The speculation is now “official”, since it is by a London investment banking firm, but it confirms this Editor’s earlier view: Oracle, to become an “AI Infrastructure Landlord” (in their apt term), has to sell off what was Cerner and the EHR operation.
That train is now approaching, though realistically, no one knows when it is due and at what station.
The need: Oracle must reduce the extent of its “liquidity and capital expenditure crisis” in order to stay in the AI Game. Layoffs of 30,000 staff, or 18% of their global employees, is not enough. A fresh financing of $16 billion from the PIMCO bond fund and others cannot relieve the financial stress created by a previous estimated $72 to $100 billion in previous debt load and payments, so significant that banks refused to lend to still-profitable Oracle. And the AI transformation itself is high risk. Oracle owes OpenAI alone $553 billion in remaining performance obligations, and it has obligations to Meta as well. Add to this the long “taffy pull”–the years-long process of building, chip expenditure, then making a data center operational and generating cash. [TTA 14 May, 7 May, and prior; also Ed Zitron’s article for a much longer take.] Take all of them together, and they are polite words for “rock and a hard place” or a Very Dark Corner.
The London investment banking firm Nelson Advisors has taken a deep yet remarkably easy-to-digest analysis on a potential sale. Highlights are below. The paper is one long web page, not a deck of 50 pages. It is well worth your reading time.
Background: Cerner was bought four years ago in the go-go days of June 2022 for $28 billion. Cerner had an aging EHR and a deteriorating market share. Recently it’s plummeted to a 27% market share versus Epic’s 48% in large health systems. Oracle’s interest was not only in health, but also the health data Cerner contained. The plans were to update the software based EHR to a cloud-native data platform as the linchpin of Healthcare Transformation (Ed. note), except that integration proved to be slow and far more expensive than estimated.
Oracle also inherited from Cerner two huge and impossible to escape Federal obligations: the Military Health System EHR and the Veterans Health Administration EHR Modernization, two separate but mandatorily interoperable systems. MHS was the first implemented and is now completed, but remains an obligation. The VA EHRM, as TTA has chronicled, started rolling out in 2020 and by 2023 was halted after five implementations Due to Disaster. It resumed in April 2026. The VA and Congressional process for funding now has tight guardrails in place on continuance.
Who will buy the Oracle/Cerner EHR operation is the question. For how much isn’t as clear. Selling Oracle Cerner “represents the most significant “lump sum” of liquidity available. In the Nelson analogy, Oracle took the Cerner cow, milked it of data to feed its data into its LLMs, and no longer wants knackered ol’ Bessie even rejuvenated by the cloud. (In this Editor’s view, Oracle knows it is fighting a losing battle against Epic, which does privately pretty much what it wants and plans to stay that way.)
The obvious group of potential buyers are ‘hyperscalers’ who view health data as the Next Frontier. They already have feet in this healthcare pond. They also meet approved FedRAMP High security requirements for the VA and MHS contracts. Equally, they all have drawbacks.
Microsoft seems the most logical. It already has a huge footprint and expertise within health systems, courtesy of ambient scribe Nuance/DAX Copilot and cloud computing platform Azure.
- Conflict #1: Epic is a major Azure customer. Would Microsoft be willing to lose this business in a high-stakes move?
- Conflict #2: FTC would likely challenge the acquisition based on this huge existing footprint.
Amazon is also engaged in healthcare, but not with health systems. It has Amazon Health Services comprising Pharmacy, One Medical, and DTC telehealth services. (Editor’s note: not mentioned by Nelson is that Amazon Health has a new leader, Dr. Roy Schoenberg, with experience in Federal contracts via Amwell for the Defense Health Agency and MHS. This broke late last week.)
- Conflict: Amazon Web Services is an established vendor in other areas of health systems, and acquiring an EHR could be seen as too much under one roof.
- Problem: no experience with EHRs (same as Oracle) nor highly regulated health systems. The scale of the MHS/VA implementation and academic hospitals would be a steep learning curve with little existing precedent or credibility in Amazon-World.
Google certainly has the size and resources, and could position the EHR to rival both Microsoft and Epic.
- Conflict #1: Cultural. Google moves fast and healthcare slowly.
- Conflict #2: Lacks the enterprise sales and support needed to service health systems. It doesn’t have a service culture.
- Editor’s note: Google has tried and failed to be a healthcare giant at least twice. It doesn’t seem to fit.
Nelson also looked at two outliers, UnitedHealth Group/Optum and the hospital groups HCA or CommonSpirit Health. Both would be vertical integrators. Hospital groups do not have the margin nor borrowing power to make the move. UHG and their Optum operation face cash crunches and ongoing Federal scrutiny. (Had this been a few years ago under a different management, this would have been on strategy for UHG.)
Another outlier from the international space is SAP. Their aim would be global expansion into the Middle East and Europe with another asset their enterprise resource planning (ERP) expertise. Their problem? Lack of experience in the highly regulated US environment. In the Nelson view, the US Government could be the make/break for any deal.
The final destination for this ‘hard to sell’ asset? Private equity. And more than one involved. Nelson looked at five PE players in the healthcare space: Thoma Bravo, Francisco Partners, Bain Capital, Blackstone, and New Mountain Capital. (All are familiar PEs to Readers.) Even with their considerable individual assets, it would likely take a consortium to buy Oracle Health in a $20 to $25 billion deal. Nelson rates this as the most likely scenario as long as a consortium could be formed and it can be seen as a turnaround. The drawbacks are a governance structure and the real lack of an exit strategy. (PEs always need exit strategies to keep the funders happy. They are not in it to buy and keep.) The lower price could be made palatable to Oracle if they retained the Oracle Cloud Infrastructure (OCI) network and the Oracle Autonomous Database revenue streams.
The other partner in this consortium scenario? The Federal Government. It’s a high priority to secure the EHR for both the MHS and VA. Congress is already concerned.
Place your bets! Hat tip to a Reader who wishes to remain anonymous.
Many of us have been watching the VA Fed EHR implementation wondering if it would fail. It hasn’t. It’s been a success story. However Oracle is failing instead and that puts the Federal investment and Public intest at stake. I’m betting on Fed investment like the recent Intel investment into some kind of consortium with the PE crews.
Hi Bill, that is an interesting take. VA and Oracle have had 2 years to fix the problems in the existing five, plus the sixth at Lovell with MHS. The fact it’s rolling out now and seems to not be in DisasterVille as Mann-Grandstaff was would confirm what you say.
Do you believe that PEs would go for the ‘consortium’ approach? PEs have been hard hit lately, but a Federal investment might assure them enough to go for it. The problem is how slowly the Feds move, the internal opposition in the Senate (see the 20 May hearing) and that the FY 27 budget is already in the works. (And it’s a midterm year)
I haven’t watched the recent hearings so I can’t say. I suspect a Federal investment in EHRs not on any decision maker’s radar. Those Decision makers being those in the Pentagon, 810 Vermont, and Congress.
I know little about the PE world other than I was surpised to see so many University endowment funds seem to act like PE firms. A Federal investment might bring some assurance to PE investors. A consortium might make sense especially since the other scenarios you described don’t seem likely.
Dwight D. Eisenhower’s problem-solving philosophy was, “If you cannot solve a problem, enlarge it”. I’m doing Oracle Health a favor here by expanding their problem.
VA’s success implementing yesterday’s EHR with plans to keeping going to 2031 will create a new set of problems adopting the tech to modern standards (think of the AI in Healthcare chatter we’ve been hearing, it’s real stuff though, not just talk).
So I expanded everyones problems to see where the new boundaries will fall.
I never knew that Ike liked to expand problems–but that is very much the Army way. Get it noticed.
The PEs, if they go into a consortium as I believe will be the outcome, may have to stop acting like PEs looking for the door marked EXIT. Are they capable of that, and of investing in the EHR to continue to develop the platform?
I tend to be a little bit ludditeish and ‘modern standards’ can lead to rabbit holes of expensive misery. Let’s recall that back around 2015, the Feds spent over $1BN in trying to make VistA and AHLTA interoperable. (Talk about flushing $$$!)
The important things are that the EHR works to support patients and clinicians across VA, including their extensive research sites, is interoperable with MHS, and that the two systems develop concurrently to continue to be interoperable. It’s just one part of a huge infrastructure. Congress and VA EHRM and the MHS counterpart have to be on top of this. There are not any alternatives now.
Of course, they could have picked Epic.