Pentagon Awards $9 Billion Contract for Electronic Health Records

The U.S. Defense Department on Wednesday awarded one of the biggest health information-technology contracts in history to Leidos Inc.

The agreement, announced at 5 p.m. in Washington, D.C., is designed to digitize the military's medical record system for troops, their families and retirees. It's valued at almost $4.3 billion over a decade and potentially worth nearly $9 billion over 18 years, officials said.

To highlight the significance of the work, Frank Kendall, the department's top acquisition official, said he has spent more time on this program than any other -- even the F-35 Joint Strike Fighter, the Pentagon's most expensive weapons system.

"This date represents an important step in the acquisition of a modern health care system for DoD," he said during a conference call with reporters earlier in the day. "It's not the final step by any means. We have a lot of work ahead of us."

Learn more about your Tricare medical benefits.

Leidos beat out the other two finalists for the lucrative deal in part by offering a more cost-effective bid, officials said. The government contract is the largest of its kind since the one that led to the 2013 creation of the Healthcare.gov website to register individuals for health care policies under Obamacare.

STILL YEARS AWAY

"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," the announcement states.

The contract will modernize how the Pentagon provides care to some 9.5 million military members, families and retirees in part by installing new IT equipment and software to better share patient information with the Veterans Affairs Department and private providers, officials said.

While the military has used electronic health records for years, many troops who deployed to combat zones such as Afghanistan and Iraq had trouble accessing their medical history from base to base and resorted to storing the information on portable computer disks such as thumb drives. In other cases, they carried around paper records in manila folders.

"That will be a thing of the past," Jonathan Woodson, a doctor and assistant secretary of defense for health affairs, pledged during the conference call.

Yet getting the new system up and running across the Pentagon's 55 military hospitals and 600 clinics will take years. The plan is to begin installing the technology at eight locations in the Pacific Northwest, then expand to the rest of the sites over six or seven years, Kendall said. The names of the initial locations weren't immediately available.

'MUCH CHEAPER'

After the urging of President Barack Obama and lawmakers from both political parties, the Pentagon and the VA had previously considered jointly developing a new healthcare management system. But the cost of doing so -- estimated at $25 billion -- was considered too expensive and the effort was abandoned, Kendall said.

Still, officials didn't specify why they rejected a bid from a vendor that proposed using VistA, the VA's current system that's open-sourced, Internet-based and free.

Kendall said the commercial market for such software and equipment has significantly evolved in recent years to the point where it's now "vibrant" and "rich" with vendors -- an environment he said that generated competitive bids that will help to control costs. He described it as "much cheaper" than any other course of action.

"We really do have a great opportunity here to save money, save time and, most importantly, save lives," said Christopher Miller, the Pentagon official who oversaw the selection process. He also rejected the idea that the Pentagon and VA medical record systems aren't currently compatible, or interoperable. "We are interoperable with the VA today," he said.

SKEPTICS REMAIN

Leidos partnered with Cerner Corp., a publicly traded health IT supplier based in Kansas City, Missouri, and Accenture Plc to bid for the work. Other finalist teams included Epic Systems Corp. and Allscripts Healthcare Solutions Inc.

Outside experts say relying on a commercial product won't dramatically improve care or record-sharing across the military community.

"None of the three finalists has been able to improve overall outcomes or reduce costs in the private sector despite a track record spanning more than a decade with complete freedom of oversight," Dean Kross, a Pittsburgh cardiologist who studies healthcare information technology, told The Washington Post. "How can anyone expect that to change now?"

Ross Koppel, a sociologist at the University of Pennsylvania who also studies and writes about healthcare IT, was even more critical, according to article by Amy Ellis Nutt and Amy Brittain.

"Epic and Cerner are mediocre products that should be a lot better for the cost," he said, according to the article, and noted that requests by health professionals to make upgrades and repairs "are hundreds of thousands [of items] long" and that the systems "take years to implement."

--Brendan McGarry can be reached at brendan.mcgarry@military.com