Background On Cerner’s Capture Of DoD EHR Data Center Biz

Posted on January 6, 2016 I Written By

Anne Zieger is veteran healthcare consultant and analyst with 20 years of industry experience. Zieger formerly served as editor-in-chief of and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. Contact her at @ziegerhealth on Twitter or visit her site at Zieger Healthcare.

As many readers will know, the Department of Defense awarded Cerner the $4.3 billion Defense Healthcare Management System Modernization contract this summer, through its partnership with Leidos and Accenture. In doing so the partners beat out some formidable competition, including an Epic/IBM bid and a group, led by Computer Sciences Corp., whose partners included Allscripts and HP.

This is a system integration project on the grandest scale, connecting healthcare systems located at Army hospitals, on Naval vessels, in battlefield clinics across the glove. The idea is to bring all of this data — on active-duty members, reservists and civilian contractors — into a single open, interoperable platform. The new platform should serve 9.5 million military beneficiaries in roughly 1,000 locations.

Now, just six months into the 10-year deal, the DoD has decided to change the rules a bit. Military officials have concluded that the new records system capabilities won’t function at their best unless they’re hosted in a Center datacenter. The new system, officials said, “requires direct access to proprietary Cerner data, which is only available within Cerner-owned-and-operated data centers.”

I’m not sharing this tidbit because it nets the partnership more money — Cerner will take in a comparatively trivial $5 million per year to host the government health data — but for a few other reasons that offer ongoing perspective on this massive deal:

  • While there’s no concrete way to prove this, the buzz around the time of Cerner winning the contract was that it won because it was perceived as more open than Epic. Arguably, if the DoD has to transfer data hosting because it needs access to proprietary algorithms, maybe the whole open thing was a fake-out. Certainly, needing access to Cerner logic locks down the deal even further than a straight ahead contract award.
  • Why couldn’t the DoD anticipate that their own data centers wouldn’t meet the needs of the project?  And why didn’t planners know, in advance, that they’d need access to Cerner’s “quantitative models and strategies” prior to signing on the dotted line? Admittedly, this is a sprawling project, but planning for appropriate network architecture seems pretty basic to me. Did Cerner deliberately raise this issue only after the deal was done?
  • In the notice the DoD issued outlining its intention to shift hosting to Cerner, it noted that while it wasn’t seeking competitive proposals, “any firm believing that they can fulfill the requirement of providing these services may be considered by the Agency.” The key for late entrants would be to prove that they could both meet hosting requirements and connect to proprietary Cerner data.
  • Was the intent always to host the EHR at the Cerner data centers and this was a way to do an end around the bid process and make the initial bid look more attractive (ie. cheaper) so it won the contract? I wonder how many more of these late additions the DoD will have when implementing the Cerner EHR. We’ve seen many hospital EHR implementation budgets have skyrocketed. It’s not hard to imagine the same scenario playing out with the DoD EHR budget. This might be the first of many EHR add-ons that weren’t part of the original contract.