Cerner Is A Cash Cow!
I was reviewing Cerner's financial information the other day and noticed in the analyst presentation how much money that company actually makes! For those of you that do not read Healthcare IT financial news, you should! Even if you are not planning to invest in the stock, the information can be very useful if you are in the process of selecting a HIT vendor. There is really a lot of information there.
I know Cerner has been a wall street darling over the past few years, but I really was not sure why, until I went through the information. One item that really stuck out is their contribution margin (In simplest terms, the contribution margin is total revenue minus total variable cost). Cerner has an 85% contribution margin on software license, meaning for every dollar of sofware license sales, Cerner has $0.85 in their pocket! Those are some nice margins! You can check it out for yourself by reading this Cerner Analyst Presentation. Good for investors, bad for patients!
Now Cerner is most likely not different from any of the other HIT vendors. Margins like that are pretty common in software. However, personally I think this is absurd! I mean everyone in Healthcare, including HIT vendors, is babbling about how high costs are, but no one really does anything about it!
I know first hand (have several Cerner quotes) that Cerner positions itself in the higher end of the market from a price perspective. They are the typical come in high and negotiate down vendor. So if you are in the process of purchasing from Cerner, believe me you have a lot of wiggle room!
In the end, the only one that is hurt by the high cost of software is the consumer, the patient! I have lots more to share regarding Healthcare software price, but will spread it out over different posts.
I know Cerner has been a wall street darling over the past few years, but I really was not sure why, until I went through the information. One item that really stuck out is their contribution margin (In simplest terms, the contribution margin is total revenue minus total variable cost). Cerner has an 85% contribution margin on software license, meaning for every dollar of sofware license sales, Cerner has $0.85 in their pocket! Those are some nice margins! You can check it out for yourself by reading this Cerner Analyst Presentation. Good for investors, bad for patients!
Now Cerner is most likely not different from any of the other HIT vendors. Margins like that are pretty common in software. However, personally I think this is absurd! I mean everyone in Healthcare, including HIT vendors, is babbling about how high costs are, but no one really does anything about it!
I know first hand (have several Cerner quotes) that Cerner positions itself in the higher end of the market from a price perspective. They are the typical come in high and negotiate down vendor. So if you are in the process of purchasing from Cerner, believe me you have a lot of wiggle room!
In the end, the only one that is hurt by the high cost of software is the consumer, the patient! I have lots more to share regarding Healthcare software price, but will spread it out over different posts.
posted by HIT Dude at 9:05 AM
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