Dive Brief:
- Cerner on Wednesday reported bookings rose 12% year-over-year in the first quarter of 2018. However, the EHR company also reported weaker-than-expected revenue growth, with first quarter revenue at $1.29 billion, a 3% increase year-over-year. Net earnings fell to $160 million from $173.2 million in the year ago period.
- Delay of a Department of Veterans Affairs contract negatively impacted revenue, Cerner executives said on an earnings call. The contract, which came under fire because it was awarded outside the typical bidding process, is now expected to be signed in the second half of the year.
- The Kansas City, Missouri-based company decreased its expected revenue range for the year. Shares opened on Thursday 10% below the previous day's close.
Dive Insight:
While revenue fell short of expectations, the uptick in bookings is encouraging for the health IT space.
Most providers have now adopted an EHR system. To broaden the market, health IT vendors such as athenahealth, Allscripts and Epic have all pushed out new product add-ons this year.
For its part, Cerner has teamed up with Salesforce to develop cloud-based population health tools.
'We believe that our lower penetration of revenue cycle, Cerner RevWorks, Cerner ITWorks and population health represents significant growth opportunity," CFO Marc Naughton said on the earnings call. "We have also demonstrated that the addressable market for our population health platform goes beyond our traditional provider end market, and we expect to continue expanding the reach of our population health solutions and services."
Sean Dodge, an analyst at Jefferies, wrote in a note Wednesday that Cerner is still on track for margin expansion this year, in part due to ramping up its population health/software-as-a-service offerings.
Dodge acknowledged concerns of tapering health IT spending but wrote he sees health IT as "one of the more attractive sub-sectors for the years ahead." Part of the reason for that is the transition toward value-based care, which more and more private payers are embracing.
"To be successful in this new environment, providers will need the ability to capture, aggregate, analyze and act on data," Dodge and David Windley, another analyst at Jefferies, wrote in an April 26 note. "More sophisticated HCIT [healthcare IT] infrastructures are required to support this, meaning providers that have put an EHR in place are not done spending on HCIT, rather they are just beginning."
Not all health IT vendors can point to bookings growth. Athenahealth recently disclosed weaker bookings in the first quarter year-over-year.
EHR company Allscripts will release its first quarter results Thursday.