In Medicare Advantage market, Cerner straddles the line between partner and competitor

Cerner
Cerner's Medicare Advantage play could put it at odds with one of its biggest clients. (Hookmeupbarb CC BY-SA 4.0)

Cerner's entry into the Medicare Advantage market could put the EHR vendor at odds with some of its biggest clients. 

In June, Cerner announced a 10-year strategic investment in Lumeris, which oversees a Medicare Advantage plan in Missouri. As part of the arrangement, Cerner invested $266 million into the company and plans to release a joint offering geared toward Medicare Advantage later.

Weeks later, Centene announced it is exploring a joint venture with Ascension Health to launch a Medicare Advantage plan in 2020.

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The two arrangements have little crossover, except for one: Ascension uses Cerner’s EHR platform, potentially putting the vendor at odds with the health system as both launch separate Medicare Advantage offerings.

RELATED: Cerner sinks $266M into Lumeris as part of strategic partnership targeting Medicare Advantage plans

On an earnings call last week, Cerner CEO Zane Burke downplayed the potential for Cerner to suddenly become a competitor with its own client, arguing that he sees it as “an opportunity for growth across multiple service lines, across multiple areas.”

“We'll have to get into the competitive environment of each one of those scenarios as we move forward,” Burke told investors. “And we're thinking about those thoughts very carefully. We don't want to be on the opposite side of our clients. We want to be on the same side as our clients as we move forward.”

Straddling that line, however, could become increasingly difficult as Cerner looks to position itself as a significant player in the population health world. Chief Financial Officer Marc Naughton said Cerner’s partnership with Lumeris would give the company a much bigger piece of the Medicare Advantage pie, by expanding the company’s potential revenue from $1 to $5 per member per month as a pure technology company to $15 to $20 PMPM as Cerner gets “fully ramped up” and expands its offerings with Lumeris.

“While there's a lot of work ahead to realize the full potential of the Cerner-Lumeris collaboration, the value proposition at the outset is high,” Burke said.

RELATED: Centene plans Medicare Advantage joint venture with Ascension

That could very quickly run up against the Centene-Ascension partnership, especially since all four companies are headquartered in Missouri.

Cerner reported a strong second quarter thanks to a long-awaited 10-year, $10 billion contract from the Department of Veterans Affairs. Bookings were up 9% thanks to some seven contracts worth over $75 million, according to a financial filing. Revenue increased 6% compared to the previous year, and net earnings dropped to $169.4 million.

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