Cerner announces partnership with Utah-based Intermountain Healthcare

09/27/2013 7:25 PM

09/27/2013 7:25 PM

Cerner Corp. has struck an agreement with a health care system known for its medical proficiency and use of advanced technology, a partnership the firm thinks will help it prosper in a growing field known as population health management.

The multiyear strategic partnership announced Friday is with Intermountain Healthcare, based in Salt Lake City. The nonprofit system operates 22 hospitals and 185 clinics, and it has a medical group that employs 1,000 physicians in Utah and Idaho.

The value of what’s expected to be a 10-year agreement was not disclosed. But investors obviously liked the move. Cerner shares rose $3.88, nearly 8 percent, to $52.61.

Intermountain was recognized in 2009 by President Barack Obama as a model for providing high-quality health care at reasonable costs. Officials at North Kansas City-based Cerner think the partnership will enhance their competitive position in health care technology.

“We think the industry will pause with this announcement and think, ‘This is a major decision by a well-known health system. If they partner with Cerner, we should take a serious look at Cerner,’” said Marc Naughton, chief financial officer at Cerner.

Cerner, known mainly for its medical records software, also expects the Intermountain partnership to help make it more competitive as the health care industry moves into population health management. That approach focuses on keeping large, designated groups of people healthier to reduce costs.

“Population health is going to be a major change for how health care works going forward,” Naughton said. “The question will be ‘How do I keep people from getting sick?’ rather than just ‘How do I treat them?’”

Industry analysts think population health management could grow to become a $50 billion industry.

“Health care is in the midst of tremendous change … from being paid for volume on a fee-for-service basis to value measured by our clinical outcomes and our success in improving the health of a community,” said Bert Zimmerli, Intermountain executive vice president and chief financial officer.

Providing the back-office services that health care providers will need for population health management is expected to fuel many of the jobs Cerner expects to create over the next 10 years.

The new deal with Intermountain comes at a time when Cerner is rapidly expanding its local workforce. The firm recently opened an office campus in the Village West development in western Wyandotte County that is expected to accommodate 4,000 employees.

It’s also planning a massive office development on the site of the former Bannister Mall in south Kansas City. A $4.1 billion redevelopment plan for what is projected to ultimately be a 4.5 million-square-foot office campus when fully built out in 10 years has been endorsed by a city development agency. The proposal is expected to be before a Kansas City Council committee next month.

Cerner’s growth has been accelerating in recent years, and the firm now employs 9,000 people in the metropolitan area, part of a total global workforce of 13,000 employees.

Intermountain Healthcare has had a reputation for developing its own information technology over the years, and Cerner executives praised its decision to partner with their company.

“It is an honor to have an opportunity to join with Intermountain’s leaders to accelerate quality and cost innovations that will improve care for the region and the nation,” said Jeff Townsend, executive vice president at Cerner.

As part of the new agreement, Townsend will lead several key executives and staff who will be moved to Salt Lake City to help Intermountain implement the new collaboration.

Before the Intermountain announcement, Cerner had products licensed by about 10,000 hospitals, doctors’ offices, medical laboratories, ambulatory centers, pharmacies and other facilities in the United States and abroad.

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