With a big boost from Washington, Neal Patterson’s futuristic vision for computerised health care has made him a very rich man. But will it make Americans healthier?
North Kansas City is an unlikely place to launch a revolution in American health care. Yet here, amid the dilapidated grain elevators, fast food joints and vast green plains, the dream of using computers to keep you alive at a reasonable cost is battling onward. In a bunker-like building built to withstand a direct hit by a category five tornado, 22,000 servers handle 150 million health care transactions a day, roughly one-third of the patient data for the entire US. Records of your blood pressure, cholesterol, lab test results, that gallbladder surgery last year—and how much you paid for it—may sit there right now. Armed guards stand watch.
This is a data centre at the headquarters of Cerner, the world’s largest stand-alone maker of health IT systems—and company number 1,621 on Forbes’ Global 2000 list—where the blood-and-guts realities of medicine meet the sterile speed and exactitude of the computer revolution.
For 33 years founder and Chief Executive Neal Patterson has preached better health through information, a world in which powerful digital machines right out of Star Trek link hospital bedsides with real-time data on what ails the entire nation, finding patterns, suggesting treatments—and tracking costs. Patterson, 62, has likened the journey to pushing a “500-pound marshmallow up a hill” but now insists that health care’s moment of digital transformation has arrived. “It is finally happening,” he says. “Without a doubt in my mind, it is happening this decade.”
It would certainly seem so from Cerner’s financials. Over the past five years sales have grown an annualised 9 percent and earnings 22 percent. Last year, the company booked $307 million in profits on sales of $2.2 billion. Since Patterson started Cerner in 1979 it has been consistently profitable, and shares have increased at an annualised 22 percent since a 1986 IPO. That’s 11 percent better than the S&P 500 over that 26-year span. The appreciation of Cerner’s shares has made the frugal Patterson a very rich man. His Cerner stake is worth $1 billion.
Patterson’s innovations in computing and data storage certainly helped fatten that number. But Washington, especially President Barack Obama, has given him a healthy boost. As the rest of the economy floundered, Cerner boomed, thanks to a 2009 law that was Obama’s first foray into health care.
The Health Information Technology for Economic & Clinical Health (HI TECH) was a $19 billion part of the 2009 stimulus bill designed to create new jobs. This bipartisan effort—even stimulus basher Newt Gingrich lobbied for it—aims to entice and then punish hospitals into finally going digital.
Beyond financial matters, sometimes putting in a big computer system may even do patients harm before it can do good. When the Children’s Hospital of Pittsburgh installed a Cerner digital drug-ordering system to replace its old paper one in late 2002, the medication error rate declined—except for kids who had been transferred from other hospitals. Five months after the new system was installed, the death rate for these children had doubled. In a controversial 2005 paper in Pediatrics, a group of doctors at the medical centre blamed a complicated user interface that required up to ten mouse clicks and several minutes for a single drug order. Cerner disagrees about the software’s role in the problem; everyone agrees that it was fixed and that mortality is now lower than it was under the old paper system. But the Hippocratic oath says nothing about breaking eggs to make omelettes.
Epic Systems: Marketing Sucks
(This story appears in the 08 June, 2012 issue of Forbes India. To visit our Archives, click here.)