Vital Signs Blog

Blog: Decision looms on mother lode of IT contracts

When news broke that the U.S. Army had awarded a $16.2 million contract to Cerner Corp. for laboratory software, it made a few people ponder.

Was it a portent? Had Cerner gained a leg up on the multibillion dollar U.S. Department of Defense contract for a new electronic health record for the 56-hospital, 350-clinic Military Health System?

Or, did it merely indicate that the military's EHR procurement team, after announcing it would seek a “single enterprise solution” and use a “best-of-suite” (PDF) approach, had conceded the need for at least a partial “best-of-breed” strategy for its now two-year-old Defense Healthcare Management Systems Modernization (DHMSM) program?

Or, did the right hand of the Army, in this separate procurement, simply not know what the left hand was doing?

Last October, bids for DHMSM (pronounced “dim sum”), were submitted to the Defense Department for review.

Word within the information technology world is that a decision on DHMSM—possibly the largest health IT contract in U.S. history—could be announced later this month.

Veteran health IT consultant Daniel Garrett, a principal at PricewaterhouseCoopers and head of its health IT practice, claims no direct knowledge of the outcomes of either the Army or DHMSM contracts. Garrett led the PWC team that joined with EHR vendors DSS and Medsphere Systems and systems integrator General Dynamics Information Technology, in a failed bid for the military EHR contract award.

Garrett said he doubts the Army operated in a vacuum on the lab contract award. But, based on his wider industry experience, he doesn't read more into the Army's decision than what's already well-known in the health IT industry.

“That's not a big flag that something spectacularly different is going to happen,” Garrett said. “It's common to have a separate lab system, and Cerner has a strong product in that space. So, it's not uncommon for people to go with their product in that space and another product in another space.”

Lab systems are the stem cells of Kansas City, Mo.,-based Cerner, which was co-founded in 1979 by its CEO and Chairman Neal Patterson. Cerner started out producing lab software systems and the rest of the company grew out of them.

Today, it's a publicly traded global provider of complete EHR software and health IT services.

Cerner and its consortium (Leidos and Accenture) are still up against rival bidders and EHR developers Epic Systems Corp., (paired with IBM) and Allscripts (teamed with Hewlett-Packard Co. and Computer Sciences Corp.)

Should Cerner get the military's nod, it would be the largest contract win of the 64-year-old Patterson's health IT career, and could give a boost to the company's fortunes (or Allscripts', too) of the magnitude that the Kaiser Permanente deal did for Epic in 2003.

When I contacted Cerner for some of its lab software-business history, Patterson answered questions about the old days himself.

“Fixing the broken billing system for MAWD Pathology Group (based in Kansas City) was my first exposure to healthcare,” Patterson recalled in an email. “I started talking to the doctors and looking at what was happening on the other side of the business office. There was a lot of need for clinical systems, and existing vendors at the time did not address it all.”

In those days, records for specialty areas, such as anatomic pathology, were “mostly manual, with reports being dictated and transcribed,” Patterson said. “That's how PathNet (Cerner's family of lab applications) was born.”

"We developed PathNet as modules you could convert alone or in combination. General Lab was the first to be commercially available in 1982,” he said. "Modules for microbiology, blood-bank donors, blood-bank transfusions and anatomical pathology followed in subsequent years. At the same time, we were building out modules for other hospital departments like radiology and pharmacy.”

CoPath, Cerner's anatomic pathology module, has been used for years by the Military Health System, and is in use at all 45 of the Defense Department's anatomic pathology laboratories in the U.S., Europe and Japan, according to a Cerner statement.