VA extends EHR modernization contract with Oracle Health for 11 months

The Department of Veterans Affairs extended its contract with Oracle Health for another 11 months as part of a massive electronic health record modernization project.

The agency had previously extended the contract for one month in May.

The VA agreed to the contract extension despite a history of poor performance with the system, including technical problems and patient safety issues. Financial details of the contract were not disclosed.

The VA said in a press release the second option period for its contract with Oracle Health emphasizes "improved fiscal and performance accountability."

The VA signed a $10 billion deal with health tech company Cerner, now owned by Oracle, in May 2018 to move from the VA’s customized Veterans Health Information Systems and Technology Architecture (VistA) platform to an off-the-shelf electronic health records system. The goal was to align the country’s largest health system with the Department of Defense, which has already started integrating Cerner’s MHS Genesis system.

Software giant Oracle closed its nearly $30 billion deal to acquire Cerner in June 2022 and inherited the company's VA tech project and is working to fix the problem-riddled system. VA has spent roughly $5 billion of taxpayer money to implement the Oracle Cerner EHR system at six of 171 medical centers, where it has badly disrupted operations for veterans and VA providers, according to federal lawmakers.

The new EHR system has scored poorly with physicians as well. An internal VA report finds that less than 20% of its Oracle Health users believe that the system helps them deliver high-quality care and just 13% believe that it helps keep their patients safe, according to a report from Bloomberg after reviewing the survey data.

During a House Committee on Veterans’ Affairs Subcommittee in February, lawmakers grilled leaders from the VA and tech company Oracle about the big-ticket electronic health record (EHR) overhaul and patient safety issues related to pharmacy software flagged by federal watchdogs. A draft VA Office of Inspector General (OIG) report found that an error in Oracle Health’s software coding resulted in the widespread transmission of incorrect VA Unique Identifier numbers from hospitals and clinics using the new Oracle Cerner medical records system to hospitals using the "legacy" EHR, or VistA.

On May 16, 2024—the date the first Oracle Health contract option year was set to expire—VA announced a one-month extension to support negotiations to ensure long-term success of the program for veterans and VA providers. The 11-month option awarded June 13, 2024, completes the second option period award, the VA said.

“This announcement is a testament to VA’s commitment to keeping the best interests of Veterans, VA providers, and taxpayers at the forefront while maximizing resources in a fiscally restrained environment,” said VA Deputy Secretary Tanya Bradsher in a statement. “Executing the second option period of the contract allows VA and Oracle Health to continue to drive forward on the goals of the reset and future deployments. VA remains committed to holding ourselves and our vendors accountable for resolving challenges with deployment of the Federal EHR and moving forward productively.”

Negotiations for the second option period focused on two main objectives—supporting value-added services, such as system improvements and optimizations and achieving better predictability in hosting, deployment, and sustainment, all while keeping an eye on fiscal responsibility, the VA said in a press release.

The VA announced in April 2023 that it pausing deployments of the EHR system as a "program reset" to address major issues with the software. Executives had vowed to get the rollout “back on track” amid lawmaker scrutiny that has persisted into 2023.

Last year, VA renegotiated the contract with Oracle Health from a five-year term to five one-year terms, allowing the annual review of Federal EHR progress and renegotiation with Oracle Health, as needed. 

The VA plans to resume site deployments in 2025. The contract will also support potential pre-deployment and deployment activities at new sites in 2025 once the VA determines reset goals have been met, the agency said.

In February, Oracle tapped Seema Verma, who served as a top healthcare policy leader in the Trump administration, lead Oracle Health, which includes the electronic health records business.

The VA's intent to resume deployments in the next fiscal year is a "significant milestone that reflects the hard work" Oracle Health and VA's collective teams have done to improve the system, Verma noted in a statement, "as well as the confidence in our shared ability to continually evolve the EHR over time to meet the needs of both practitioners and patients.”

Oracle recently completed deploying the new federal EHR system at Department of Defense (DOD) facilities, pointing to this project as a major win in its work with the DOD and VA.

The successful go-live of the VA EHR system at the Captain James A. Lovell Federal Health Care Center (Lovell FHCC) capped the five-year project of delivering the federal EHR system to the DOD, Oracle executives said.

The EHR system, known as MHS GENESIS, is now live at 3,890 garrison facilities with over 197,200 end-users serving more than 9.5 million beneficiaries spanning the United States, Europe, and the Asia Pacific region, according to Oracle.

"This is the same EHR system being used by VA, and will provide service members with a single, longitudinal health record from enlistment through life-long care at VA," the company said.

The federal EHR system will enable VA to standardize workflows, training, and technology management across its facilities using a single enterprise system. It supports better coordination across federal and commercial partners including the DOD, the Coast Guard, and the National Oceanic and Atmospheric Administration, according to Oracle.

“Our most recent roll-out at the Captain James A. Lovell Federal Health Care Center in North Chicago, IL exceeded expectations and demonstrated what’s possible as we move ahead with other VA facilities. Our veterans, and the people who care for them, deserve a world-class EHR system and we are delivering it,” Verma said in a statement.

During Oracle's fourth-quarter earnings call last week, CEO Safra Catz noted that the company will no longer be breaking out the Cerner business in its earnings results.

"And even though it will begin to grow modestly throughout the year in both revenue and operating margins, it’s not necessary to break it out any more because it is now operating in a growth mode," Catz said of the Cerner business.

The company also announced new cloud sales to Google and OpenAI.