VA signs $10B deal with Cerner, but implementation challenges still loom large

After nearly a year of fits and starts, the Department of Veterans Affairs has finally signed a deal with Cerner to upgrade its EHR system.

The 10-year, $10 billion deal signed on Thursday represents one of the largest federal IT contracts. The move from the system’s customized VistA platform to an off-the-shelf EHR aligns the country’s largest health system with the Department of Defense, which has already begun integrating Cerner’s MHS Genesis system.

“With a contract of that size, you can understand why former Secretary Shulkin and I took some extra time to do our due diligence and make sure the contract does what the President wanted,” Acting VA Secretary Robert Wilkie said in a statement.

In the end, former VA Secretary David Shulkin, M.D, the leading proponent of the shift to a commercial solution, wasn’t the one to ink the deal. On Twitter, Shulkin called the deal “an important step forward in the modernization of this essential system.”

When he announced the no-bid contract last June, Shulkin estimated it would take three to six months to finalize negotiations with Cerner and emphasized the need to move quickly on modernization efforts. But VA officials missed an initial November deadline and then put the contract on hold while it conducted a report to address concerns Cerner wouldn’t be able to meet system's interoperability needs.

RELATED: Editor’s Corner—Shulkin’s firing has implications well beyond the Cerner contract signing

In April, Politico reported a Florida doctor with close ties to President Donald Trump was holding up the deal. And just last week, a DOD report outlined significant patient safety concerns tied to the EHR system at three different hospitals.

The delays caused some financial pain for Cerner, which was forced to readjust its 2018 earnings projections while it waited for the deal to be signed. On Thursday, Cerner CEO Brent Shafer said interoperability between the DOD and private providers would be a core feature.

RELATED: Lawmakers call for review of VA’s EHR contract as Cerner resets earnings expectations

“This agreement will benefit veterans and catalyze wide-scale adoption of innovation across the healthcare industry,” he wrote.

Others were less enthusiastic about the signing.

"It’s not an achievement for veterans and it’s not an achievement for the health IT industry," Niam Yaraghi, a nonresident fellow at the Brookings Institute, told FierceHealthcare. "It just signals the fact that you can't have interoperability between two different software companies."

"It's only bonus points for politicians and a really sweet, fatty deal for Cerner," he added.

Legal, implementation challenges ahead

The agreement could face a formal protest from another EHR vendor in the next 10 days, but it won't come from Cerner's main competitor. Epic spokesperson Meghan Roh confirmed the vendor doesn't plan to protest the contract, pointing to comments CEO Judy Faulkner made at HIMSS18 in March when she said "we never challenge anything." 

However, San Diego, Calif.-based CliniComp indicated it will challenge the contract. The EHR vendor already took the VA to court following Shulkin's announcement last year. That case is still working its way through an appeal after a district court dismissed CliniComp's complaint. 

“It’s unconscionable that the VA would choose to move forward with this decision in light of an overwhelming body of evidence calling to question Cerner's ability to deliver for veterans," CliniComp CEO Chris Haudenschild said in a statement to FierceHealthcare. "This was a no-bid contract awarded to a non-performing company. This unaccountable process has very real consequences for the men and women who have served this country in uniform.

"We absolutely intend to fight this decision and push for a competitive bidding process," he added. "Needless to say, the carelessness with which our veterans’ health is being treated is unacceptable. Our veterans deserve better and we intend to fight for them."

The VA is also fighting off a lawsuit from CliniComp challenging the VA’s decision. Another lawsuit (PDF), filed in April by the Democracy Forward Foundation, challenges Willkie’s authority to make decisions for the VA in his capacity as acting secretary.

Further, there's plenty of concern over the VA’s implementation plans. In a post published earlier this week, Yaraghi wrote the VA project is “very likely to fail,” citing physician loyalty to VistA and the fact that few high-cost government contracts succeed.  

After the deal was announced Thursday, Yaraghi hadn't changed his opinion. He expects the deal to go well past the $10 billion allocated, citing past government IT projects that often end up over budget, and he's not convinced it will drive interoperability across the industry. 

"This deal guarantees that Cerner shouldn't worry about sending or receiving data from other EHR systems because the most important connection is between their own system and the DOD," he said. "To some extent, it’s a missed opportunity. The VA could have used its buying power to force interoperability."

Matt Guldin, a senior analyst with Chilmark Research, noted the VA contract is Cerner’s largest implementation by far. With 168 hospitals and more than 1,000 outpatient facilities, the VA project is three times the DOD contract, which has already had a rocky start. 

“[Cerner] certainly can do it, I just think their lack of experience in doing this is going to be challenging,” he said.

Guldin added that there are plenty of differences between the DOD and VA health systems, and Cerner’s ability to work with Leidos will play role in a successful implementation. He also wondered whether the project could divert attention from Cerner’s other business lines, including population health solutions.

“How much of this will consume Cerner’s overall focus?” he said. “It’s a key part of their revenue growth over the next few years in particular. It’s something that could sidetrack them form development in other areas.”