, solidifying Cerner's position as the leading maker of laboratory information systems. Cerner next moved to expand its product family beyond clinical management systems and into care management systems, with the introduction of its ProNet and CareNet products. ProNet provided automated support for patient management and registration, ordering, scheduling, and tracking processes. CareNet gave patient care planning, management, and measurement tools to nurses and other direct care providers.
Care management was meant to play a central role in gathering information needed for the care process. With Cerner's care management tools, providers could more easily manage the many pieces of patient information, including demographic and financial data, health status, operations data such as treatment procedures and protocols, while linking this information to ordering, tracking, scheduling, and patient, case, and health records management.
By the end of 1991 Cerner's client base had expanded to 320 sites, producing revenues over $77 million and net earnings of $4.7 million. These sales still centered primarily around PathNet. Yet in 1991 Cerner moved closer to its goal of creating the paperless patient medical record with the acquisition of Intellimetrics Instrument Corporation of Massachusetts, and with the launch of its repository product line with the introduction of its Open Clinical Foundation (OCF). The OCF was an enterprisewide, relational database with multimedia capabilities, which captured the information generated by the various clinical and core systems to form a computer-based patient record, while also supporting data extraction capabilities for medical and outcomes research.
International and Domestic Growth
In 1991 Cerner established its first international subsidiaries, in Australia and in the United Kingdom, marking the first implementation of its international strategy. In England, it took over service of PathNet systems originally installed in 15 hospitals through a licensing agreement with McDonnell Douglas Information Systems. In Australia, agreement had been reached to install PathNet in the New South Wales Health System. With client sites operating in Canada and Singapore, Cerner reached an agreement to install PathNet at the Riyadh Armed Forces Hospital in Saudi Arabia. International sales grew to $9 million by the end of 1991. By 1993 Cerner had established the first of its two German offices as well.
By the end of 1993 Cerner had completed the largest part of its product family, with the 1992 introduction of its SurgiNet and Open Management Foundation (OMF) products, and the 1993 introduction of its MRNet product. SurgiNet, part of Cerner's clinical management product line, offered information management support for operating room teams. OMF extended Cerner's repository line with tools for supporting management analysis and decision making based on process-related information. MRNet functioned to link the OCF and OMF products in automating the chart management process for the medical records department.
By this time Cerner's repository and care management products had begun to make significant contributions to the company's $120 million in revenues. Net earnings for 1993 reached $14.6 million.
In November 1993 Cerner acquired Megasource, Inc., in a stock-swap merger valued at approximately $6.7 million, creating the company's wholly owned Cerner Megasource, Inc., subsidiary. The Megasource merger added another product to Cerner's clinical management group, MSmeds, which provided information management capabilities to pharmacy operations. This merger was significant in that roughly 80 percent of all physician orders, both in inpatient and outpatient areas, went for either laboratory or pharmacy services. With Megasource, Cerner filled out a significant presence in both services. During 1993 Cerner also moved to expand its client support services, opening regional offices in Atlanta, Boston, Dallas, Kansas City, Los Angeles, and Washington, D.C., while providing 24-hour emergency support at its Kansas City headquarters.
Strategic Alliances
Strategic alliances contributed to Cerner's growth starting in the early 1990s. By 1991 Cerner had participated in a joint venture with Sony Corporation's medical electronics division to develop the Cerner Pathology PACS Workstation, which integrated Sony's color video capabilities with Cerner information technology. A second collaboration was formed with Beckman Instruments Inc. to introduce PathTrac, which coupled parts of PathNet with Beckman's chemistry analyzer. A third alliance, with APACHE Medical Systems, Inc., gave PathNet, ProNet, and CareNet capabilities through APACHE workstations.
In 1994 Cerner extended its alliance strategy with the formation of the Cerner Alliance Program. Initial partners were SDK Health Care Information Systems of Boston, MEDIC Computer Systems of Raleigh, North Carolina, and Amisys Managed Care Information Systems of Rockville, Maryland. With these alliances, Cerner moved to add administrative and financial functions, based on HNA, that fell outside of its own development efforts. In addition to collaborating on engineering, the alliances also profited from some shared marketing activities.
By year-end 1994 more than 30 clients had contracted with Cerner for the broad implementation of the complete HNA system, including five contracts in the fourth quarter alone; another 100 clients had purchased multiple system components. The company rolled out support for the IBM RISC System/6000 processor and announced support for Microsoft's Windows interface. Revenues reached $156 million, and net earnings grew to $19.5 million, representing increases from 1990 of 217 percent and 686 percent, respectively. An important component of Cerner's success had been its aggressive R&D spending--more than $80 million in the first half of the 1990s, with plans to spend another $200 million by 2000.
Cerner Millennium Debuts
In 1997 Cerner introduced Cerner Millennium, an upgrade to the previous HNA system that integrated all of Cerner's various product lines under a unified architectural system. Cerner's Millennium system was meant to be flexible, allowing organizations to purchase new features, online applications, and software that could be seamlessly integrated into the system. Cerner also offered previous customers an affordable "migration path," to help switch from the old systems to the millennium model without losing data or budgeting for extensive training.
In 1999 Cerner implemented the HNA Millennium architecture in over 349 institutions. "Today, Cerner Corporation's HNA Millennium base of installed applications has increased to nearly 100 clients at more than 150 locations around the world," said Glen Tobin, chief operating officer for Cerner, in official company press releases. Cerner achieved other important milestones in 1999, including the formation of a financial partnership with GE Healthcare to help provide clients with affordable options in purchasing Cerner's HNA system. Cerner also won a major contract toward the end of the year to implement their HNA system at Shriner's Children's Hospitals. At the end of the fourth quarter, revenues were estimated at $340.2 million, over a 3 percent increase from the previous year.
Cerner at the Start of the 21st Century
In 2000 Cerner began offering its HNA systems through an applications service provider (ASP) model. The new structure allowed Cerner to deliver software, hardware, implementation, technical aid and automatic software upgrades from a single location and significantly simplified implementation and maintenance. "Unlike healthcare information technology companies that simply convert a provider's legacy system to operate over an ASP, our ASP delivers Cerner's fully functional HNA Millennium solutions with a convenient graphical user interface," explained Cerner CEO Neal Patterson. Cerner also debuted, in 2000, their first "e-health" division, IQHealth, designed to help health organizations to develop their own e-health consumer systems.
Cerner continued to expand its services through strategic partnerships, including partnering with DoctorQuality.com to integrate error management monitoring into the company's services and a partnership with LifeMetrix, Inc., to integrate cancer patient treatment programs into the system. Cerner also completed a number of strategic acquisitions, including purchasing Mitch Cooper & Associates, a company specializing in managing supply-line monitoring for health organizations and ADAC Health Care Information Systems, a company specializing in medical imaging. In April 2000, it was announced that Cerner's international division would expand with service to Saudi Aramco Medical Services Organization, a medical care group focusing primarily on the Saudi Arabian oil company employees.
In 2001 Cerner formed a partnership with IBM to integrate technology in hospitals, creating what the companies called "e-hospitals," with more integrated services, records, management and financial information to reduce costs and improve efficiency across the hospitals. As the company's list of products grew, it became clear that they would need more input from physicians to help direct the design and implementation of product lines. To this end, in 2002 Cerner appointed Jeff Rose, M.D., to serve as the company's first chief medical officer, helping to ensure that the company's products and development teams were designing systems that would meet the needs of physicians.
The year 2004 was one of the strongest growth years in Cerner's history, with revenues approaching $1 billion for the year and more than 3,000 implementations of the Cerner Millennium system. Bookings for new business increased by over 13 percent from the previous year. In 2004, Cerner added another revolutionary application to its list of programs, the PathNet Helix system, which was the first computer system to allow genomic information to be stored in patient records.
Growth continued in 2005, through key acquisitions, the expansion of partnerships, and the establishment of lucrative contracts, including a ten-year agreement to provide information services for the U.S. Department of Defense, through 100 hospitals and more than 400 clinics across the world. Cerner officially passed the $1 billion mark in 2005, with revenues of $1.16 billion, a 25 percent increase from the previous year.
From 2006 to 2008 Cerner continued to grow on a number of fronts and expanded both its domestic and international operations. In late 2006 the company released another expansion package for the Millennium architecture. "By far, our clients' participation in the design and process of Cerner Millennium 2007 is unparalleled in the industry," said Vice-President Jeff Townsend in a company announcement. The new software release featured over 8,600 new features, including an updated system for managing perioperative patient data and patient flow from the emergency department to all critical care departments.
In February 2008 Cerner released its financial data from the previous year, revealing over $1.5 billion in revenues and 10 percent growth. By the end of 2007 Cerner's Millennium architecture had been implemented at over 1,200 facilities worldwide, with over 339 successful implementations in 2007 alone.
In 2008 Cerner's healthcare services comprised three major areas. The company's Millennium 2007 architecture, its professional technology suite, incorporated 13 separate applications, with packages grouped as needed for use by emergency and radiology departments, as well as in critical care and record-keeping functions. Cerner also offered Cerner Learning, a group of applications and programs designed for student and staff training. Cerner's third major set of applications, called Cerner Devices, provided software and applications that integrate medical technology into electronic patient records.
Strategic partnerships and acquisitions have helped the company to expand geographically, reaching a total of 22 offices around the world. There are 11 international offices as well as partnerships with international clients, including the state of New South Wales in Australia; the NHS in the United Kingdom; the Canadian Infoway; the Ministry of Health in Malaysia; and the General Authority for Health Services for the Emirate of Abu Dhabi. With strong growth and products that are consistently acknowledged as innovative, Cerner was poised to remain a major force in health information technology.
Principal Subsidiaries
Cerner Megasource, Inc.; Cerner Corporation Pty., Ltd. (Australia); Cerner Deutschland GmbH (Germany); Cerner Arabia Co. Ltd. (Saudi Arabia); Cerner Ltd. (United Kingdom).
Principal Competitors
Eclipsys Corporation; GE Healthcare; McKesson Corporation.
Further Reading
Bond, Sarah, "MedStar Health Chooses Cerner Solutions to Drive Superior Health Outcomes," Reuters, January 23, 2008.
"Cerner Corporation (Members on the Move)," Physician Executive, May-June 2003, p. 68.
"Cerner Predicts Earnings Will Be Below Estimates," New York Times, April 4, 2003.
"Cerner Stock Jumps As Company Rejects Buyout Offers," New York Times, November 23, 1996.
DeCarlo, Scott, "America's Best Big Companies," Forbes, December 21, 2006.
Electronic Medical Record: Supporting Lifetime Health Management, Kansas City, Mo.: Cerner, 1995.
Intrarelation: Characterizing Cerner's Health Network Architecture, Kansas City, Mo.: Cerner, 1995.
McGill-Murphy, Richard, "49 Companies Batting a Billion," Fortune, April 27, 2006.
Meyer, Gene, "Diagnoses on Cerner: More Growth Ahead," Kansas City Star, September 26, 1995, p. E20.
"100 Best Places to Work in IT-Overall Rankings 2007," Computerworld, June 2007.
Rodengen, Jeffrey L., Cerner: From Vision to Value, Ft. Lauderdale, Fla.: Write Stuff Enterprises, 2006.
Tierney, Mary C., "Cerner Corporation," Business Digest, March 1996, p. 24.
— M. L. Cohen; Updated by Micah L. Issitt
