Cerner Agrees To Pay $106M Over Allegedly Defective Software

Posted on March 12, 2014 I Written By

Anne Zieger is veteran healthcare branding and communications expert with more than 25 years of industry experience. and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also worked extensively healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

After years of back and forth, Cerner has settled a dispute with a North Dakota hospital claiming that Cerner’s financial software was defective and didn’t deliver expected business benefits.

Back in April 2012, Trinity Health told the vendor that it was transitioning away from Cerner’s patient accounting software solution and certain IT services provided by Cerner. At the time, it alleged that the patient accounting solution didn’t work right.  Of course, Cerner disputed the allegations, according to its 10-K yearly report.

The two players began arbitration in December 2013, a move which allowed Cerner to collect some payments due from the hospital.  At the outset, Cerner was predicting liability you of up to $4 million, while Trinity anticipated damages totaling $240 million.

Ultimately, the two agreed upon a settlement under which Cerner would pay Trinity $106 million. Interestingly, Trinity is continuing as a client of Cerner for its clinical solutions, something you might not expect under the circumstances.

This is a particularly unusual outcome for a vendor/hospital dispute, because most vendor contracts contain clauses to eliminate “consequential damages,” which limit hospital’s ability to take legal action, notes Trinity attorney Michael Dagley. That being said, there are areas under state and common law provisions of consumer fraud statutes, under which manufacturers cannot misrepresent product capabilities and benefits.

Knowing how hard it is for a hospital to sue a vendor of IT services, it makes you wonder whether the growing number of hospitals dumping their current EMR are doing so because they’re not getting what they want but can’t sue to get their money back.  While it may be heinously expensive, buying a new EMR and installing it is certainly faster than going through years of court proceedings and then having to buy another EMR nonetheless.