VA underestimated infrastructure costs that could raise EHR price tag by up to $5B: OIG

The total cost of the Veterans Affairs Department’s new medical records system could be $2.5 billion to $5.1 billion higher than currently estimated, according to two inspector general reports.

The VA's commercial electronic health records project was originally pegged at $10 billion then raised up to $16.1 billion, including $4.3 billion for information technology infrastructure upgrades. 

But the VA failed to account for millions in IT and physical infrastructure needs, according to reports from the VA Office of Inspector General (OIG). The OIG found that the estimate of about $4.3 billion was not reliable, and, as another problem, a lack of complete documentation made it difficult to determine the accuracy of estimates, the report issued last week said.

The VA also did not report to Congress other, critical program-related IT infrastructure upgrade costs totaling about $2.5 billion, thus underreporting the program life-cycle costs by a significant amount, according to the inspector general.

The report looked at cost estimates for IT infrastructure—including system interfaces and end-user devices like desktops and laptops—using documentation maintained by the Office of the Electronic Health Record Modernization, or OEHRM. That central office manages the EHR system rollout at VA and the new EHR program at the Defense Department, MHS Genesis.

RELATED: First VA medical center (finally) goes live on Cerner EHR as part of $16B project

The watchdog issued a report earlier this year that found cost estimates for physical infrastructure work related to the EHR project—such as heating, ventilation and cooling, electrical work and cabling—were underreported by $1 billion to $2.6 billion.

The VA signed a $10 billion deal with Cerner in May 2018 to move from the VA’s customized VistA platform to an off-the-shelf EHR to align the country’s largest health system with the Department of Defense (DOD), which has already started integrating Cerner’s MHS Genesis system.

For the VA, the Cerner EHR will replace the approximately 130 operational instances of VistA currently in use across the department. While the initial EHR contract signed with Cerner was for $10 billion, the VA has pushed the estimated 10-year cost for implementing the system past $16 billion.

Mann-Grandstaff VA Medical Center in Spokane, Washington, went live with the new Cerner EHR system in October 2020, the first site as part of VA's massive medical records project.

It's a technology project that's been plagued by delays, leadership turnover, and infrastructure problems since it kicked off in 2018.

The OIG audit team evaluated two estimates OEHRM provided to Congress dated December 2018 and August 2020—each for about $4.3 billion.

RELATED: Federal watchdog says VA's March EHR go-live date was 'unrealistic'

"Neither of the estimates fully met the characteristics of being well-documented, comprehensive, and credible," the OIG wrote regarding the IT infrastructure estimates.

The OIG found there is an increased risk of insufficient funding to complete the upgrades because OEHRM lacks formal agreements with VA’s Office of Information and Technology (OIT) and the Veterans Health Administration (VHA) to commit these entities to funding the $2.5 billion in upgrades OEHRM expects them to contribute.

"By not including the expected costs of some IT infrastructure upgrades necessary to deploy and sustain the new system in congressionally mandated reports, OEHRM has underreported the EHRM program’s total cost by about $2.5 billion, or 15%. This is a significant portion of one of the program’s three main cost components," the OIG wrote.

The watchdog noted that there is considerable risk that a program could experience cost overruns when initial estimates are unrealistic.

The IG recommended an independent cost analysis, formalize agreements with OIT and VHA to identify the expected funding contributions from each entity and establish procedures that identify when lifecycle cost estimates should be updated and ensure those updates are disclosed in the program’s congressionally mandated reports.

OEHRM officials agreed with all six recommendations and provided action plans. 

RELATED: Lawmakers irked at lack of transparency from VA after Cerner EHR project delay

In preparation for deploying the Cerner EHR, VA medical facilities need significant upgrades to their physical infrastructure, such as electrical work, cabling, heating, ventilation, and cooling. These upgrades are critical to the successful deployment of the new system and are likely to cost billions of dollars, the IG wrote in the May report.

VHA staff told the IG that it was not until November 2018, nearly six months after Cerner signed the EHR, that key VHA staff were first made aware of a need for physical infrastructure upgrades. The IG noted that the first time VA publicly announced the significant cost associated with the EHRM program was in a February 2020 hearing, close to two years after the contract with Cerner was signed.

“However, none of the eight quarterly reports submitted by [the Office of Electronic Health Record Modernization] as of January 2021 included physical infrastructure costs in the program’s life cycle cost estimate, despite all but one of them containing language indicating that physical infrastructure costs were included. In fact, the only infrastructure costs the life cycle cost estimate included were related to information technology infrastructure,” the report said.

The IG warned that current estimates for physical infrastructure costs are likely far too low, because, in part, the estimates were based on VA’s first facilities to implement the new system, which were found to be significantly lower than actual needs dictated.

The VA IG made five recommendations, all of which were accepted by VA leadership.

The IG also recently released a report looking at training deficiencies with VA’s EHR at the Mann-Grandstaff VA Medical Center in Spokane.

The House Veterans Affairs Committee plans to hold hearings on the two infrastructure reports and the progress on the EHR project in the coming weeks.

"It is clear from these reports that the cost estimate for VA’s EHRM project was vastly underestimated by the previous administration and that there are significant failures with the current staff training program,” said Chairman Takano. “I appreciate the work of the Inspector General in identifying these issues, and I’m grateful that VA has acknowledged them and plans to offer our Committee greater transparency."