One-on-One with Cerner President Trace Devanny, Part II

June 24, 2011
With more than 6,000 clients worldwide, Cerner is certainly one of the largest players on the healthcare IT landscape. In business since 1979, its

With more than 6,000 clients worldwide, Cerner is certainly one of the largest players on the healthcare IT landscape. In business since 1979, its founders — Neal Patterson, Cliff Illig and Paul Gorup — remarkably still call Cerner’s corporate corridors home. Earlier this year, the company threw the industry a curveball by announcing it would no longer exhibit at the HIMSS annual conference, making it clear the organization wouldn’t simply do things just because they had always been done. HCI Editor-in-Chief Anthony Guerra recently had a chance to chat with Cerner President Trace Devanny about where his company — and the industry at large — is headed.

Part I

AG: How do you approach process improvement?

TD: We are constantly looking at ways to improve how clients perceive Cerner; how our service levels can improve. At Cerner, if you can’t measure it, you can’t manage it, so we measure everything, and we hold ourselves to a very high standard. That includes metrics across our consulting business, where we have had dramatic improvements in the total costs of ownership for our clients and, more importantly, we reduce that time-to-value proposition in getting those critical solutions installed much more efficiently, much more quickly, and bringing that return to our clients faster than ever.

On the deployment or the consulting side, we’ve had a number of initiatives, including our MethodM technology that brings the education, the deployment, all those critical elements of a successful project plan into one place. We’ve also had some really good success with measuring our host of clients, and even extended some of the capabilities beyond our host of clients, around up time, the availability of the hardware that supports the Millennium application. We call that Lights On, and that’s a program where we take the best practice, and we have close to 200 separate clients now running out of our data centers here in Kansas City. We learned a lot, each and every minute of the day, in how those systems operate; because we’re managing those systems and we’re able to create a lot of learning and thus create best practices from that learning that we drive right back into our clients and our operations.

So, that’s a very important improvement, and we’ve now approached 99.9 percent availability of systems, far and away better than what most of our client, in most cases, can provide themselves. We do it for lots and lots of different clients, so we have the ability to see those mistakes all the time before our clients even encounter them because we’re managing so many different environments.

Relative to support, we are very much aware of KLAS rankings, we are very much aware of how Gartner looks at the marketplace, we take a look at all those critical external measurement organizations that measure all of us, each and every day, and we are working and have plans in place to improve all of those metrics. I, personally, manage the cabinet that is concerned with client satisfaction, so the client care cabinet is something that I spend a good bit of my time looking at, constantly looking at ways to improve, and that’s at the senior-most level of the company.

On support, consulting, our hosting business, all of those elements are very front and center to us. And, frankly, it’s a strategic initiative for our company that we reduce the total cost of ownership for these very critical systems.

AG: As a business manager, do you have a way that you either monitor or evaluate your competition in order to just keep a good understanding of the way things are moving vis-à-vis those competitors?

TD: We have to. You’ve seen the consolidation that’s taken place in the competitive ranks. You look at the Siemens, you look at the GEs, the big cap guys that are going to become our biggest competitors. We have to know a lot about them; we have to manage. I think we do a very good job of competitive analysis, and we see them in the marketplace each and every day, so we take that learning back. We have an organization that focuses on managing competition and managing what we learn when we win and, more importantly, when we lose. So those points are very much captured, we try to take that learning and drive it back into the sales force so we don’t make any of those mistakes a second time. There will be continued consolidation in this industry; it has become more and more of a big cap game in order to manage the complexities of healthcare. I think you have to be able to fund it, and you’re going to find increasing pressure on some of these competitors to stay in the game and to be able to manage. If you’re going to be a one stop shop, if you’re going to be a full provider of many of these solutions, you’re going to find it tougher and tougher for the landscape to make that work.

AG: It must be interesting, on an RFP process, to keep coming up against the same five or six competitors every single time?

TD: That’s exactly the way it is. It’s the same five or six competitors almost exclusively in our world. We, unlike most, we span the entire continuum of care; we’re worried about the consumer, so we have a retail business; we’re worried about ambulatory; we’re worried about the centers and by that I mean our imaging centers; surgical centers, rehab centers, sleep centers and then you take that to the most acute settings. Unlike most of our competitors, we’re worried about all of those venues of cares. For the most part, to your point, we see the same five or six competitors, and we typically end up being one of the two finalists. So it’s not hard to create and build dossiers on these guys because we see them so much.

AG: Do you think that, at some point, the software will be commoditized and you’ll compete on service?

TD: I think if you look at this industry, just like all other industries, there’s a maturation process that takes place that eventually commoditizes whatever it is that you provide to a business. I wouldn’t say that represents the way we are in healthcare IT today, but clearly you can see, having watched this competitive landscape, you can see the consolidation of the industry. You can see that there’s fewer and fewer significant competitors than there were even a couple of years ago. And to my point a moment ago, it’s becoming increasingly difficult to fund the complexity necessary to support the ever-changing requirements of the very large and oftentimes very complex integrated delivery networks at the medical centers, even community hospitals, as well as individual practices and physicians themselves.

I think you’re going to see more maturation, I think it’s going to become less of a transaction-based world for companies like ours and it’s going to revolve around the relationship. The depth and breadth of solution that Cerner brings in the Millennium platform is unmatched anywhere in the world, and I would ask for those comparisons, and that’s going to serve us very, very well. The average Cerner site today has less than seven solutions. The Millennium site has less than seven of our 57 solutions. So, there’s lots of opportunity for Cerner to go back to these clients and sell additional solutions because we provided those additional solutions on our relational architecture platform called Millennium. So, I like our chances in that marketplace, it will continue to evolve and I think it’s going to be like every other industry. You’ve got to continue to innovate, you’ve got to continue to look at today’s requirements and you’ve got to be prepared to create the kind of enduring relationships that allow you to have a sustainable business.

AG: As we discussed, with the RFP process, nobody gets every deal. When you do not get the deal, are you able to identify a consistent reason, be it price or whatnot, or is it a variety of reasons?

TD: There’s always a variety of reasons; there’s never one single reason. I think we’re all pretty price competitive. I think a lot of it now is, as the marketplace shifts to a more physician-focused set of decisions, you get physicians more involved, and that changes the dynamic of the decision-making process. Clearly, the competition is not only price sensitive, but many of our strengths revolve around our relationships, our deep install base, around which we’ve been building relationships for nearly 30 years. That’s a very tough competitive advantage that is very hard to unseat. So, the fact that we have such breadth and depth of solutions, the fact that we have such a deep install base over these many, many years, I think positions us very well in what has become a very competitive marketplace. There’s room for plenty of us out there, don’t misunderstand. There is not going to be a sole survivor here, and frankly the canvas for help here is so big and so broad, there is lots of opportunity, and we find ourselves not being a disruptive influence. We will continue to innovate and be part of the landscape because we’ve always taken that approach.

AG: You speak to a lot of CIOs I’m sure, in your career and in your business. Do you think the role of the CIO has changed over the last five years; and what do you think it takes to be a good CIO of a large hospital or a multi hospital health system today?

TD: That’s a big question, and it’s a good question. I think, historically, CIOs have been technology leaders. They’ve made most of the decisions around the types of solutions that a hospital or a healthcare system, an academic medical center, a children’s hospital purchases, and they’ve always been at the center of those decisions. They certainly still are today, but I think you find as the market has evolved, there’s a lot more participation at the enterprise level around those decisions.

So, I think the role of the CIO has become probably more important, in my view, and they not only have to be knowledgeable about many, many different departments and many, many different aspects of the healthcare enterprise, but they’ve got to build consensus among the clinical community. They’ve got to build consensus among the financial community. They have to know the right network; they have to hire the right people. So, just like any other industry, the job of technology officers and information officers is ever challenging and will continue to be that. You are going to continue to see a new breed of those folks that are going to come into the ranks. They grew up playing video games, they grew up with a laptop under their arm when they went off to high school and college, and that’s going to serve our industry very, very well. I’m very bullish on our business, I’m very bullish on the marketplace, and I’m very bullish on the opportunities that this industry can offer to include the very critical CIOs that help drive this business today.

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