Why are strategic owners and Private Equity exiting the Electronic Health Records market?

Nelson Advisors
7 hours ago
11 min read

Analysis of Strategic Divestitures and Private Equity Shifts in the Global Electronic Health Record Market

The global Electronic Health Record (EHR) market is currently undergoing a transformative period of "Industrial Maturity," characterised by a significant realignment of capital among strategic owners and a tactical shift in private equity investment.

This "Great Rationalisation" is being driven by a convergence of high-intensity capital requirements for artificial intelligence infrastructure, shifting domestic reimbursement landscapes, and a "Regulatory Darwinism" that has substantially increased the cost of market participation.

In the United States and Europe, the retreat of diversified conglomerates such as Oracle Corporation and UnitedHealth Group from the EHR space, contrasted with the specialised "taking-private" manoeuvres of firms like CVC Capital Partners, reveals a market bifurcating between enterprise dominance and vertical specialisation.

The Oracle-Cerner Divestiture: Financing the AI Frontier through Strategic Sacrifice

The reported exploration of a sale for Oracle Health, formerly Cerner, represents one of the most significant strategic reversals in the history of healthcare technology. Having acquired Cerner for $28.3 Billion in June 2022 to pivot toward a healthcare centric data ecosystem, Oracle is now faced with a liquidity crunch driven by the astronomical capital expenditures required to dominate the generative artificial intelligence sector.

The primary driver for this potential divestiture is a five-year, $300 Billion contract with OpenAI, which necessitates an estimated $156 billion in capital spending for GPUs and infrastructure—a burden that has caused significant trepidation among U.S. debt investors.

The Financial Mechanics of the OpenAI Infrastructure Pivot

Oracle’s commitment to building a significant amount of new AI compute capacity by late 2026 has fundamentally altered its balance sheet priorities. The company is currently building data centers not only for OpenAI but also for Meta and Nvidia, bringing its total Remaining Performance Obligation (RPO) to an unprecedented $523 billion.

To finance this "AI beast," Oracle has reportedly begun requiring 40% upfront deposits from new infrastructure customers and is evaluating the sale of its health tech unit to inject a massive lump sum of liquidity. This move is intended to allow Oracle to service its debt without tapping an increasingly skeptical bond market, where credit default swap (CDS) spreads have tripled in recent months.

Oracle Financial and Infrastructure Metrics (2026 Forecast)	Value / Metric
OpenAI Five-Year Contract Value	$300 Billion
Total Remaining Performance Obligation (RPO)	$523 Billion
Projected Capital Expenditure for AI Infrastructure	$156 Billion
Potential Jobs Impacted by Oracle Health RIF	20,000 – 30,000
Annual Cash Flow Savings from Workforce Reduction	$8 – $10 Billion

The desperation for liquidity is further evidenced by Oracle’s shifting financing strategies. As U.S. banks pull back from lending on data center projects, Oracle has sought more expensive capital from Asian lenders while exploring "Bring Your Own Chip" (BYOC) arrangements to move hardware expenses off its books. In this context, the healthcare strategy, once a linchpin for CEO Larry Ellison, is being sacrificed to feed the immediate capital needs of the AI buildout. The "data milk" has arguably been extracted, and Oracle appears ready to sell the "cow" now that its condition has deteriorated.

Competitive Erosion and the Epic Monopoly

The external competitive landscape has made the retention of Cerner even less attractive for Oracle. Data from the 2025 KLAS Research report indicates a steady migration of large health systems toward Epic Systems, which added a net 176 acute care multispecialty hospitals in 2024 alone. Conversely, Oracle Health suffered a net loss of 74 hospitals during the same period, with prominent systems like Intermountain Health, UPMC, and Henry Ford Health exiting the platform.

Customer dissatisfaction has peaked, with only 47% of interviewed clients viewing Oracle as a long-term partner in early 2025, a significant decline from 67% at the time of the acquisition. The loss of prestige accounts and the struggle with federal implementations, such as the Department of Veterans Affairs (VA) rollout, have dampened the asset's valuation and strategic utility.

UnitedHealth Group and the Optum UK Divestiture: Domestic Margin Recovery and Portfolio Pruning

The move by UnitedHealth Group (UHG) to divest its Optum UK business, including the EMIS electronic patient record platform, mirrors a broader strategic retreat from international healthcare IT markets. This decision is driven by severe margin compression in the U.S. insurance market and a need to refocus on core value-based care initiatives following a turbulent 2025.

Margin Compression in the Medicare Advantage Sector

UnitedHealth’s operating margin at its insurance arm plummeted from 5.2% in 2024 to 2.7% in 2025, primarily due to changes in Medicare funding, the effects of the Inflation Reduction Act, and escalating medical costs. The company expects to lose between 1.3 million and 1.4 million Medicare Advantage members in 2026 as it prioritises margin recovery over membership volume, a disciplined pricing approach necessitated by the current cost environment.

UnitedHealth Group Financial and Membership Outlook (2026)	Projected Value
Total Projected Membership Decline	2.3M – 2.8M
Medicare Advantage Membership Loss	1.3M – 1.4M
Projected Medical Loss Ratio (MLR)	88.8%
Optum Health Risk-Based Membership Reduction	~15%
Operating Margin Recovery Goal (by 2027)	Return to historical range

The fiscal strain is exacerbated by the 2024 Change Healthcare cyberattack, which forced Optum to refocus on regaining customer trust and stabilising its domestic claims processing infrastructure. In this environment, the management of EMIS, the largest supplier of GP IT systems in England, is viewed as a non-core distraction.

Despite EMIS being used by more than 4,000 GP practices, the ongoing regulatory scrutiny and the emergence of new competition in the UK market, such as Medicus Health, have reduced the attractiveness of the international footprint.

The TPG Acquisition and the PE Buy-and-Build Logic

The acquisition of Optum UK by TPG, valued at between £1.2 Billion and £1.4 Billion, exemplifies the private equity appetite for healthcare software assets with "sticky" customer bases and long-term contracts. TPG’s intent to combine Optum UK with Nextech, a U.S.-based EMR provider, follows a classic "buy-and-build" strategy designed to achieve synergies through technological integration and expanded market reach.

Private equity firms are increasingly targeting these specialised platforms because they offer predictable, Medicaid-funded or government-funded revenue streams that are relatively recession-proof.

CompuGroup Medical and the Shift to Private Ownership

The partnership between CompuGroup Medical (CGM) and CVC Capital Partners represents a counter-cyclical trend where private equity is used to take public healthcare IT companies private to facilitate long-term, capital-intensive R&D.

The delisting of CGM from the Frankfurt Stock Exchange in June 2025 was a strategic move to insulate the company from short-term market volatility and the ad-hoc disclosure obligations of public listings.

The Rationale for Delisting and Long Term Innovation

Under the stewardship of CVC, which now holds a 27.78% stake alongside the founding Gotthardt family’s 50.12%, CGM is focusing on its "Success Story" next chapter: the implementation of cloud-based and AI-driven solutions.

The high cost of compliance with the European Health Data Space (EHDS) and the requirement for "Glass Box" AI interpretability under the EU AI Act make it difficult for public companies to sustain the necessary investment levels without punishing their quarterly earnings.

CGM Financial and Ownership Structure (2025)	Detail
CVC Capital Partners Ownership Stake	27.78%
Gotthardt Family Majority Stake	50.12%
Delisting Offer Price per Share	€22.00
2024 Reported Revenues	EUR 1.15 Billion
Syndicated Financing Package	EUR 1.5 Billion

CGM’s strategy is heavily reliant on expansion initiatives, including the French government’s "Segur" initiative, which stimulates the adoption of digital health solutions. By operating as a private entity, CGM can leverage its €1.5 Billion financing to acquire specialised firms like Ehrmedbilling, strengthening its revenue cycle management capabilities without the immediate pressure of public analyst scrutiny.

System C and the Vertical Specialisation Play

CVC’s role in the EHR market is further illuminated by its portfolio company, System C Healthcare, which has pursued a strategy of specialised vertical expansion. The acquisition of MYP Technologies in August 2025 allows System C to dominate the disability, allied health, and aged care sectors in Australia and the UK. This move highlights a shift in private equity interest away from the "red ocean" of general acute care EHRs toward niche sectors with high clinical complexity and protocol-driven workflows.

System C is part of CVC’s dedicated healthcare division, which has deployed more than €6 Billion since 2017. The investment firm views these platforms as "long-term custodians" of health data, focusing on "unsexy" backend infrastructure, the "plumbing" of healthcare that enables interoperability. This strategy capitalises on the growing demand for home based care and the move toward value-based reimbursement in specialised medicine.

Regulatory Darwinism: The Compliance Bottleneck as an Exit Driver

A primary driver for the exit of strategic owners is the escalating cost of compliance with new federal and international regulations. In both the U.S. and Europe, regulatory status has become a critical metric for valuation, surpassing traditional growth metrics like Annual Recurring Revenue (ARR).

The European Health Data Space (EHDS) Mandate

The EHDS Regulation (EU 2025/327) establishes a comprehensive framework for health data exchange, requiring EHR manufacturers to certify their compliance with mandatory interoperability standards.

Organisations must ensure that all electronic health data is maintained in structured formats to facilitate both primary care and secondary use for research.The technical requirements, including data cataloging, anonymisation, and managing patient opt-out selections, represent a significant capital burden.

Key European Regulatory Deadlines (2026)	Impact on EHR Vendors
EU Medical Device Regulation (MDR)	Class III compliance for custom devices by May 26
EU AI Act Enforcement	Stringent governance for "high-risk" medical AI by March
EUDAMED Mandatory Usage	Mandatory device database usage by May 28
EHDS Interoperability Compliance	Mandatory certification for EU market access

The 21st Century Cures Act and Information Blocking

In the U.S., the 21st Century Cures Act and the ONC's latest Health Data, Technology and Interoperability (HTI-1) rule have raised the bar for EHR technology. Vendors must accommodate USCDI v3 data using FHIR US Core profiles by January 1, 2026.

The penalties for "Information Blocking" are severe: hospitals risk losing 75% of their Medicare annual payment updates, while physician practices could receive a zero score in the Promoting Interoperability category of MIPS.

These regulations have created a "Compliance Moat." Smaller vendors and legacy systems, unable to absorb the high cost of continuous updates, are being ruthlessly eliminated. Strategic owners like Oracle and UnitedHealth, faced with the choice of investing billions in compliance for legacy platforms or deploying that capital into high-growth AI or insurance segments, are opting for the latter.

The Technological Inflection Point: AI and the Cloud Migration Crisis

The global EHR market is shifting from "systems of record" to "clinical operating systems" that leverage AI to reduce administrative burden. However, the cost of this transition is prohibitive for many existing players.

The High Cost of Modernisation

Migration from expensive on-premises infrastructure to cloud-based platforms typically costs between $500,000 and $5 Million depending on organisation size. Large scale implementations, such as those reported by iCare.com, can reach upwards of $300 Million.

For vendors, the "Hidden Costs" of maintaining legacy infrastructure, ranging from security patches to SOC 2 compliance, often exceed visible budgets by 40–60%.

EHR Implementation and Training Cost Components	Estimated Cost Range (US $)
Implementation (Solo Practice)	$15,000 – $100,000
Implementation (Mid-Sized Clinic)	$65,000 – $200,000
Hospital / Enterprise Implementation	$200,000 – $300,000,000+
Data Migration (Legacy to New System)	$20,000 – $50,000
Staff Training (Per Employee)	$1,000 – $5,000

The industry is currently rewarding "AI-native" platforms that achieve an ARR per FTE of $500,000 to $1 Million. Legacy systems that require manual workflows are no longer scalable, and the cost of re-engineering these platforms for ambient listening and automated order creation is a primary reason strategic owners are seeking an exit. The "Regulatory Darwinism" ensures that only those who can afford "Glass Box" interpretability and real-time data fluidity will survive.

The "Epic Effect" and Market Stagnation

The dominance of Epic Systems has created a winner-take-all dynamic in the U.S. acute care market. With a 42.3% hospital market share and 54.9% bed coverage, Epic has set the standard for interoperability through its "Care Everywhere" network.

Rival vendors like Meditech and Oracle Health have struggled to match Epic's reputation for customer partnership and follow-through. In 2024, acute care EHR purchases declined overall, as health systems became increasingly cautious about large-scale capital investments, further squeezing the revenue potential for secondary players.

Regional Divergence: The "American Accent" in European HealthTech

While strategic owners are exiting, the European market is seeing a surge in late-stage deals funded by U.S. investors. In 2025, U.S. investors participated in 62% of European late-stage digital health deals, triple the rate of 2023. This "American Accent" in European deal flow is driven by the fact that European ventures often have deeper clinical validation, making them "de-risked innovation" targets for U.S. market entry.

However, the European ecosystem remains fragmented, with go-to-market cycles slowed by 27 distinct regulatory environments. Private equity firms are navigating this by focusing on "Buy-and-Build" strategies that consolidate fragmented regional assets into larger pan-European platforms. These platforms can eventually be exited at significant premiums (12x–15x EBITDA) to U.S. strategics looking for immediate access to the European market without the regulatory risk.

European Digital Health Market Dynamics (2026 Forecast)	Value / Metric
Estimated Market Size	$113.94 Billion
Projected CAGR (2026–2031)	17.85%
US Participation in Late-Stage Deals	62%
Average Late-Stage Deal Size Increase	4.1x
Cloud-Based Delivery Market Share	56.90%

Strategic Refocusing and the Value Based Care Pivot

For firms like UnitedHealth, the decision to exit the UK EHR market is also a reflection of a refocusing on the "original intent" of the value-based care model. Optum Health has narrowed its provider network by 20% over the past year, walking away from risk-sharing deals where viable terms could not be reached. The company is prioritising high-performing, employed, or contractually dedicated physicians who are fully aligned with quality outcomes over volume.

This internal consolidation requires massive investment in proprietary data analytics and ambient AI within the domestic U.S. market. UnitedHealth plans to invest nearly $1.5 Billion in AI and related technologies in 2026 alone to regain customers lost after the Change Healthcare attack. In this context, the maintenance of an international EHR platform like EMIS is an unnecessary drain on capital and management bandwidth.

The Return on Investment (ROI) and the Break-Even Reality

As organisations evaluate their technology budgets for 2026, the ROI of EHR systems is being scrutinized with unprecedented rigour. While returns are often indirect, stemming from reduced administrative chart-time and fewer regulatory fines, the breakeven period for these multi-million dollar investments is stretching.

The financial success of healthcare providers is increasingly tied to their ability to demonstrate clinical ROI through ambient AI. Vendors like RXNT are positioning themselves as "value leaders" with transparent, low-cost pricing ($118/month) to attract budget-conscious practices that are being priced out of enterprise systems. This fragmentation at the lower end of the market provides another exit signal for large strategics who are unable to compete on price with lean, AI-native startups.

Conclusion: The Great Rationalisation as a Market Corrective

The mass exit of strategic owners and the shift in private equity behaviour in the EHR market is a natural consequence of the "Great Rationalisation." The speculative fragmentation of the early 2020s, fuelled by easy capital and pandemic-era telehealth booms, has been replaced by a disciplined era of "Industrial Maturity".

For Oracle, the necessity of funding a $156 Billion AI buildout has made the $28 Billion Cerner acquisition a luxury it can no longer afford. For UnitedHealth, the need to protect its 2.7% insurance margins in the face of Medicare Advantage headwinds has necessitated a retreat to its domestic U.S. moat. For CompuGroup Medical and System C, the shift to private ownership allows for the patient, long-term investment required to survive "Regulatory Darwinism" and build the "Glass Box" AI tools of the future.

The market is no longer interested in "vision"; it is interested in durable adoption, defendable distribution, and clinical evidence. As the EHR market continues to consolidate, the remaining players will be those who can navigate the complex "plumbing" of global health data space while delivering measurable improvements in clinician efficiency and patient outcomes.

The exits of 2025 and 2026 are not a sign of failure, but a strategic repositioning toward the next frontier of healthcare technology: the AI-native, cloud-resident clinical operating system.

Nelson Advisors > European MedTech and HealthTech Investment Banking

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