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Cerner wins DoD electronic health records contract

Cerner beat out competing bids from the teams of Epic Systems and IBM; and Allscripts, Computer Sciences Corp. and Hewlett-Packard.

A coalition including Cerner has won the coveted Defense Healthcare Management System Modernization contract to replace the electronic health records system for the Military Health System. Kansas City, Mo.-based Cerner joined with with federal contractors Leidos and Accenture Federal on the bid.

Cerner beat out competing bids from the teams of Epic Systems and IBM; and Allscripts, Computer Sciences Corp. and Hewlett-Packard. The award is valued at $4.3 billion, though Defense Department officials said that it could be worth more than $9 billion over the next 10 years — below earlier estimates of $11 billion.

From the Pentagon’s official announcement:

Leidos, Inc., Reston, Virginia was awarded a ceiling $4,336,822,777 indefinite-delivery/indefinite-quantity contract, with firm-fixed-price, cost-plus-fixed-fee, cost-plus-incentive fee, and fixed-price incentive pricing arrangements, for the Defense Healthcare Management System Modernization program. As a service provider integrator, the contractor will provide an electronic health record off-the-shelf solution, integration activities and deployment across the Military Health System. 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. Additional funds will be obligated as individual delivery orders are issued. This was a competitive acquisition, with six offers received. The Space and Naval Warfare Systems Command, San Diego, California, is the contracting activity.

“Today is not just about picking a software vendor,” DHMSM program executive officer Christopher Miller said in an official DoD report. “Today is really about making sure we provide the right team that will provide the services and all those things that are necessary to meet our objectives.” Those objectives center around delivering better care at lower cost.

Miller said that the contract includes specific language giving the DoD control over EHR data in case the Cerner-Leidos-Accenture team ever has to be replaced.

This appears to be an upset of sorts, as it had been widely expected that Epic would emerge the winner. Verona, Wis.-based Epic provides the EHR for Kaiser Permanente, the largest private-sector health system in the country, with about 8 million patients, and Epic CEO Judy Faulkner is a longtime supporter of President Obama.

The Military Health System serves about 9.5 million active-duty service members and their dependents.

Cerner is in a mandatory quiet period until next Tuesday ahead of its scheduled earnings announcement for the quarter ended June 30, and thus is unable to comment.

Leidos e-mailed a statement to MedCity News essentially declining to comment:

Earlier today, the Department of Defense publicly posted its decision to award the DHMSM contract to the Leidos Partnership for Defense Health. In respect for the government’s acquisition process, it would be inappropriate for us to discuss further specifics around the DHMSM procurement.

Cerner recently won a Pentagon solicitation to replace the Military Health System’s pathology laboratory system.

Photo: Flickr user David B. Gleason