By Joseph Venturelli

Just about a week ago the United States Department of Defense decided to award Cerner a potential eighteen year EHR deployment engagement deal that could payout $11bn

Cerner’s EHR suite will replace the Department of Defense’s current system in its 55 hospitals and 350+ clinics, as well as onboard ships, submarines and other locales in the military operations theater.

So why may this be a good thing for Epic and why may Judy Faulkner, being the brilliant, cunning business person that she is, have let this deal get away?

Well let’s look at some of the data. Epic has been named the #1 software suites by KLAS every year since 2010.  Epic has about 315 customers which are comprised of 69% of the Stage 7 hospitals in the United States, 83% of the Stage 7 Clinics in the United States and 71 children’s hospitals in the United States.

Epic is innovating on a weekly basis with updates and new functionality coming out at a breakneck speed. They are firmly entrenched in Kaiser Permanente, Cedars Sinai, the Cleveland Clinic, Mount Sinai and Yale New Haven.

So let’s quickly look at the players who bid the deal:

First we had CSC with HP and Allscripts their ambulatory and Acute don’t really interoperate well together and Eclipsys hasn’t moved much since their acquisition in 2010, so they were a likely “non-starter”

Then we had CACI with IBM and EPIC. What is there to say about Epic and IBM, my guess is this would be the team to beat. Epic and IBM both have very regimented implementation strategies, one may even say they are “military” in their way of doing things? A structure you would have thought the DoD would have appreciated, but also keep in mind Epic’s lack of flexibility. Remember also the contract required that you integrate in 30% of small businesses; this may have also been a tough pill for Judy to swallow. Either way my money would have been on this team.

Then we have the Cerner / Leidos / Accenture trio – Leidos being the incumbent, and then bringing on the powerhouse Accenture, who has a ton of healthcare experience, really stacked the deck for them.  For me it just seems like the most comfortable choice for the DoD to make, basically “the devil you know”

Maybe Epic customers came out the winner here when you hear things like this from Micky Tripathi, CEO of the Massachusetts eHealth Collaborative when he said “My biggest worry isn’t that Cerner won’t deliver, it’s that DOD will suck the lifeblood out of the company by running its management ragged with endless overhead and dulling the innovative edge of its development teams. There is a tremendous amount of innovation going on in health IT right now. We need a well-performing Cerner in the private sector to keep pushing the innovation frontier. It’s not a coincidence that defense contractors don’t compete well in the private sector, and companies who do both shield their commercial business from their defense business to protect the former from the latter.”

I challenge you to think about the sheer drag that this contract will put on Cerner and how it has the potential to slow the company down in so many ways. Ways that may not become apparent for 18 to 24 months, but once implementation and training start getting on the schedule Cerner may find itself bogged down in the bureaucratic mud.

However in their call last week Cerner President Zaine Burke assured their investor base that “they were fully prepared to meet their staffing requirements of the project.”

When asked about the potential drag on its current customer base, Burke said “We believe this is a positive development for our clients, and they should have confidence that Cerner will continue to execute to meet all of our current and future commitments, he said.”We do not expect this to have a material impact on bookings, revenue, or earnings in the near term since the project will have several phases and will start with a small initial rollout.”

Is there a better way to cripple your competitor than to see them awarded a potentially 18 yearlong contract that will likely not allow them to concentrate on much else while you (Epic) continue to pick off the remaining portion of the U.S., keep innovating and rolling out neat new stuff while Cerner is working on staffing up and creating the project plan?

When Frank Kendall, Undersecretary of Defense for Acquisition, Technology and Logistics, announced the award, he said that the decision was based in a large part “to limit changes in the current electronic health records system”

And that “Market share was not a consideration,” “We wanted minimum modifications.

Kendall went on to say “The trick … in getting a business system fielded isn’t about the product you’re buying, it’s about the training, the preparation of your people, it’s about minimizing the changes to the software that you’re buying,”

Which leads one to wonder that if it isn’t about the quality of the product, or the fact that the market has widely adopted the product you didn’t pick, then just how would you deploy a piece of software over an 18 year engagement while minimizing the changes? Something has to give.

The DoD also said that Cerner’s EHR will be “an important enabler of sustaining care anywhere people might serve, a vital piece of care coordination,” that will reside in more than 1,000 sites around the globe and that means the commercial software must interoperate not only with the VA but also with the private sector healthcare entities that conduct as much as 70 percent of service-member’s care.”

By the time the DoD gets this all rolled out in 2030 Epic will likely have most of the private sector here and abroad locked up

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Cris Ross, Mayo Clinic Chief Information Officer, explained to Healthcare IT News that the reason Mayo clinic is switching from Cerner to Epic was the need to converge its practices in which case Epic was a better option because of its reliability in terms of revenue cycle and patient engagement.

He added that, Epic’s ability to connect through direct protocol and other EHRs, the volume floating across networks from Epic to other EHRs was impressive.

What equal opportunity do we supposed Epic will have? While Cerner will be delivering project plans, Epic will continue strengthening an integrated EHR across organizations, starting with Mayo whose practice of convergence is a core mission thereby strongly supporting a long-term objective for them. Unlike Cerner’s contract, Mayo’s deal is a long-term relationship based on technological commitment, which will create a foundation for Epic’s innovative strategy.

Can the DOD make a breakthrough in the 21^st century using technology from the 20^th century? To achieve an advanced healthcare system, an open, internet based platform committed to building a national health information network is paramount.

As Sun Tzu put it in The Art of War, “The greatest victory is that which requires no battle”. So the question remains, did Epic lose the deal to Cerner or did Epic let Cerner have the deal knowing that ultimately the deal would begin the death spiral for Epic’s largest competitor or should I just get fitted for a tin foil hat?

* Sept 2019 (4 years hence) only 4 locations in Idaho and California are live on Cerner.

** June 2022 the DoD gets to the half way point, while the VA struggles.

*** Fast forward 8 years to April of 2023 and the Veterans Administration announced that it would put the $16B EHR rollout on an indefinite pause until Cerner/Oracle can address the very serious issues affecting the VA.

July 2023:

Costs for the Veterans Affairs Department’s Cerner EHR rollout continue to soar, causing tension between the VA and Congress, with some lawmakers wanting to ax the program, while others advocate for the VA to take one more shot at the implementation, Politico reported July 21.

In 2018, the VA’s EHR costs were initially projected to be $10 billion over 10 years but have grown to $50.8 billion over 28 years. These upticks have caused some lawmakers to want to shut down the project. 

There have been several bills introduced to end the program as issues with the EHR system continue. According to the publication, the VA’s Cerner EHR system led to the deaths of four patients, and it has suffered outages at facilities that have implemented it. 

“It has been a nightmare,” House Veterans’ Affairs Chair Mike Bost, R-Ill., told the publication. 

More than a dozen officials who have been involved or are intimately familiar with the EHR project told Politico that “the system’s problems are myriad.”

“The program was never designed to be successful,” Peter Levin, a former VA chief technology officer, told the publication. “Not making difficult choices and not making good choices is costing, at the very least, taxpayers billions of dollars.”