Healthcare Business News
Chuck Hagel

Defense secretary considers commercial EHR system

By Joseph Conn
Posted: May 23, 2013 - 4:00 pm ET

The Defense Department is back in the market for an electronic health-record system for its sprawling healthcare empire, according to a memorandum from Defense Secretary Chuck Hagel.

The memo from Hagel, obtained by the website Nextgov, was addressed to Frank Kendall, the undersecretary of defense for acquisition, technology and logistics. In it Hagel said he is “convinced that a competitive process is the optimal way to ensure we select the best value solutions for DoD.”

At a hearing last month, Hagel said he was putting on hold spending plans regarding then-current efforts to improve interoperability between the Military Health System's several EHRs and the VistA EHR system used by the healthcare arm of the Veterans Affairs Department.

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But the two-page memo to Kendall, whom Hagel thanked for leading a 30-day review of the department's EHR options, referred to the findings of that review, saying, “A competitive process will allow DoD to consider commercial alternatives that may offer reduced cost, reduced schedule and technical risk, and access to increased current capability and future growth in capability by leveraging ongoing advances in the commercial marketplace.”

In recent weeks, there had been some speculation that the Defense Department might join with the VA in an open-source project to upgrade the VistA system for use as a common platform for both the VA's Veterans Health Administration and the Defense Department's Military Health System.

Military hospitals now run at least in part on the older Composite Health Care System, a clone of the VA EHR, and on CHCS' long-planned and long-beleaguered replacement, called AHLTA, which has not lived up to expectations.

Hagel—a former deputy VA administrator who previously had been a proponent of its home-grown health IT program, which led to the development of VistA—said in the memo that “there are good reasons for the VA to have selected its legacy system (VistA) as the basis for it EHR core. However, many of these reasons do not apply to DoD. Also based on DoD's market research, a VistA-based solution will likely be part of one or more competitive offerings that DoD receives.”

In fact, that's similar to how the Military Health System's CHCS was developed. It was the work of defense contractor SAIC, and was based on the code it obtained free from the VA. It initially cost taxpayers $1 billion. CHCS and its would-be successor, AHLTA, eventually would cost $3 billion to $4 billion, according to one healthcare IT expert.

In February, Hagel's predecessor, Leon Panetta, and VA Secretary Eric Shinseki, announced they were scrapping as too expensive a five-year effort to develop a joint replacement EHR for their two healthcare organizations.

The Military Health System operates 59 hospitals and 360 health clinics, according to that agency's web site.

The VA operates 151 hospitals and 827 clinics, according to a spokeswoman. Its former CIO, Roger Baker, cited the $4 billion cost estimates in “published reports” for installing a commercial EHR from Epic Systems Corp. at 36 locations for Kaiser Permanente, and called $16 billion “a reasonable estimate” to replace VistA with a commercial-off-the-shelf system. By that gauge, a commercial system for the Military Health System would cost more than $6 billion.

Follow Joseph Conn on Twitter: @MHJConn

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