The triumph of Cerner's team for the Pentagon's highly coveted electronic health record contract had as much to do with the Kansas City, Missouri, company's perceived strength on the interoperability front and its government experience as it did with rival Epic's inability to "play nice" with other systems, according to industry analysts.
Cerner, which partnered with Leidos and Accenture Federal, was announced as the contract winner Wednesday by the Department of Defense. The contract is worth $4.3 billion for its first phase of two years. There are two additional three-year option periods, as well as another potential two-year award term. DoD officials said Wednesday they believe the price tag will be roughly $9 billion, despite estimates as high as $11 billion prior to the announcement.
"Leidos has done a tremendous amount of work with DoD over the years," John Moore, founder and managing partner for Chilmark Research, told FierceEMR. "I think there was a certain amount of trust and confidence in Leidos to execute on this project."
In May 2014, the DoD awarded Leidos a $70.7 million sole source bridge contract to support its current EHR system for 11 months. Leidos, previously known as Science Applications International Corporation, managed clinician order entries for the Pentagon via a $1 billion Composite Health Care System contract in 1988; it won additional contracts in 2009 and 2011 to continue its work.
Moore also said Cerner's association with the CommonWell Health Alliance and its strong support of Health Level 7's Fast Healthcare Interoperability Resources standard for exchanging information electronically likely were big factors in the decision.
"To a certain extent, whether it's more marketing than reality, Cerner's push to be perceived as a more open platform is something that worked in its favor," Moore said. "Epic will continue to be a strong player in the EHR market, but I think this points out one of their perceived weaknesses, which is that they don't interoperate with others; they have quite a history of that."
Nancy Fabozzi, a principal analyst for connected health with Frost & Sullivan, agreed, saying Epic's messaging on interoperability has been interesting since it started competing for the contract.
"They've been falling all over themselves to say how open they are, and that's just not the case," Fabozzi told FierceEMR.
Doug Brown, managing partner and president of Black Book Research, believes organizations that choose to not participate in CommonWell going forward could be perceived as marketplace losers.
"Any EHR vendor or support system that does not participate with CommonWell is likely going to be assessed as outside the innovative interoperability ramp," Brown told FierceEMR. "Epic has rejected the invitation of CommonWell, which consequently decreased the satisfaction scores of its own users in our polls over the last two years."
In addition, Fabozzi said Cerner's partnership with Intermountain could be crucial on the data exchange front because of the Salt Lake City-based health system's reputation as an industry innovator.
"It'll be very interesting to see what they come up with as a solution to interoperability," Fabozzi said. "This is the motherload of all challenges. If they come up with a solution, that could be a real game changer for the industry. In five years, the industry could be completely turned on its head."
Money, money, money
Fabozzi pointed out that the deal's price tag could have a big impact on the industry moving forward.
"Price pressure is hitting the industry across the board; if there's any proof of that, it's this deal," she said.
To that end, Epic, which she said also has a reputation for its expensive systems, will have to step up its customer service game going forward.
"All these [Epic customers] are locked into these expensive deals, and now they're seeing this DoD decision," Fabozzi said. "I think Epic is going to have to bend over backward pleasing its current customers, or it could be in a world of pain when those contract come up for renewal."
The future for Allscripts
Both Fabozzi and Brown also think Allscripts will be a company to watch going forward.
Brown called it the biggest winner outside of Cerner, despite the perception that Allscripts had no shot at winning the contract.
"Allscripts has the experience of large system clients, complex system implementations, internal resources and satisfied customers," Brown said. "Most importantly, Allscripts also has earned a reputation as an interoperability leader and acquired strategic companies to support population health and revenue cycle management. As Cerner becomes involved with the DoD launch and Epic goes back to its niche in re-tooling regional networks and redirecting resources to implementations and connectivity, Allscripts is already prepared to win those contracts that Cerner and Epic used to challenge Allscripts for until now. The spoils of Cerner being consumed with DoD, and Epic losing credibility with the contract loss will undoubtedly go to Allscripts."
Fabozzi's take differed slightly. She said prior to Cerner's acquisition of Siemens, Allscripts certainly could have been a target to be bought.
"Will Allscripts go private?" Fabozzi said. "Are they going to buy or be bought?"