Pentagon Readies Record $11B Health Care Contract Bid

Sometime in the coming months, the Defense Department will bid out its Healthcare Management Systems Modernization contract, an effort so large in monetary size and game-changing scope that it could significantly influence the future of health care in the U.S.

The DHMSM contract’s estimated lifecycle value is approximately $11 billion and would include initial operating capabilities by 2017 and full functionality by 2023, according to Dr. Jonathan Woodson, assistant secretary of Defense for health affairs, who testified in February before the House Appropriations Committee’s defense panel.

Even in Washington, $11 billion is a lot of money, and it would surely rank among the largest IT-related contracts in government. What’s unique about this effort is that the Pentagon wants a single contractor to lead the integration of a commercial electronic health records system to cover its nearly 10 million beneficiaries and large assortment of health care facilities worldwide. Defense is one of the largest health care providers in the country, on par in size with the Veterans Affairs Department and private sector leaders like Kaiser Permanente.

Presumably, big-name Beltway-familiar contractors – the IBMs, Accentures and Northrop Grummans of the world – will partner up with vendors of enterprise electronic health records systems like Epic or Cerner. These and other companies have had a slew of representatives present at several industry days held around DHMSM, and most have already partnered up in preparation for the contract, though they won’t publicly discuss those relationships.

Defense officials want to award the contract by the end of 2014, and the winning contractor would have a chance to advance interoperability within DoD’s health records system, which has continually been one of the biggest faults of its current health records system, the Armed Forces Health Longitudinal Technology Application, or ALTHA.

Major data gaps in patient records occur when health care is delivered to beneficiaries outside the DOD network, and today approximately half of DoD’s 9.8 million beneficiaries receive their health care outside the network.  

An interoperable system has the chance to right many of the wrongs omnipresent in Defense’s health care operations, and could well help the government take a leading role in using technology to improve patient health care. Though the transition in U.S.-based health care systems from paper-based to digital health records is not yet complete, interoperability between electronic health care records is a big piece of the puzzle.

“Healthcare is a very important undertaking to the nation, not just the DoD, and we are going to be very aggressive about this,” said Andrew Maner, U.S. Federal Leader for IBM’s Global Business Services division.

IBM announced new investments to its growing federal health care team April 24, including Dr.  Keith Salzman as its chief medical information officer. Salzman spent 20 years with the DoD’s military health system. In joining Big Blue, Salzman puts his name behind a company that also wants to lead the way in health care analytics, having developed an assortment of content and natural language processing analytic tools that allow for the extraction of unstructured data in electronic medical records.

It’s likely Defense’s procurement will seek to incorporate various analytic capabilities because structured data – basic information such as a patient’s age or sex – only makes up a small portion of an electronic medical record. Structured data is easier to share between machines using traditional relational databases.

However, most health IT experts say 80 percent of the information in health records is unstructured, but composed of highly valuable data such as physicians’ notes, symptom descriptions and the like. Various pilots have showed analytics of this unstructured data leading to improved patient care.

“The MDs and the CIOs come together in a procurement like this. It’s a business process change and a transformation of health care delivery,” Maner said.

There are other major ramifications for DHMSM, too. 

Last year, efforts to develop a joint VA-DoD electronic health records system were scrapped after estimated costs ballooned to $28 billion. By Congress’ count, the doomed effort – a result of the 2008 Defense Authorization Act – already cost taxpayers more than $1 billion. 

Instead, Defense looked to sustain operation through 2018 of its electronic health record, AHLTA, as well as its Composite Health Care System and Clinical Data Repository, which contains 240 million records. 

Meanwhile, VA Secretary Eric Shinseki has expressed interest in competing for DoD’s DHMSM procurement. Shinseki told the House Veteran Affairs Committee in March that its next-generation Veterans Health Information Systems and Technology Architecture, or VistA Evolution, will be comparable to commercial options.

Conversely, Shinseki said that if DoD develops a program that meets VA needs, “We will go after that.”

DoD and VA’s recent health care history, as well as the residual effect from the failings of HealthCare.gov’s rollout, are likely to put DHMSM under intense scrutiny. Thus far, the government has written out $319 million in checks to myriad contractors involved with the project and obligated a total of $677 million to fund HealthCare.gov. Accenture, which continues to beef up its federal health care business, was recently charged to run HealthCare.gov after CGI Federal was given the boot.  Officials from Accenture did not comment to Nextgov when asked about their interest in DHMSM.

While DHMSM and HealthCare.gov have little in common outside the words “health care” – DoD has operated a full, transparent procurement so far and plans to award a single contract – it’s likely they’ll be linked simply because of their size, scope and subject matter.

With DHMSM, however, DoD and the contractor it chooses have a chance to write a new chapter in health care IT, and perhaps more importantly, in general patient health care.