Oracle said on Monday that it had agreed to pay $28.3 billion for Cerner, a large electronic health records vendor. The deal is the largest-ever acquisition by Oracle, a database giant, and a sign that some major technology companies see health care as a growth opportunity.
For Cerner, the deal is not only a payday but a merger with a deep-pocketed owner at a time of increasing competition and changing technology in the market for digital patient records.
Cerner is No. 2 in the electronic health record business, with 25 percent of the market in 2020, according to KLAS Research, which tracks the health care industry. Cerner was slipping slightly and Epic, which had 31 percent of the market, was gaining, the research group reported this year.
The digital patient record market, like most industries, is adopting cloud-computing technology. Both Microsoft and Oracle, analysts say, see the huge health care market as a path to strengthening their positions in the cloud business, in which customers tap into remote data centers and typically pay on a pay-for-use basis.
Microsoft has the second-largest cloud business, behind Amazon. In April, Microsoft agreed to pay $19.7 billion for Nuance Communications, the leader in voice-recognition software used in hospitals, clinics and doctors’ offices.
Oracle was slow to move its database and enterprise applications to the cloud, but it has made strides in the past few years.
For Cerner, the deal is a striking step by its new chief executive, Dr. David Feinberg. Dr. Feinberg joined Cerner from Google, where he headed its health technology unit. His move to Cerner was announced in August, but he did not start the job until October.
In a statement, Dr. Feinberg said combining with Oracle would give Cerner “an unprecedented opportunity to accelerate our work modernizing electronic health records,” improving the experience for physicians and nurses, and care for patients.
The negotiations on a deal between Oracle and Cerner were reported last week by The Wall Street Journal.
Electronic health records are regarded as a necessity to move medicine into the digital age — a shift that in the long run should increase efficiency, curb costs and deliver better care.
But the transition over more than a decade has been difficult, costly and time-consuming. Most doctors and nurses now use digital records, but they spend an average of one to two hours doing desk work for every hour they take seeing patients, according to a study by the Mayo Clinic that Oracle cited.
Voice recognition and automated transcription have the potential to sharply reduce the time spent typing up patient information and physician notes.
In explaining the deal, Oracle executives pointed to its voice assistant technology, as well as its cloud, as assets that should help Cerner improve its offerings.
Buying Cerner gives Oracle a leading technology company in health care, a mammoth, if fragmented, market. Other technology giants, including IBM and Google, have stumbled in health care in recent years.
But Cerner is an established presence in clinics and hospitals. “The future of enterprise software is being able to engage with industry segments,” said Bob Parker, an analyst at IDC. “And this puts Oracle deeply into a key part of the health care business.”
The merger also holds the potential to combine data that Cerner gathers in its digital records with Oracle’s data analysis and artificial intelligence tools to spot patterns and make predictions about effective treatments.
In the digital patient record business, Cerner had another appeal for Oracle. Its records, unlike those of other large suppliers like Epic, are built atop the Oracle database. They run on a specialized medical database called Cache.
“Cerner really was the only logical match for Oracle,” Mr. Parker said.
