Oracle's Cerner isn't keeping up with Larry Ellison's ambitions

Oracle’s promise to be at the forefront of the “next generation of health care” is falling short as the company hemorrhages workers and loses major clients for its Cerner subsidiary.

Oracle purchased Cerner, an electronic records company, in 2022 for $28 billion. Oracle co-founder and chairman Larry Ellison at the time said the pairing of Cerner and his company would “transform” healthcare delivery by providing easy-to-use systems that would lessen the burden on medical staff. Oracle CEO Safra Catza added that the company expects Cerner “to be a huge growth engine for years to come.”

The company has fallen far short of those ambitions, Bloomberg News reports, citing a trove of internal and public documents as well as interviews with more than 30 former and current employees and customers. Sales from the division that includes Cerner — now rebranded as Oracle Health — are expected to fall in the current fiscal year, which ends on May 31, and stay flat in the next year.

At least a dozen major clients signed deals to replace Oracle Health’s software with their competitors’ in 2023, Bloomberg reports. In 2022, the division lost a combined capacity of 4,658 patients, even as it brought in 22 hospitals, according to industry experts.

Boston Children’s Hospital announced its plans to switch from using a combination of both Cerner and rival Epic Systems’ software to just Epic last September. The hospital’s chief information officer, Heather Nelson, told Bloomberg that the move would make it easier to exchange information with neighboring hospitals. Northwell Health, a New York-based network of hospitals, has also made the switch.

Plus, a $16 billion deal with the U.S. Department of Veterans Affairs to standardize software at its 117 medical centers is in limbo. After a series of system outages and software errors caused harm to at least 148 veterans, the department put the contract on hold.

Cerner is expected to report a 5% decline to $5.6 billion in revenue for the latest fiscal year and stay flat the following year, according to Bloomberg. The company has embarked on an aggressive cost-cutting campaign; more than 3,000 sales and consulting employees left between March 2023 and February 2024, Bloomberg reports.

The trouble at Cerner underscores a more widespread difficulty for tech companies to enter — and disrupt — the health care industry. Amazon, Google’s parent Alphabet, and Apple have each spent billions on health care investments. Ellison’s Project Ronin, a cancer-focused software startup, shut down in March.

On April 23, Ellison announced that Oracle would move its headquarters to Nashville, which he described as “the center of the industry we’re most concerned about, which is the healthcare industry.” Just a few years earlier, Oracle had said goodbye to Silicon Valley and moved down to Austin, Texas, although most of its office workers stayed in California.