With a now-estimated price tag of $16.1 billion, federal regulators and government representatives question the VA’s replacement for their VistA medical records system

Originally estimated to cost $10 billion, a contract to replace the federal Department of Veterans Affairs (VA) electronic health record (EHR) system will now cost $16.1 billion, according to new estimates, and this has drawn increased scrutiny from regulators and the media.

ProPublica reports that the initial deal signed in May 2018 between the VA and Cerner, one of the nation’s largest vendors of laboratory information systems (LIS) and anatomic pathology information systems, included a $10-billion ‘no-bid’ contract to replace the VA’s aging VistA medical records system over 10 years. Since then, that estimate has ballooned to $16 billion, and with this latest increase, is now at $16.1 billion.

One ongoing challenge facing clinical laboratories and anatomic pathology groups is maintaining interfaces to the plethora of disparate EHR systems implemented in healthcare networks across the country. It’s a costly undertaking that has nearly bankrupted many healthcare providers.

Thus, these developments could impact how medical laboratories and pathology groups work and communicate with the VA in the future and are worth paying attention to.

Price Concerns Grow Before Progress Starts

Citing talks at a 180-day review hearing with the House Committee on Veterans’ Affairs Subcommittee on Technology Modernization, Fierce Healthcare reported that Rep. Jim Banks, R-Ind., said, “The total estimate has already gone up before any real work begins. How can that be?”

In response, John Windom, Executive Director of the federal government’s Office of Electronic Health Record Modernization (OEHRM), told the House Committee that the VA’s original estimate failed to include roughly $35 million/year for VA government employee costs over the decade-long Cerner contract.

“We have to have highly qualified subject matter experts to grade the implementation efforts of Cerner. Those people in the industry cost money,” noted Windom, Health Data Management reported.

This review hearing came just after ProPublica reported on a progress report where Cerner had assigned an alert rating of “yellow trending toward red” to the VA’s EHR implementation efforts.


“It scares the hell out of me,” Ken Kizer, MD, MPH, CEO of health information technology (HIT) developer Medsphere Systems, and former Under Secretary for Health at the VA, told ProPublica. “I don’t think the VA, given other issues, has the luxury to have something that doesn’t work.” (Photo copyright: UC Davis Health.)

Deploying a new EHR in a system as large as the VA is a highly complex operation. Adding in government oversight—and coordinating development and deployment between all the parties involved—further complicates the VA and Cerner’s efforts.

One complication not receiving much coverage is the fact that EHR systems designed primarily for insurance billing purposes may be incompatible with the needs of the VA and other federal agencies that do not bill insurance companies.

“VA is different. The focus of the VA’s electronic medical record is never about clinical documentation to support billing. It’s about giving the information to the provider at the right time to inform the best care. There are true risks to patients if they don’t do this right,” Heather Woodward-Hagg, PhD, former National Program Director (Acting), Veterans Engineering Resource Centers (VERC) and Founding Director, Veterans Affairs Center for Applied System Engineering (VA-CASE), told ProPublica.

Nevertheless, according to coverage of the Review Committee hearing by MeriTalk, Windom remains hopeful that the project’s financials will improve. “There are going to be efficiencies gained we can’t forecast at this point,” he told the Committee members.

Other Federal EHR Project Overruns

The VA’s implementation of Cerner’s system aligns with another recent government-related Cerner deployment—the US Department of Defense (DoD) Military Health System Genesis EHR system. That project also was subject to budgeting overruns.

According to MeriTalk, the original deal between the DoD, Cerner, and Leidos in 2015 was estimated at $4.3 billion. However, in July 2018, the DoD increased the project budget by $1.2 billion—bringing the total estimate to $5.5 billion.

Still, this falls far short of the VA estimate of $16.1 billion leaving regulators and media outlets questioning the health and oversight of the Cerner/VA project.

The VA estimate also is well above the cost of other notable EHR implementations—such as the development and deployment of Kaiser Permanente’s HealthConnect EHR.

Speaking with InfoWorld in 2013, Philip Fasano, then CIO of Kaiser Permanente, noted that it cost roughly $4 billion to build a system alongside Epic to serve their 9-million members. When asked what it would take to implement a similar system nationally, he estimated costs in the “tens of billions.”

The Hidden Costs of EHR Implementation

Speaking with Becker’s Hospital Review in 2016, Eric Helsher, Vice President of Client Success at Epic, highlighted how difficult it is to budget for such upgrades. “It’s misleading to say, ‘A hospital is undergoing a $X million Epic implementation,’ because the install includes far more than simply the Epic software,” he said. “An EHR from any vendor requires technology like servers and storage to house the software—be it on-premise or in the Cloud—and laptops and mobile devices to access it. That would be like if you go buy a fully loaded laptop and attribute that full cost to Microsoft Word. You needed the computer to get Word.”

Whether the VA and Cerner can determine ways to bring the contract in line with budgets remains to be seen. However, while healthcare reform highlights EHR implementation and interoperability as major concerns in the modern US healthcare landscape, the VA’s latest attempts at replacing their VistA medical records system serves as a reminder of the complexity and hidden costs facing healthcare providers working to meet healthcare reform requirements and offer a more personalized care experience.

This, of course, applies equally well to clinical laboratories.

—Jon Stone

Related Information:

How Kaiser Bet $4 Billion on Electronic Health Records – and Won

Lawmakers Grill VA Officials on Higher Costs of EHR Overhaul

Cost of VA’s EHR Modernization Program Grows by $350M

House Chairman Sees “Every Indication” That VA’s EHR Difficulties Will Continue

VA’s EHR Project Is “Yellow Trending towards Red,” Says Report Obtained by ProPublica

The VA Shadow Rulers’ Signature Program Is “Trending towards Red”

VA Replacement of Legacy EHR Could Cost as Much as $16B

VA’s EHR Project Hits Early Cost Overrun

VA and DOD Senior Leaders Commit to Aligned Electronic Health Records System Rollout

VA to Congress: First Cerner EHR Install Will Go Live by 2020

Price Tag for New VA EHR Now Totals Nearly $16B

Congressman Raises Concerns about “Deteriorating, Rudderless” Leadership of VA’s EHR Project

VA EHR Optimization Efforts a Concern for Congress