US Department of Defense picks Cerner/Leidos/Accenture for $4.3 bn EHR

Breaking News Updated  The winner of the massive, potentially ten year contract for the Defense Healthcare Management System Modernization program is defense computer contractor Leidos, which brought in Cerner and Accenture Federal Systems.The DOD announcement mentions only lead contractor Leidos, interestingly under the US Navy Space and Naval Warfare Systems Command, San Diego, California. The announcement was released just after 5pm EDT today.

This combination beat the Epic/IBM and the Allscripts/Computer Sciences/HP bids. According to the DOD announcement, “This contract has a two-year initial ordering period, with two 3-year option periods, and a potential two-year award term, which, if awarded, would bring the total ordering period to 10 years. Work will be performed at locations throughout the United States and overseas. If all options are exercised, work is expected to be completed by September 2025. Fiscal 2015 Defense Health Program Research, Development, Test and Evaluation funds in the amount of $35,000,000 will be obligated at the time of award.” Modern Healthcare attended the embargoed press conference this morning and adds in its article that only one-third is fixed cost, with the remainder as ‘cost plus’, which could conceivably run the contract to the $4.33 bn ceiling over the 10 years. The system will be used in 55 military hospitals and 600 clinics, with an initial operational test as early as 2016 (Washington Post) and full rollout by 2023.  Interoperability with private EHR systems was a key requirement (Healthcare IT News).Over the 18 year life cycle, the contract value could be up to $9 bn, according to the WaPo.

The race to replace DOD’s AHLTA accelerated with the final failure to launch a plan to create a joint DOD-VA EHR in March 2013 [TTA 27 July 13], though hopes revived in Congress occasionally during the past two years [TTA 31 Mar].

It is also widely interpreted as a blow to Epic, which has been defensive of late about its willingness to play in the HIT Interoperability sandbox with other EHRs; certainly it cannot make Big Blue, which would undoubtedly have found some way to sell Watson into this, happy.

POLITICO’s Morning eHealth had many tart observations today, mostly pertaining to the belief of some observers that Cerner will be strapped in meeting this Federal commitment and would find it increasingly difficult to innovate in the private sector.

Example–From Micky Tripathi, CEO of the Massachusetts eHealth Collaborative: “My biggest worry isn’t that Cerner won’t deliver, it’s that DOD will suck the lifeblood out of the company by running its management ragged with endless overhead and dulling the innovative edge of its development teams. There is a tremendous amount of innovation going on in health IT right now. We need a well-performing Cerner in the private sector to keep pushing the innovation frontier. It’s not a coincidence that defense contractors don’t compete well in the private sector, and companies who do both shield their commercial business from their defense business to protect the former from the latter.”

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