Leidos wins huge DOD health records deal

A team led by Leidos has won the $4.3 billion Defense Healthcare Management System Modernization contract to build DOD's new health records system.

EDITOR'S NOTE: This story first appeared on FCW.com.

A team led by Leidos and including Accenture and Cerner has won a $4.3 billion contract to build the Defense Department's massive electronic health records system.

To win the contract, the team bested what many consider the market leader in electronic health records, Epic Systems. Epic was part of a team led by IBM and was considered the favorite to win.

DOD apparently is getting a bargain over what it expected to pay for the Defense Healthcare Management System Modernization, or DHMSM. The contract was initially estimated to have an $11 billion lifecycle cost through 2030, but the actual award announced July 29 is for a fraction of that amount: $4,336,822,777 over 10 years if the options are exercised.

"We feel confident that we made a good source selection," said Chris Miller, Defense Healthcare Management Systems program executive officer, on a call with reporters. "Competition has worked, costs have come in below our estimates. We're very happy with the results we've got."

Big competition

In addition to the teams led by Leidos and IBM, EHR vendor Allscripts had teamed up with Computer Sciences Corp. and Hewlett-Packard for its bid, and PricewaterhouseCoopers briefly led another team bid. According to the DOD award announcement, there were six bids in all.

But it was Epic's rival Cerner -- which had long touted its edge in providing EHR interoperability -- that pulled off a coup. The fact that the behemoth Epic wouldn't win was hinted at earlier in the day (and reported early by NextGov), before the official 5 p.m. announcement.

"Market share really wasn't a consideration," said Frank Kendall, undersecretary of Defense for acquisition, technology and logistics. "We wanted someone who had proven they could do what we needed to get done."

Kendall added that the Defense Department is prepared to weather a bid protest, though he isn't certain one will come.

"There is a clear best value, and I think that will be clear to the people who weren't selected," he said.

In an IBM statement, a company spokesman said: “We are very disappointed by today’s announcement and firmly believe that our proposal, along with our combined expertise, would provide the U.S. Department of Defense with the most innovative technology platform to best serve our military families now and into the future. We stand ready to help the Defense Department in this endeavor.”

A massive undertaking

In tackling the contract, the Cerner team will have its work cut out for it.

DHMSM aims for a single, commercial product that includes full interoperability with the Veterans Affairs' VistA health records system as well as private-sector systems, while serving some 9.6 million service members, retirees and dependents.

The system will need to be deployable from the front lines of combat all the way home, accessed by more than 150,000 professional providers at 55 hospitals and more than 600 clinics, said Dr. Jonathan Woodson, assistant secretary of Defense for health affairs.

Several years of upgrades are included in contract.

The system will need to run along some 50 legacy systems, gradually replacing some and working with others, Miller noted, as the consolidation of military health services continues.

What's next

Change management will be critical, Miller noted, saying more than 25 percent of the contract will go to support and training to ensure clinicians know how to use it.

"Today is just the beginning," he noted. "The hard part is about to start."

DHMSM is scheduled to be tested at eight sites in the Pacific Northwest starting at the end of 2016, with a full rollout by 2022.

That schedule could still change, however. "We want this to be an event-driven program, not a schedule-driven program," Kendall said. "We're not going to take risks to stick to a schedule."

Conversely, he added, "we'd like to go more quickly" if possible.

Kendall also spoke to what he called a "big misconception" about interoperability between the military and the VA.

"We are interoperable with the VA today," he said.

Kendall said the new system would merely provide an opportunity to "enhance" the existing interoperability.

Miller, meanwhile, rebuffed concerns about "vendor lock," noting that the Defense Department will own all of the data rights under the contract.

"We own 100 percent of our data," he noted. "People cannot charge us to share our data."

He added that it remains to be hashed out whether the data centers running the new military health records system will be Defense Department-owned or owned by the vendor.