How Cerner won the biggest EHR deal ever, twice

With the massive DoD EHR modernization project still getting off the ground, the company scoops up a complementary contract for the VA that may dwarf it in size.
By Mike Miliard
03:23 PM
Cerner DoD EHR

It's been almost two years since Cerner was awarded the most lucrative electronic health record contract in history by the U.S. Department of Defense. Now, as champagne pops in Kansas City celebrating its new U.S. Department of Veterans Affairs win, we remember what, for its time, was a pretty big deal.

On July 29, 2015, Cerner – along with bid partners Leidos and Accenture – secured the much-coveted DoD Healthcare Management System Modernization contract, more than two years after it was first announced in 2013.

The many months between had seen no shortage of jockeying from the biggest technology vendors in healthcare industry and beyond, with Cerner ultimately edging Epic/IBM and Allscripts/Computer Sciences Corp/Hewlett-Packard for the DHMSM contract. The prize? An initial payout of $4.3 billion, perhaps increasing to $9 billion by the end of the contract.

It's a massive deal in more than its price: Cerner is still piloting what's become known as the MHS Genesis system at Fairchild Air Force Base in Spokane, Washington, but the system rollout will ultimately expand to impact more than 204,000 health professionals at 1,230 locations, serving 9.5 million patients in 16 countries worldwide.

The contract price for the new VA deal has yet to be set. In announcing the deal on June 5, VA Secretary David Shulkin, MD, said he expects a three-to-six-month process during which the agency will develop "both the implementation plans and the cost of this system." 

Will the price tag exceed Cerner's $4.3 billion DoD contract? 

"I would love to do it for less, but I think that would be unrealistic," said Shulkin. "We have not agreed upon any pricing but I can assure you that before we were to sign off on a contract, we are going to make sure that this is the best value for taxpayers."

As those numbers get tabulated, we look back at our years-long coverage of what – for a moment, at least – was the largest EHR deal in history.

DoD to go to market for its EHR (May 22, 2013)

Then-Secretary of Defense Chuck Hagel told Under Secretary of Defense for Acquisition, Technology and Logistics Frank Kendall to start looking for a commercial, off-the-shelf EHR product to replace the Defense Department's self-developed Armed Forces Health Longitudinal Technology Application (AHLTA) system. 

"I am convinced that a competitive process is the optimal way to ensure we select the best value solution for DoD," Hagel said.

DoD EHR modernization set to rock marketplace (July 24, 2015)

After more than two years, during which many of the biggest names in technology teamed up, jockeyed for position and sometimes dropped out (a Medsphere/PwC/Google team was once in the mix, as was one from InterSystems), speculation over what was expected to be an $11 billion contract was at fever pitch.

The sheer size of the project suggested its gravitational force would extend beyond DoD to affect the rest of healthcare – including, ideally, an advance in interoperability and information sharing industry-wide.

DoD awards Cerner, Leidos, Accenture EHR contract (July 29, 2015)

At last, the big day had arrived. One of the biggest surprises was the adjusted overall price tag for the massive project – a total of $9 billion, down 20 percent from the initial estimates. "We feel comfortable that we made a good source selection. Costs are coming in lower than our estimates," said Kendall. "Competition has worked for us."

"Today is just the beginning," added Chris Miller, program executive officer, DoD Healthcare Management Systems Modernization and Integrated Electronic Health Records. "Now the hard part is going to start." 

Cerner data sharing may have been difference-maker (July 30, 2015) 

Cerner's reputation in recent years has been one of supporting interoperability – at least, that is, in comparison to its chief competitor Epic, which felt compelled in 2015 to hire a lobbyist to help counter the narrative that it doesn't play well with others.

"Cerner’s demonstration of wide-ranging provider interoperability on multiple, different platforms were the huge differentiator over Epic’s garden-walled methodology to system user data sharing," said Doug Brown, managing partner of Black Book.

7 things DoD sought in Cerner EHR (August 4, 2015)

Indeed, interoperability, customizability and cybersecurity were among Cerner's biggest selling points.

So was training, said Miller: "Over 25 percent of the contract goes to training users and clinicians," he said. "An EHR is not just a simple piece of software."

CIOs 'surprised' at Cerner DoD win (July 31, 2015)

"I really thought it was going to Epic because they seem to be winning everything," said one private-sector hospital CIO. Another shared the sentiment, but added: "I don’t think it is a bad choice. Overall, they wouldn’t have gone wrong with either." 

The good, the bad and the ugly: social media's response (July 30, 2015)

One Twitter user wondered whether a project of this size and scope might soon echo the horribly bungled rollout of the UK's massive NHS modernization initiative: "Sorry, Epic, you lost the DoD contract," he tweeted. "Sorry, Cerner, you won the DoD contract. #GhostOfNHS" 

Cerner rides high with DoD deal (August 5, 2015)

But Cerner President Zane Burke was confident in his company's ability to keep many balls in the air at once. "We believe this is a positive development for our clients, and they should have confidence that Cerner will continue to execute to meet all of our current and future commitments." The DoD contract "is big and complex and hard, but it's not new to Cerner to do big and complex and hard projects," he added.

Is $9B Cerner deal good for DoD (July 30, 2015)

Some expressed concerns that by choosing single-platform technology, and eschewing open-source or cloud-based products, the DoD was needlessly hemming itself in for the future. One report said the military needed an EHR that's "extensible, flexible and easy to safely modify and upgrade as technology improves and interoperability demands evolve," and feared the choice of a "single commercial 'winner,' closed and proprietary, will inevitably lead to vendor lock and health data isolation."

What will DoD-Cerner mean for EHR ROI? (September 2, 2015) 

Nonetheless, IDC Health Insights thought the DoD deal would have ripples across the rest of the healthcare IT industry. The contract was a bellwether – ending a the incentive-driven post-meaningful use period of "open-ended and premium pricing" for EHR systems. From here on in, the report argues, most IT investments will be driven by considered calculation of business value: "For buyers of EHR technology, the DoD award outcome focuses attention on the ROI of EHRs and increases the expectations placed on all EHR suppliers in the market."

DoD gives Cerner EHR implementation a name: MHS Genesis (April 8, 2016)

"The meaning of 'genesis' is the origin or process of origin," said DoD officials, noting that the Cerner rollout represents "the initial stage of the developmental process of building and implementing an electronic health record by organizing the critical medical and business administrative data needed to provide quality and safe medical care."

It's a "new beginning," enabling a process for "providing greater population health data, tracking, and alerting capabilities, enabling healthcare professional to more easily monitor beneficiaries' health status and encourage healthy behaviors."

Cerner ups the cost of hosting MHS Genesis data center for Defense Department's new EHR (July 8, 2016) 

A year into the project, Cerner surprised some observers by upping the cost of hosting the data center from the initial $50 million estimate up closer to $75 million. DoD responded by saying that it might reopen bids for the data center portion of the broader DHMSM contract.

DoD delays Cerner EHR modernization (September 1, 2016)

Originally scheduled to launch in December 2016, the Department of Defense said it would push back its first pilot go-live by at least a few months. "During the testing of the system, we identified the need for more time before initial deployment to ensure we are providing the best possible user experience to our beneficiaries and health care providers,” DoD Program Executive Officer Stacy Cummings said in a statement. “We collaborated closely with our vendor, the Leidos Partnership for Defense Health, to make the best overall decision for the successful deployment of MHS Genesis.”

DoD quietly rolls out EHR pilot MHS Genesis at Fairchild Air Force Base (February 9, 2017)

Thankfully, a few months was, in fact, a few months: DoD launched a slightly scaled-back rollout in early 2017 at Fairchild AFB in Spokane. "Providers at Fairchild are treating patients while the government and contractor team are quickly implementing fixes to issues as they are identified," said Cummings. The next rollout is slated for June 2017 at the Oak Harbor Naval Hospital in Ault Field, Washington.

Twitter: @MikeMiliardHITN
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