Cerner's military EHR contract expected to speed march to interoperability

The U.S. military's giant electronic health-record contract announced last week with a consortium including EHR vendor Cerner Corp. likely will have a major impact on advancing interoperability in health information technology across the entire U.S. healthcare system, experts say.

The military's goal is to use its new system to achieve health IT interoperability with thousands of civilian healthcare partners. That's because 60% to 70% of the care provided to the 9.6 million Military Health System beneficiaries—active duty military personnel, retirees and their families—is delivered by providers in the private sector, Dr. Jonathan Woodson, assistant secretary of defense for health affairs, said at a July 29 briefing.

Communication between military and civilian systems needs to be a two-way channel. “Part of our requirement is to position ourselves to be interoperable with the private sector,” Woodson said. “But the fact of the matter is, the private sector has to make itself interoperable as well. What we're doing today will help advance that public preparedness.”

Another goal will be to enhance the Military Health System's interoperability with the Veterans Health Administration's VistA EHR, military leaders said. The decades-long inability of the two systems to communicate has been the focus of multiple Government Accountability Office reports and congressional hearings.

The winning bid on the 10-year, $4.34 billion deal to buy a new EHR system for 56 military hospitals and more than 600 clinics worldwide went to a consortium that includes Kansas City, Mo.-based EHR developer Cerner; Leidos in Reston, Va., the winning team's prime contractor; and Accenture Federal Services, Arlington, Va. It's one of the largest medical and dental health IT contracts in U.S. history.

EHR vendors have faced mounting pressure from federal policymakers, healthcare providers and insurers to speed up what has been seen as the slow pace of making EHRs interoperable. HHS' Office of the National Coordinator for Health Information Technology and congressional panels have investigated and criticized vendors and providers for what they say are business practices blocking patient information sharing. The military's EHR contract is seen as a vehicle to resolve those roadblocks.

The total cost of ownership of the system over its projected 18-year life cycle will be $9 billion, said Frank Kendall, federal undersecretary of defense for acquisition, technology and logistics. The contract has an initial two-year ordering period, with a pair of three-year option periods, and a possible two-year award term, which could bring the total contract period to 10 years. Only one-third of the contract will be for a fixed amount, Kendall said. The rest will be on a “cost plus” basis.

The contract will require Cerner to achieve interoperability between its system and dozens, if not hundreds, of other vendors' EHRs worldwide, including EHR systems developed by rival bidders Epic Systems Corp. and Allscripts, according to Defense Department and civilian health IT experts. The system also will have to connect more than 1,200 military healthcare sites, including hospitals and clinics in the U.S. and around the world, including facilities in Iraq and Afghanistan.

Federal health IT coordinator Dr. Karen DeSalvo called the MHS contract “an important step toward achieving a nationwide, interoperable health IT infrastructure.” She said her office would work closely with the Defense Department “to help ensure its interoperability efforts align with nationally recognized data standards and industry best practices.”

“It's a real win for everybody,” said Dr. Howard Landa, chief medical information officer at Alameda (Calif.) Health System and vice chairman of the Association of Medical Directors of Information Systems.

The contract could help Cerner in its competition with Epic and Allscripts for leadership in the EHR industry. Landa said that snaring the contract “has got to give a boost” to Cerner's market position. And it was a big disappointment to Epic, which had paired with IBM, and to Allscripts, which had teamed with Computer Sciences Corp. and Hewlett-Packard to bid on the contract. Before last week, Epic had been considered the favorite.

But there are some worries about how Cerner's focus on developing the military EHR system could affect its work for other clients. “The concern is on the resource side,” Landa said. “Can they get the implementation done without impacting their customers?”

That may have worried Wall Street last week, too. Cerner's stock rose 7.7% to close at $73.40 on Wednesday, before the Defense Department contract was announced, but dipped to $71.69 at the close Friday.

The contract is only “a near-term positive,” said Steven Rubis, a vice president with brokerage firm Stifel Nicolaus & Co., which restated its “hold” rating on Cerner's stock. Cerner already has a substantial backlog of orders to work through, as well as its own integration of Siemens Health Services, Rubis said. “I feel (the Defense Department contract) could over-extend them.”

In announcing the contract last week, military officials said they leaned heavily on the ONC for guidance and that the contract is “in lockstep” with the ONC on interoperability standards, said Chris Miller, program executive officer of Defense Health Management Systems, a Defense Department office set up to oversee the EHR procurement.

The first steps in coming months will be to “extensively test our interoperability with our new system,” Miller said. Deployment at eight healthcare sites in the Pacific Northwest should be completed by the end of 2016, with a complete rollout estimated in six or seven years, Kendall said.

“This is going to be an event-driven program” dependent on the availability of resources from the military and contractors, Kendall said. “We're not going to take risks to meet a schedule.”

Even though the Military Health System was not part of the federal EHR incentive-payment program, the Defense Department, in drafting its bid specifications for a new EHR, used compliance with that program's ONC-developed 2014 Edition EHR testing and certification criteria on interoperability in the bidding process.

The criteria include the use of the federally developed direct messaging protocol for “peer-to-peer” communication between providers with an established relationship. For example, hospitals can use direct messaging to electronically send patients' care summaries to their primary-care physician when they are discharged.

Civilian health IT experts were optimistic about the contract's impact on interoperability beyond the military system. “It's positive they're attaching themselves to ONC policy,” said Dr. David Kendrick, CEO of MyHealth Access Network, a Tulsa-based health information exchange that connects 275 providers across Oklahoma. “Anything that moves them forward on interoperability is fantastic.”

Oklahoma has three major military bases, but none of them have healthcare facilities connected to the Tulsa exchange, Kendrick said. He invited the military to join their interoperability efforts. The “dream situation,” he said, would be for the base commanders to appoint a representative to participate in the HIE. “We work with Cerner a lot here. We've got confidence we can interoperate with them,”he said.

“I was thrilled to see that the Military Health System put such a (focus) on interoperability into their contract,” said Jitin Asnaani, executive director of the CommonWell Health Alliance, a consortium of EHR vendors, including Cerner, that seeks to incorporate basic interoperability protocols into their EHR systems.

Still, Russell Branzell, CEO of the College of Healthcare Information Management Executives, said Cerner and its partners have a giant task ahead of them in “figuring out how to exchange data with every single (IT) vendor” in the country. Branzell, who is enrolled in Tricare, the military's health insurance program, illustrated the challenge by noting that he receives all of his healthcare from private-sector providers. “I go to a hospital where they have GE in their physicians' office and McKesson in inpatient,” he said. “All my scrips today go directly to the DOD online pharmacy. So they're going to have to connect to that.”

The Defense Department's Miller said the military is focused on the interoperability issue. “We're going to extensively test our interoperability with our new system,” he said. “Interoperability is not something you buy and then you've got it. It needs continuous improvement.”