How Cerner will move forward after terminating revenue cycle agreement with Adventist

In January 2018, Cerner and Adventist entered into a partnership for the Kansas City, Mo.-based EHR vendor to assume the day-to-day management of the Roseville, Calif.-based health system's revenue cycle and clinical application staff.

At the time, 275 Adventist specialists transitioned to Cerner. In October, the partners announced almost 1,700 Cerner employees would become Adventist Health employees. All Cerner RevWorks associates were offered employment at Adventist, including patient access representatives, medical coders, coding managers and billing specialists.

During its third quarter earnings call on Oct. 24, Cerner executives addressed the partnership's decision to terminate the revenue cycle outsourcing contract, which led to a $60 million organizational restructuring charge for Cerner.

"This was a joint decision based on what we agreed was best for both parties and is also related to our previously communicated portfolio management process," said Marc Naughton, executive vice president and CFO of Cerner, during the call, as transcribed by Thomson Reuters StreetEvents. He added that the move would reduce annual revenue by around $170 million but the company doesn't expect it to have an impact on earnings. Adventist did recommit to all clinical and revenue cycle solutions and ITWorks services.

The company now expects 5 percent revenue growth for the fourth quarter and 6 percent growth for the year; without the $25 million impact from terminating the Adventist agreement, the company expected 7 percent revenue growth.

During the Q&A portion of the call, one participant inquired whether the Adventist transition would have an impact on future revenue opportunities and partnerships.

"I don't think it hurts either our position or where we're trying to go because what we do is we try to align with the needs of our clients," responded John Peterzalek, executive vice president and chief client officer of Cerner. He said the company hasn't fielded many questions about the partnership termination and hasn't seen a negative impact.

Mr. Naughton cited the fact that Adventist was interested in taking all Cerner associates working within the partnership as a good result heading into the future.

"We're going to look at the remainder of that revenue cycle business. If it doesn't meet our selective criteria relative to margins, we're going to determine what needs to be done with that business," he said.

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