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Health IT firms vie for huge Defense contract

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The Department of Defense is expected to grant a 10-year health care IT contract, estimated to be worth as much as $10 billion, to overhaul the department's electronic health system records.

"Relative to the electronic health records vendors, we're talking probably $2 billion over the life of the contract," said Michael Cherny, health IT analyst at Evercore ISI. "A contract of this size would clearly be very meaningful. There's also a major credibility component that comes with this, by being able to partner with the military."

The three major electronic health record, or EHR, firms have teamed with data analytics heavyweights to compete for the project, which involves building a unified health platform that will handle the records of nearly 10 million service members from all three military branches, from the battlefield to the home front.


Three teams in the running

The leader in the EHR sector, privately held Epic Systems, has partnered with IBM. Their team website touts their combined strengths and includes customer testimonials from major health systems.

Rival Cerner has teamed with Accenture and the health unit of defense consultant Leidos. The team touts its record of interoperability, or the ability for their systems to communicate with others on different platforms.

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Allscripts is seen is the smallest of the three EHR vendors in the running, and is seen as the underdog. The firm has paired with defense contractor Computer Sciences and Hewlett-Packard for its bid.

"Allscripts has the most to gain from winning the contract," said Stifel analyst Steven Rubis. "That would put Allscripts on the radar screen of some large hospitals that they may struggle to get today."

Right now, Cerner and Epic have a virtual lock on the biggest health system EHR contracts, and because of that most analysts expect the DOD to choose one of the leading firms, he said.

Earlier this month, the DOD awarded Cerner a smaller, $16 million multiyear contract to revamp the military's pathology lab IT system.

Called Dim Sum, but a tall order

The program, which is officially known as the Defense Healthcare Management Systems Modernization, has been nicknamed Dim Sum within the industry because of its abbreviation DHMSM. But what the military is looking for is really more of a big enchilada.

The goal is to make the medical records for more than 9.6 million Army, Air Force, Navy and Marine personnel accessible from anywhere in the world from the DOD's medical facilities, whether on active duty or back on the home front. It would be one of the largest-ever such medical records systems in the U.S.

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"Whoever wins this contract should be held to an extremely high standard," said Dr. Peter Levin, the former chief technology officer for the U.S. Department of Veterans Affairs from 2009 to 2013.

Dr. Levin co-authored a report with retired army Gen. Hugh Shelton and Stephen Ondra of insurer Health Care Service, for the Center for a New American Security. He wanted the digital files also to work seamlessly with the VA's current digital records system. That's one of the concerns outlined in the report.

"There's been a notorious lack of interoperability, both at the system level and more importantly at the data level between the VA and the DOD," Dr. Levin said. He wants the new system to adopt so-called Blue Button technology to allow servicemen and women access to their own records, so that they can share them with doctors outside of the DOD.

"A platform that makes it fast, easy, reliable and safe to exchange health information about individual patients with other health-care providers" is what the military needs to demand, said Levin.

The big challenge: Interoperability

While the health-care industry has made big strides when it comes to electronic record keeping and data analytics, analysts say making sure that different hospital and provider systems could communicate with one another has not been a health IT priority until now.

"At the end of the day, their core systems were developed in a fee-for-volume world," said Stifel's Rubis. Building the kind of system the DOD wants will be a very big test for the winners of the contract.

"Their technology, I don't believe, is in a place they can dominate a DOD contract for 10 years, if the DOD wants to innovate," he said.

For the EHR vendors not selected, there could be an upside to losing, Cherny said. He says some large hospital clients may worry that the winning firm's best minds will be immersed in the DOD contract.

"The perception could be that resources needed to ensure as effective deployment as possible [for the DOD] could allow others to win additional business," he explained, "which in my opinion ... could be more profitable."

The DOD is expected to announce the winning bid by the end of the week.