This document summarizes the early history of Cerner, formerly known as PGI. It describes how PGI entered the healthcare IT market in the early 1980s by developing a laboratory information system (LIS) called PathNet. PGI was successful in implementing PathNet at four pilot hospitals between 1981-1983. This helped the company gain funding to market PathNet more widely and compete against other established LIS vendors at the time. By 1988, Cerner had grown to 72 LIS sales, ranking them 9th among LIS vendors surveyed that year. The document previews upcoming episodes on how Cerner was renamed, their initial public offering, acquisitions made, and growth over the years.

1. H.I.S.-tory, by Vince Ciotti
© 2013 by H.I.S. Professionals, LLC, all rights reserved.
Episode #105:
Cerner
Part 2:
LIS entrée

2. Why LIS?
• This week we pick up the story
of PGI (Patterson, Gorup&Illig)
as they entered the HIS market
in the early 1980s (they weren’t
renamed Cerner until 1984).
• We saw last week how these 3
ex-AA consultants decided to
form a software development
firm in 1979, and started with a
wide array of industrial clients.
• But what made them pick the
HIS industry, and Laboratory
Information Systems (LIS) in
particular? Actually, they
followed in hollowed footsteps:

3. Genius or Serendipity?
• Look at the early days of another HIS giant for a curious parallel:
– Medical Information Technology (familiar?) started in 1969 by
offering time-sharing services to a number of industries: auto
parts distribution, hotel chain reservation, international oil firm,
a cola company, the Hong Kong Telephone company… It was
one early client, Cape Cod Hospital, who steered them into LIS
in the early ’70s, from which they gradually evolved an ancillary
suite for RX and RIS, then added ADT and Orders/Results, and
eventually an entire HIS suite over the next several decades.
– PGI – While Cliff Illig worked with Brunson Instruments and Paul
Gorup worked for H&R Block and Cook Paint, it was Neal
Patterson’s work at MAWD Laboratories in KC that provided PGI
with their entrée into healthcare, starting with a billing problem
Neal quickly fixed. When Dr. Terrance Dolan left MAWD Labs for
St. John Medical Center in Tulsa, he called on Neal again…

4. The Path to an LIS Network
• Dr. Dolan asked Neal to address the entire array of complex sub-
departments within the Lab at St. John’s: hematology, chemistry,
serology, urinalysis, microbiology and anatomic pathology.
• Although Neal had learned a lot about Lab operations
at MAWD, he turned to a bright, young programmer
he worked with there, Liane Lance, who had been
hired from North Kansas City Hospital where she
learned the Lab ropes as a medical technologist.
• Eventually becoming an executive at
Cerner, Liane helped Neal & Co. put
together a proposal to automate the
entire lab operations at St. Johns. In the
spring of 1981, Neal presented to the
Board of Directors at St. Johns and PGI
won its first healthcare IT contract.

5. Complete PathNet Design
• The daring design of a “Total LIS”
caught on quickly, and three other
facilities signed up as pilot sites:
– Research Medical Center in KC,
Dr. James Flynn was Pathologist
and Janice Woods a Med. Tech.
– Truman Medical Center in KC; Jim
Mongan was Executive Director
– North Kansas City Hospital, where
Liane was aided by Vanetta Wick.
• Neal Patterson developed a display
of cylinders to illustrate the overall
design for PathNet (right), which is
now legendary in Cerner circles.

6. Four Rapid & Successful Go-Lives
• The four pilot hospitals came up rapidly over the next two years:
-- St. Johns in Tulsa in August ‘82
– North Kansas City in May ’83
– St. Johns Leavenworth in Aug ’83
– Research Medical Center in Oct ‘83
• PGI’snext challenge was finance$: building a total LIS took a large
team of costly personnel, and although four hospital sales was
encouraging, the maintenance from just 4 sites could hardly cover
ongoing expenses. Neal had exhausted all his loan potentials in KC,
so he hired Hal Oppenheimer to help raise some venture capital.
• Neal & Hal attended an Inc. magazine seminar in
Chicago where Hal met a fellow Harvard graduate
from First Chicago Capital Corporation, Paul
Finnegan. They talked at length about PathNet over
dinner, and Neal left Chicago with $1.5M funding.

7. LIS Market in Early 1980
• The capital infusion allowed them to take PathNet to market, and
PGI started competing with many established LIS vendors. Just
what was PGI up against? Check out these charts from Sheldon
Dorenfest’s 1980 “Guide,” thebible of the HIS market back then:
• The table from SIDA’s
survey of 250 sample
hospitals shows just how
hot LIS systems were back
then, outpacing “Data
Collection,” the domain of
HBO’s MedPro, SMS’
ACTIon and McAuto’s HDC.
• Pharmacy was way down the list, and RIS didn’t even appear! So
Neal & Co. had picked a very hot niche, which probably explains
First Chicago’s eagerness to help fund the new system & company.

8. Just Who Was PGI Up Against?
• Just who were the leading
LIS vendors at the time?
Here’s another gem from
Shelly Dorenfest’s 1980
Guide showing # of clients
by major application area
out of 250 sample hospitals:
• Anyone remember these
early LIS competitors:
– Spear, BSL, MedLab,
DNA, LCI, Genetron?
Could be its own episode…
• More importantly, how well
did fledgling PGI compete
against these early LIS-ers?

9. The LIS Market in 1988
• PGI’sPathNet sold very well
throughout the 1980s, as
turnkey mini systems for HIS
and LIS swept the shared
system field. Check out this
list I culled from an LIS
survey in the March 1988
issue of Bill Child’s
Healthcare Computing and
Communications magazine.
• Known as Cernerby1984,
Neal & Co. claimed 72 sales,
by 1988, ranking 9th among
the 23 LIS vendors who
responded to the survey.

10. HIS Vendors By Revenue in 1986
• Those of you who follow HIS
Pros’ annual “Top 100
Vendors by Revenue” in
Health Data Management
magazine may marvel at
how different the HIS
landscape looked 27 years
ago! Only two vendor names
remain unchanged in 2013:
– Meditech, ranked #15
with $28M in revenue
– Cerner, ranked # 19 with
$17M in annual revenue
• Most other leading vendors
vendors re-named, sold or
went out of business…

11. Next Episodes…
• We’ll pick up the story with:
– PGI renamed as Cerner –
how did Neal & Co. came
up with that name?
– Going public – what if
you had bought a share
of Cerner stock for $16 in
their 1986 IPO?
– Acquisitions – most of
Cerner’s growth was
indigenous, but they did
buy a few gems, eg:
– Growth – their amazing
growth in # of FTEs,
clients & employees…