Chutes, and chutes: Microsoft’s $3B Oracle cloud leasing deal goes sideways, Defense Health Agency to replace Leidos as system integrator for MHS’ EHR, Centene offering voluntary buyouts to most employees

June 19, 2026 | by

While SpaceX has debuted to well over a $2.3 trillion (that’s with a T) market cap, it seems that even giant companies are still facing expensive headwinds.

The Microsoft-Oracle cloud deal has gone sideways, if not entirely off. Microsoft’s goal was to lease space on Oracle Cloud Infrastructure (OCI) to expand its capacity and to move some of its workloads there. Microsoft Azure would be prioritized for customers. The problem was that Oracle’s public cloud infrastructure does not have the Federal Risk and Authorization Management Program (FedRAMP) security framework that Microsoft needed for some of these workloads, and Oracle was not willing to add it. OCI does have a FedRAMP framework for its Federal Government work. A source for the Business Insider article said that it was potentially worth up to $3 billion. BI’s source within Oracle said that adding FedRAMP to the public OCI would be a “massive engineering lift”.

To Reuters and to Business Insider, an Oracle spokesperson swiftly responded that the report was “inaccurate” but did not specify the inaccuracies, and that the two companies continue to have “a  tremendously collaborative and fruitful partnership.”–a statement which can be read as a non-denial.

It highlights a shortage of computing capacity in cloud services, where Microsoft and other companies are scratching for more data center bandwidth, and turning to competitors to lease. Microsoft already leases capacity from Amazon for its GitHub code development business and is searching for more. Amazon and Google’s public clouds have FedRAMP and seem like logical alternatives if they have spare capacity. Google alone signed a $920 million per month deal with SpaceX for AI compute capacity that extends from October 2026 to June 2029. SpaceX also has a similar deal with Anthropic.

Oracle could certainly have used the cash flow.

The Defense Health Agency (DHA) will be transitioning away from Leidos as the lead systems integrator for the Military Health System (MHS) EHR and related systems by July 2027.  MHS GENESIS originated from the 2015 EHR contract award to the Leidos Partnership for Defense Health, with Cerner (now Oracle Health) for the EHR and Accenture as members. Leidos served as the lead systems integrator to onboard all the parts of the entire MHS GENESIS system, which grew to include Henry Schein for dental records, Philips North America for tele-critical care, Amwell for telehealth, and Solventum Health Information Systems (formerly 3M) for clinical documentation and coding.

Now that it is fully implemented, DHA will take over the integration role, transitioning Philips and Amwell away from Leidos by the end of this July, Oracle Health by November, and both Schein and Solventum by July 2027. Reasons cited on DHA’s SAM.gov notice were “reduced cost transparency, duplicative layers of management and administration, limited government visibility into pricing structures, and constraints on the government’s ability to directly manage performance and enforce service level agreements.”

While Leidos issued an emollient statement that they hoped to remain working with the DHA, this definitive and apparently drastic move indicates DHA unhappiness with the structure and a desire to directly establish relationships with the vendors as sole-source contractors. Unhappily for Leidos, it has affected its market value and how analysts view its future position in the Federal health IT market. Washington Technology (PDF of article), Yahoo Finance  Hat tip to a Reader who wishes to remain anonymous

Major health insurer Centene is offering voluntary buyouts to most employees through a Voluntary Separation Plan (VSP). The insurer currently employs 61,000 people across multiple plans. It is both the largest state Medicaid (12.4 million members) and Affordable Care Act (ACA, 3.5 million members) marketplace provider. But its memberships in both are shrinking. As of March, Medicaid membership was down 4% and ACA membership was down a stunning 54% (2 million members). The latter drop is puzzling, since insurers have exited or cut back on their ACA Marketplace plans, notably Aetna for this year and Cigna after this year.

ACA plans are offered on a state, then county-availability level. 2026 is the first time since 2018 that the average number of insurers participating in the ACA marketplaces has dropped, according to KFF cited in MedCity News. The ACA premium tax credit subsidies expired at the end of 2025, effectively causing premiums to double for nearly everyone. Many members dropped out of exchanges; those who remained were sicker (higher risk) and in lower-level plans that cost less in premiums. Centene also expects that its ACA membership will fall by another 40% by the end of 2026, per their company statement at a Barclays conference in March. CNBC

While Centene has grown membership in other plans, such as employer-sponsored plans and Medicare prescription drug plans (PDP), its total membership has decreased.  Centene currently has almost 26.3 million at-risk members, down from 27.9 million in the prior year, a 6% decline. Yet revenue is projected to remain relatively flat, with a forecast of about $189.5 billion at the midpoint of 2026, a decline of roughly 3% from 2025. Share price has recovered from last year’s nadir by over 50%

According to (paywalled) Bloomberg News (quoted in Insurance Business), “a [Centene] spokesperson did not specify how far Centene intends to shrink its headcount, but said layoffs could follow if the company fails to reach its target through voluntary departures.” In her message to staff last Monday, CEO Sarah London wrote, “When our membership shifts, we need to shift our organization accordingly.” To Healthcare Dive, a spokesperson said that “Centene is positioning the company to lead the future of healthcare — working to deliver a simpler and better experience for our members and partners while meeting the realities of today’s healthcare environment.” 

Now what could that mean? That “shift” in London’s terms requires a repositioning and further reorganizations. Those have not been disclosed or even hinted at–yet.  Certainly, that will be a subject at Centene’s Q2 earnings call in July for investors and shareholders.

In this Editor’s view, rarely does shrinking to profitability work except as an interim strategy to stem losses. Because health plans operate on an annual basis, and enrollment periods start up in the fall, it’s likely that changes won’t be disclosed until then, though internal reorganizations will start to happen. It is hard to operate plans on a ‘bare bones’ basis for long, the nature of the health plan ‘beast’. Lack of service and low customer satisfaction affect vital quality ratings such as STAR (CMS) and HEDIS (NCQA), which influence both CMS payments and plan buyers.

This leads to other alternatives that may be open to Centene. The company could be acquired, broken up, or the larger plans spun off.

  • A full sale presents regulatory and Federal antitrust problems to any plan, and would take a long time for approval both at the state and Federal level. Perhaps longer than Centene can afford.
  • Payers aren’t attractive to private equity except on a hit-and-run basis. Politan Capital, since its major moves to reorganize Centene in 2022-23 after accumulating $900 million in shares, is now down to $70 million.
  • What might be faster: selling off individual or groups of plans to a smaller company such as Molina, or to larger Cigna (once rumored as an acquirer, now divesting whole lines of business), Elevance, or Humana. Centene has always been a ‘family of brands’ such as Wellcare and HealthNet, and the Centene ‘brand’ is nonexistent.

It cannot be emphasized enough that Federal antitrust and the states present significant regulatory barriers on all these alternatives. The plans are what is left to sell. Centene has already sold off most, if not all, of its non-plan management services, such as Magellan and the Collaborative Health Systems ACO/MSO, to generate cash after the Politan Capital-led reorganization.

Another factor: at the state and Federal levels, since ACA, Medicaid. and Medicare Advantage plans are funded and approved by them, eventually the layoffs will attract attention and questions by CMS and state departments of banking and insurance (DOBIs). The VSP may be a way to get around them.

Details for the VSP, eligibility as a % of the workforce, and acceptance goal numbers have not been publicly disclosed. Employee posting sites such as The Layoff and on Reddit indicate that the ‘bonus’ for signing the agreement is an additional four weeks on a package based on your tenure by service years and grade level, plus paid-for COBRA and outplacement. The consensus in the comments is that the information provided to eligible employees is somewhat vague. The word “estimated” is used in terms of the buyout. In addition, ‘eligibility’ apparently does not guarantee that the applicant will be accepted for the VSP (an exit date mentioned is 1 September) nor that an involuntary layoff for a lesser package will take place before then. Recent hires with tenure under two years apparently are not eligible. Opt-out date is 2 July. Unsurprisingly, a third-party administrator has by reports been brought in for this. For employees, another consideration is that accepting a voluntary separation means that in many states, it is treated as ‘quitting’ and you are ineligible for unemployment payment. Most on these boards believe that involuntary layoffs will happen anyway.

It is certainly a difficult decision to make for most people. Best wishes from this Editor to everyone. The impact on healthcare is not going to be subtle, which is why this is discussed at length. (Disclosure: this Editor was briefly a Centene employee after the company she worked for, WellCare Health Plans, was bought by Centene. She is a holder of Centene stock converted from her prior company. The above is strictly her opinion and protected speech, and should not be used as investment advice.)

Week-end short takes: payer earnings for Centene, Cigna, Humana; Centene and Walmart partner in FL; Dispatch Health and US Acute Care partner; Amwell widens loss; ProMedica $710M home health sale; AQuity’s $200M sale to IKS Health (updated)

November 2, 2023 | by

On the payer side, buyers of telehealth are trying maintain course:

Challenged Centene beat Wall Street estimates, but clouds loom. For Q3 they reported $38 billion in revenue, but year-over-year profit of $469 million was down 36%. 2014 forecast earnings were already downgraded. Centene is heavily dependent, as some other payers are, on state Medicaid. New Federal guidelines are ending the automatic eligibility redeterminations that took effect during the Covid pandemic. 2024 redeterminations may take millions more off the rolls, though many requalify. The payer contracts with 31 states to offer Medicaid coverage and has lost 1.1 million Medicaid members over redeterminations to date. Their Medicare Advantage (MA) plans were also hit in 2023 with low Star ratings, which reduce desirability and payment status with CMS, but recovered for 2024 with 87% over 3 stars (the minimum) compared to 53%. Layoffs also have bitten into Centene with a known layoff of 2,000 this summer, plus another unannounced layoff terminating staff in December, according to this Editor’s source. Healthcare Dive  Update: Centene is terminating 2,000, or about 3% of workforce, with an end date of 8 December. Becker’s Payer

Cigna also beat Wall Street estimates in a generally upbeat forecast. For Q3, they reported revenue of $49 billion, up 8% year over year. Net income was down 50% to $1.4 billion but understandably as Cigna sold businesses in six countries. Membership are up 9% year over year to $19.6 billion, mostly due to commercial membership. Cigna has little exposure to ACA business, but that grew as well and margins are improving. Healthcare Dive 

Humana saw increased Q3 utilization in its MA plans plus increased Covid hospitalization. This helped to drive its medical loss ratio (MLR) up for 2023. While beating the Street on revenue of $26.4 billion and profit of $1.1 billion and with projected MA growth MA of 19%, or about 860,000 members plus 2024 of 45,000, shares went a bit wobbly. In Star ratings, they did well and maintained a 4.5 Star (out of 5) in its largest contract with 40% of its MA members while the second largest contract improved from 4.5 to 5 stars. Healthcare Dive

A brighter spot for Centene is a partnership with Walmart in Florida on ACA plans. Ambetter from Sunshine Health in Florida is adding Walmart Health Centers to its preferred provider network. This will cover seven counties and focus on care coordination and referral management. Walmart is also working with Orlando Health, a private, not-for-profit network of community and specialty hospitals across Florida, to improve care coordination in the Orlando area initially. Walmart release, Becker’s

In partnerships, Dispatch Health announced today (2 Nov) that will be working with US Acute Care Solutions (USACS) to offer additional support for patients after a hospital stay or when they need hospital-to-home alternative care. Dispatch Health offers same-day, urgent medical care; hospital alternative care; and recovery care. USACS is owned by its physicians and hospital system partners for integrated acute care, including emergency medicine, hospitalist, and critical care services. Dispatch Health release

Back to Big Telehealth, Amwell didn’t have a good quarter. Their net loss of $137.1 million was up 94% year-over-year. This quarter included $78.9 million in impairment charges linked to sustained decreases in its share price and market capitalization. So far in 2023, these impairments have totaled $436.5 million. Another hit was that revenue declined 11% year over year to $61.9 million. Amwell is working to complete the transition of its customers to Converge. On the positive but very long term side, Amwell is partnering with the Leidos Partnership for Defense Health (LPDH) with the US Defense Health Agency as part of the Digital First initiative for the Military Health System (MHS). This will replace the MHS Video Connect system with Amwell Converge, a “comprehensive hybrid care enablement platform designed to power the full continuum of care using digital, virtual, and automated modalities”, and link to MHS GENESIS, the Oracle Cerner EHR. The contract may be worth up to $180 million over 22 months in a prolonged rollout. Healthcare Dive, Amwell release

In sale news, some big numbers are posting:

Ohio-based 12-hospital system ProMedica is selling its home health, palliative and hospice business to Atlanta-based Gentiva Health Services for a tidy $710 million. Gentiva is the largest hospice care company in the US. 4,000 employees will be transitioning. The hospice operations will go under the Heartland Hospice brand by the end of 2023, with home health also joining Heartland Home Health and the palliative care business under Empatia Palliative Care brand between the end of this year and 2024. Becker’s

AQuity selling to IKS Health for $200 million. The sale will add AQuity’s medical-coding, clinical-documentation and revenue-support capabilities to IKS’ technology-backed care enablement platform. This creates a $330 million company with a 14,000 person workforce that includes 1,500 clinicians, 350 medical coders, technology experts, clinical documentation specialists, and revenue integrity specialists. Another example of a larger trend in companies acquiring specific companies to build out their platforms and become more ‘one-stop shopping’, a more attractive proposition at least for now to VCs. Mobihealthnews. More discussion on why VCs are no longer hot on niche or point solutions in MedCityNews.

Rounding up the week-end: Oracle Cerner layoffs hit 500+ in VA, DoD groups (updated); AWS cash cow stumbles; Transcarent-ViewFi team on virtual MSK; Veradigm delays annual, quarterly reports again; Olive AI sells BI to BurstIQ

June 16, 2023 | by

Oracle, which already laid off 3,000 since its Cerner acquisition and dumped its real estate, is proceeding with more layoffs in Cerner groups serving the Federal government, specifically DoD and VA. According to the Reddit group r/cernercorporation on this thread, the layoffs hit broadly within the Federal teams: VA and DoD professional services, Federal care delivery, Federal change management, support service owners, and consulting. The number is at least 500 but may be more. The severance package is four weeks plus an additional week for every year of service plus unused vacation with the layoff date 30 June. Offers made to start for new hires have been rescinded. This has fueled speculation that Oracle Cerner may start to wash its hands of the just-renewed VA EHR implementation by outsourcing most of it. There is precedent for this: Cerner partnered with Leidos for the DoD implementation from the start and Oracle Cerner brought in Accenture for training in February. Of course, the all-heart Mr. Market liked the layoff news coupled with Oracle’s Q4 ending 31 May results of net income of $3.32 billion, a rise of 7% versus last year. CNBC  Oracle is now at a $342 billion valuation, a new high. HIStalk 16 June    

Updated 16 June: details remain sketchy but confirmation that layoffs are in the ‘hundreds’ Reuters, Becker’s, KC Business Journal (paywalled); the last posits from CEO Katz’s statement that this is only the first of many to come.   Further details on the Reddit group is that consultants were onsite at clients working on projects and go-lives when they received their layoffs, that 80% of departments were affected, and that the layoff may go over 1,000. 

Amazon Web Services’ business continues to slow, with the AWS cash cow’s growth slowing to half versus last year’s, with further decline expected this quarter. This Editor noted that market analysts at Seeking Alpha called it back in February when we looked at Amazon’s ability to spend cash so freely in healthcare, for example on OneMedical. Google and Microsoft have been tough competitors and while their growth is off too, they are starting with smaller pie slices. Companies are using more than one cloud provider in a ‘belt and suspenders’ approach; Gartner predicts that by 2026, more than 90% of businesses will use multiple providers, from 76% in 2020. AWS’ plans continue to build outside of the US, with a $12 billion investment in cloud infrastructure in India by 2030 as well as five data centers in Oregon due to a controversial $1 billion tax break. Google and Microsoft have also led in generative AI, while AWS has not. AP

Enterprise health navigator Transcarent has made another bid in the virtual health area. It’s a partnership with ViewFi, which helps MSK providers to diagnose and treat MSK injuries in real time. ViewFi providers are affiliated with the NYC-based Hospital for Special Surgery. The idea for ViewFi came from retired tennis champion Andy Roddick who, with his orthopedist Josh Dines, MD turned their bad experiences during the pandemic using FaceTime for virtual consults into a new platform. ViewFi’s platform now takes patients through an intro screener that records physical and mental health, through diagnosis and a recovery care plan with personalized diagnostic tests and exercises with real-time support from their health guides. For Transcarent-contracted companies, a ViewFi initial appointment can be set in as little as two days as opposed to the usual average of 17 days. Transcarent bought the virtual care platform developed by 98point6 in March. FierceHealthcare

We noted back in March and last month that Veradigm (the former Allscripts) had serious problems with their Q4 and FY 2022 reporting due to a software flaw (!) that affected its revenue reporting going back to 2021. Nasdaq has extended for the second time–from 14 June to 18 September–their 2022 annual 10-K filing and their 10-Q for the quarter ending 31 March 2023. Not filing the reports will mean delisting. Seeking Alpha

Olive AI’s reorganization continues [TTA 23 Feb], with data solutions company BurstIQ buying its business intelligence platform.  LifeGraph Intelligence uses AI tools such as natural language processing and machine learning to extract insights from clinical notes and EMR fields. The platform presents cost and clinical data in a meaningful way through cohort comparisons. According to an example on their website, it contributed to $90 million in savings for one health system. Acquisition cost and management transitions were not disclosed. BurstIQ release  Hat tip to HIStalk 16 June

VA says goodbye to VistA, hello to Cerner for new EHR–and possible impacts (updated)

June 7, 2017 | by

The new sheriff just turned the town upside down. Veterans Affairs’ new Secretary, Dr. David J. Shulkin, as expected moved quickly on the VA’s EHR modernization before the July 1 deadline, and moved to the same vendor that the Department of Defense (DoD) chose in 2015 for the Military Health System, Cerner. VA will adapt MHS GENESIS, based on Cerner Millenium. The rationale is seamless interoperability both with DoD and with private sector community providers and vendors, which base their services on commercial EHRs. The goal is to have one record for a service member through his or her lifetime and to eliminate the transition gap after discharge or retirement. (Transition gaps are also repeated when reservists or National Guard are called up for active duty then returned to their former status.) Another priority for VA is preventing the high rate of suicide among vulnerable veterans.

Updates: VA confirmed that Epic and Leidos will keep the development of the online medical appointment scheduling program, awarded in 2015 and currently in pilot, to be completed in 18 months. The contract is worth $624 million over five years. Wisconsin State Journal  The House Appropriations subcommittee on Veterans Affairs likes the Cerner EHR change. The Senate Veterans Affairs Committee is meeting Wednesday to discuss the VA budget sans the EHR transition. The EHR numbers are expected to be sooner rather than later. POLITICO Morning eHealth 

Dr. Shulkin is well acquainted with the extreme need for a modernized, interoperable system serving the Veterans Health Administration (VHA), having been on the US Senate Hot Grill for some years as Undersecretary of Health for VA. The foundation for the move from homegrown VistA to Cerner was laid last year during the prior Administration through an August RFI for a COTS (commercial off the shelf) EHR [TTA 12 Aug 16] and in later hearings. “Software development is not a core competency of VA” and it has been obvious in system breakdowns like scheduling, maintaining cybersecurity and the complex interoperability between two different systems. To move to Cerner immediately without a competition, which took DoD over two years, Dr. Shulkin used his authority to sign a “Determination and Findings” (D&F) which provides for a public health exception to the bidding process. The value of the Cerner contract will not be determined for several months.

For those sentimental about VistA, he acknowledged the pioneering role of the EHR back in the 1970s, but that calls for modernization started in 2000 with seven ‘blue ribbon’ commissions and innumerable Congressional hearings since. He understated the cost in the failed efforts on interoperability with DoD’s own AHLTA system, VA’s own effort at a new architecture, and modernizing the outpatient system. This Editor tallied these three alone at $3 billion in GAO’s reckoning [‘Pondering the Squandering’, TTA 27 July 13]. 

It is still going to take years to implement–no quick fixes in something this massive, despite the urgency.

  • Both MHS and VA will be running two systems at once for years (more…)

Cerner’s takeoff delayed on DOD’s new EHR, MHS Genesis

October 20, 2016 | by

The new $4.3 billion US Department of Defense EHR, jointly developed by Cerner and Leidos, has taken another delay from the aggressive rollout schedule set in April.  The original test start date was 6 December at the Fairchild Air Force Base hospital in Spokane, Washington (state) and the Oak Harbor Naval Hospital on Washington’s Whidbey Island. Back in early September, it was reported that it would be delayed by at least a few months for technical reasons (Federal News Radio and Healthcare IT News). The rara avis in the latter is a mention of major dental supplier Henry Schein–along with Accenture, they were part of the award, but very much a junior partner in providing the dental EHR. (Leidos release)

The latest update on the start of MHS Genesis is February 2017 for Fairchild AFB and June for Oak Harbor. Healthcare IT News

VA’s moves spell the end of the homegrown EHR

August 12, 2016 | by

The Veterans Health Administration (VHA) is formally reaching out to the private sector to explore switching from its current, pioneering EHR system, VistA (also referred to as CPRS, Computerized Patient Record System) to a commercial system. Their ‘feeler’ is an August 5 and 8 notice in FedBizOpps.gov titled 99–TAC-16-37877 * RFI – VHA supporting COTS EHR REQUEST FOR INFORMATION (RFI), Solicitation Number: VA11816N1486. This requests information on business support for transitioning to a commercial-off-the-shelf system (COTS–don’t governments love acronyms?–Ed.) and closes 26 August, which is not a lot of time even for an RFI.

VHA has been under extreme pressure from Congress to modernize its EHR, lately in July hearings before the Senate Appropriations Committee. EHR replacement is also in line with the Congressionally-mandated, now concluded Commission on Care’s recently published recommendations on a total, top-down reorganization of VHA, including a sweeping reorg of their HIT management. The VHA strategy appears to be that while they are walking down the road to replace VistA and have already spent to assess where they are with KLAS and other EHR consultancies (spending $160,000+ on surveys), they are essentially ‘kicking the can down the road’ to the next administration (POLITICO’s Morning eHealth, 14 July).

Current state is to continue to upgrade VistA through late 2018, though the closely related Department of Defense’s Military Health System is in the long process of cutting its homegrown AHLTA over to Cerner-Leidos as MHS Genesis, awarded last August, with a first trial in the Pacific Northwest later this year (HealthcareITNews, Ed. emphasis). Of course, it will take the VHA years to roll it out; there are close to 9 million veterans enrolled in the closed system that is the VHA.  FCW, Morning eHealth 10 August

Love EHRs or hate them, the sheer size of the VHA and its growing concession that VistA won’t do in caring for American veterans makes it clear that the future of EHRs is in private systems from major developers–a field which is winnowing out to The Few (take that, GE).  (more…)

Cerner win at Defense a crossroads for interoperability (US)

August 4, 2015 | by

Modern Healthcare’s analysis of the Cerner/Leidos/Accenture win of the Department of Defense (DoD) EHR contract focuses on its effect on interoperability. In their view, it’s positive in three points for active military, retirees and their dependents.

* EHR interoperability with the civilian sector is needed because 60-70 percent of the 9.6 million Military Health System beneficiaries—active duty military personnel, retirees and their families—is delivered by providers in the US private sector through Tricare, the military health insurance program.

* A major criticism by Congress and veterans’ groups of both DoD and VA is the lack of interoperability between these systems as well as civilian. Many military members change their status several times during service, and can cycle within a few years as active, Reserve, National Guard and inactive reserve. Records famously get lost, sometimes disastrously.

* It’s a boost to state health information exchanges (HIE) in states with large military bases and also for the CommonWell Health Alliance, an industry group which is establishing EHR interoperability standards.

Less optimistic are some industry observers who see the DoD contract as sidelining resources demanded by Cerner’s civilian hospital clients, and whether realistically they can develop a system to exchange data with every EHR, including dental, and e-prescribing system in the US (and probably foreign as well). Modern Healthcare

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

July 29, 2015 | by

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.”