Cerner attributed the lower-than-expected software bookings to timing and pointed to a strong pipeline of potential business hookups. Technology resales were also somewhat off in the third quarter.
“There isn’t anything that’s forcing clients to go get deals done,” Cerner CFO Marc Naughton said during a Thursday earnings call. “The market is still active. We just didn’t get much of it in Q3.”
Cerner also said it is not yet seeing the full impact of government contracts. Nonetheless, officials called it a strong quarter with solid results.
“We continue to have good contributions from our key growth areas” of population health, revenue cycle management and health IT outsourcing, said Chief Client Officer John Peterzalek, who replaces departing President Zane Burke starting next week.
“As we look at our portfolio and our investment plans, there’s some transformation of our own that we need to do to make sure we’re positioned well for the opportunities in front of us,” said Cerner Chairman and CEO Brent Shafer. “Part of that work is creating an operating model that is really designed to support innovation at scale. We are at scale now and want to continue to scale.”
Meanwhile, Cerner faces fresh competition from commercial health giant UnitedHealth, which is expanding into EHRs with a fully integrated system in 2019. During a recent earnings call, UnitedHealth CEO David Wichmann said the company will launch a “fully individualized, fully portable” EHR early next year leveraged off its Rally mobile wellness platform.
In a race to build-out hospital services in the northern part of Suffolk, Bon Secours has received an edge over Sentara.
State health staff, who reviewed expansion requests from both health care systems this summer, recently provided a recommendation of conditional approval for Bon Secours. Its proposal seeks to add 18 in-patient beds and four operating rooms to a facility at the Harbour View campus.
The plan calls for a two-story, 76,000-square-foot facility on the northeast corner of Bon Secours Drive and Harbour Towne Parkway. Bon Secours executives say it’s an effort to better reach western Hampton Roads patients and establish a short-stay, surgically focused hospital.
Within days of each other, Bon Secours and Sentara filed letters to state health officials seeking permission to add or move beds to their respective northern Suffolk campuses.
Bon Secours filed its letter of intent first to apply for a “certificate of public need” to move hospital beds and a few surgery rooms from its Maryview Medical Center in downtown Portsmouth. Days later Sentara submitted a similar request for in-patient beds, operating rooms and a CT scanner at its Sentara Belleharbour campus on Route 17 Bridge Road.
That plan would involve moving beds from Sentara Obici Hospital. Hospital executives have said the shift would meet patients closer to where they are: About 14 patients at Obici each day are coming from Belleharbour, said Dr. Steve Julian, president of Obici, in a June interview.
But the Sentara project “duplicates” services already available in the district, according to the state’s review, and would contribute further to the hospital system’s market dominance. Staff recommended denial of the request, stating it could be “harmful to competition in the region.”
In a statement issued through a spokesman, Julian said Sentara was disappointed with the review but would consider next steps in the state’s certificate of public need process.
“We believe our application offered the most benefit for the least cost in a hospital-ready building already under construction,” Julian said in the statement.
The competing mini medical center proposals demonstrate how hospital systems vie for turf – and how the state tries to weigh those requests in the balance of keeping health care costs reasonable for patients.
The state health commissioner will render a final decision on the projects later this year.
Two letters of opposition against the Sentara project appear to have factored into the staff’s preference for the Bon Secours plan.
Dr. Joseph Verdirame, former president of the medical staff at Obici, wrote that, since acquiring Obici, Sentara has migrated many resources away from downtown Portsmouth and central Suffolk to Belleharbour and Sentara Norfolk General. He believes those shifts are detrimental to care in central Suffolk.
In another letter, Virginia Slocum, strategic operations planning manager at Chesapeake Regional Healthcare, said Sentara doesn’t have enough competition and that allowing it to spend more on expansion could drive “increases in health care costs” for consumers.
The conditions follow a Health Policy Commission report that warned the merger could result in a $128.4 million to $170.8 million increase in healthcare spending for inpatient, outpatient and adult primary care services and up to $59.7 million for specialty physician services.
The commission concluded that while the merger could lead to improvements in quality and efficiencies, the companies hadn’t explained how that would happen. The new conditions call for a second report in five years to assess the merger’s impact on healthcare costs and services in the state.
BIDMC CEO Kevin Tabb called the commission’s conditions “strict,” but said they won’t discourage the planned merger. “While the conditions are unprecedented, we are eager to move forward together as Beth Israel Lahey Health,” he told Healthcare Dive via email. “The status quo in this market is unacceptable, and it’s time to do something different.”
As mergers and acquisitions continue in healthcare, potential problems could lead to more stringent conditions. Research has shown, for example, that horizontal mergers can drive up costs. Once completed, Beth Israel-Lahey Health would rival Partners HealthCare System in terms of market share in Massachusetts. The new company could use its increased bargaining power to raise prices for commercial payers, increasing healthcare spending.
A recent National Bureau of Economic Research analysis also played down the extent to which hospital mergers increase efficiencies. According to NBER, acquired hospitals save just 1.5% of total costs following a merger — or an average of $176,000 a year.
And a recent University of California-Berkeley study of health system consolidation in the state found that highly concentrated markets led to higher hospital and physician service fees, as well as higher Affordable Care Act premiums, especially in northern California.
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|It pays to have an insurance monopoly|
|Also from Health Affairs: The level of competition among insurance companies has affected Affordable Care Act premiums more than any other factor.
By the numbers: Premiums are 50% higher this year in areas with just one insurer than in areas with two insurers.
How it works: Jessica Van Parys, the Hunter College economics professor who conducted the study, suggests that insurers underpriced their ACA offerings in the first few years to capture market share, then raised their prices over the years.