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Cerner laying off more than 250 workers as part of wider cost cutting effort

See inside Cerner’s Innovations complex in Kansas City

Mike Nill, chief operating officer for Cerner Corp., talks about the company's future, employees, and growth with the media during a tour inside the company's Innovations complex in Kansas City. This video was originally published March 9, 2017.
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Mike Nill, chief operating officer for Cerner Corp., talks about the company's future, employees, and growth with the media during a tour inside the company's Innovations complex in Kansas City. This video was originally published March 9, 2017.

Cerner Corp. will lay off 255 workers as part of a wider effort to cut costs within the healthcare IT business.

The layoffs affect workers in the Kansas City area and in Cerner offices across the country. The 255 affected workers represent less than 1 percent of the company’s global workforce of nearly 30,000.

Affected employees, who work in a variety of business units, were notified on Wednesday, Cerner officials said. They were offered a severance package and their official last day will be Nov. 5.

With about 14,000 employees, Cerner is the Kansas City area’s largest private employer. It boasts offices across the metro: a world headquarters campus in North Kansas City, an office complex near the Kansas Speedway in Kansas City, Kansas, and a sprawling Innovations Campus, which occupied the former Bannister Mall site in south Kansas City.

Founded in 1979 by Neal Patterson, Paul Gorup and Cliff Illig, Cerner has been known for its explosive growth here and around the globe.

But this week’s layoffs come at a time of major change for the 40-year-old company.

Cerner initially pioneered the work of digitizing the nation’s paper health records. But that domestic market has largely completed the move away from paper records and Cerner and its competitors have saturated the market.

That has pushed Cerner to look for ways to diversify its business model and executives are participating with third-party consultants in an exhaustive review of all current operations.

CEO Brent Shafer frequently refers to the company’s current change as a “transformation.” On a July earnings call with investors, he said the company had taken a series of actions to drive efficiencies and promote long-term growth and profitability.

“Since introducing our new operating model earlier this year, we’ve made considerable progress in realigning the company in a more client-centric manner,” he said.

CFO Marc Naughton said the company was working on 165 initiatives to optimize costs and simplify the business. He said the company is looking to cut more than $200 million in expenses. He said those cuts needed to be sustainable savings.

Savings included a recently completed buyout program, which offered a payout and benefits to certain tenured employees who agreed to voluntarily leave. While he didn’t say how many employees participated in that plan, Naughton told investors the company spent about $40 million on that effort.

“Certainly, we’re pleased to have gone through that,” Naughton said. “We’re pleased to start getting the benefits of that. But we’re certainly more excited about the benefits we’ll get from our additional optimization work.”

In April, Cerner entered into an agreement with activist investor fund Starboard Value, which reportedly owns more than 1 percent of the company’s stock. As part of the agreement, Cerner restructured its board of directors and created a finance and strategy committee to oversee efficiency and profit improvement efforts.

Since 2017, more than half of Cerner’s board has changed.

Cerner’s annual report showed the company last year earned $5.366 billion in total revenue, including $775 million in profit.

Even with this week’s reductions, Cerner officials say the firm will continue to grow here and elsewhere.

Cerner has already hired several thousand workers this year with plans to hire hundreds more before the end of the year.

The company continues building out its Innovations Campus, which is east of Interstate 435 and stretches from 87th to 95th streets.

A 10-year development plan calls for that campus to mushroom into a $4.45 billion complex with 16 buildings housing 16,000 Cerner workers. The site was redeveloped after a commitment of about $1.76 billion in taxpayer subsidies. Those incentives require the company to meet certain hiring thresholds.

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Kevin Hardy covers business for The Kansas City Star. He previously covered business and politics at The Des Moines Register. He also has worked at newspapers in Kansas and Tennessee. He is a graduate of the University of Kansas
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