Cerner's latest results: UK and US highlights

In a Cerner conference call after an announcement of the company’s s second-quarter results, there was much discussion about “meaningful use” – a phrase which can unlock money from Congress for Obama’s $20bn healthcare IT stimulus package.

Suppliers must meet “meaningful use” requirements which are being drawn up to ensure that money spent on e-record systems is spent usefully.

In the UK, trusts can install subsidized NPfIT systems once they have met minimum national technical and security requirements. In the US “meaningful use” goes much further: it means what it implies – that hospitals and suppliers will have to show that their systems are useful in a meaningful way to get stimulus money.

A full transcript of the conference call is on the website of Seeking Alpha.

Highlights of Cerner’s second-quarter results:

–    Revenues flat at $403.8m compared with the same period in 2008, but $12m below Cerner’s previous guidance range
–    Net profits were $43.7m, up from $35.3m in 2008
–    Turnover from the UK is expected to rise to up to £61m [$100m] a year from the NPfIT and “standalone” NHS sites
–    Cerner expects to gain from the Obama healthcare stimulus but there has been “some pausing by clients awaiting clarity on the stimulus requirements and healthcare reform”, said Marc Naughton, Cerner’s Chief Financial Officer.
–    US turnover rose 6% but global turnover fell by $67m, in part because of “lower services revenues in the UK”.
–    The balance sheet reflects money owed from its work for Fujitsu, which has left the NPfIT as the local service provider in the south of England. Naughton said:

“Note that our balance sheet still reflects billed and unbilled receivables related to the Fujitsu contract that represents over 10% of total receivables. While we still do not know the exact timing of when Fujitsu and the government will unwind their contract allowing us to finalize items with Fujitsu, we currently expect to fully collect these receivables. However, they will have a negative impact on DSO‘s [days sales outstanding] meantime.”

–    Global division in 2009 may struggle to match the “catch up” business in the UK in the fourth quarter of 2008, and because of a large contract in the Middle East in the third quarter of 2008.
–    The “meaningful use” requirement of the Obama stimulus may help Cerner against some competitors.

 “With the potential for some existing providers to be challenged to bring their large installed bases to the definition of Meaningful Use, we view this as a significant opportunity,” said Michael Valentine, Cerner’s Executive Vice President.

–    Cerner’s success with Choose and Book, which is part of the NPfIT, is a “very good story” said Cerner’s President, Trace Devanny. He said:

“Our forward progress in the National Health Service’s countrywide HIT initiative at the midpoint of the year has been solid. Choose and Book, our national e-scheduling solution, achieved a successful upgrade in June that allows General Practitioners to use SNOMED CT codes to find and refer patients. As functionality and usability have become more robust, activity levels have continued to grow with bookings more than 25% higher than the same period last year. A very good story.”

Cerner’s work on the rollout of Millennium systems to acute hospitals in London is “progressing”. New deployments and upgrade activities are scheduled throughout the second half of this year. Devanny said:

“We also are moving forward with our partner BT in the South, as they have assumed work previously undertaken by Fujitsu. Most importantly, we continue to be the preferred supplier for NHS-leading Foundation Trusts as they contract for additional capability and capacity.

“The contract with Royal Berkshire Foundation Trust, signed in the quarter, being the most recent example. These activities are contributing to a building volume of work, which now includes active projects at over 20 trusts, representing more than 10% of all beds in England’s National Health Service.

“As we look to the fall, our focus is on strong delivery. Our execution will be enhanced as we seek to use an implementation approach that is more consistent with our very successful and proven MethodM engagement model. This will have a positive impact for Trust clients like Kingston and Newcastle. Strong delivery, in turn, should leave both the National Programme and Cerner well positioned for the future.”

– More details will be released, at Cerner’s Healthcare Conference in October, of its cloud computing strategy, codenamed Blue Sky.

The company’s share price today (30 July 2009) is close to an all-time high at $64.85.

Cerner’s second-quarter results – article

Cerner posts higher profit on flat revenue – Kansas City Business Journal