Pentagon raises payout in DHMSM hosting deal

The Defense Department is paying more than was anticipated for data hosting under its electronic health record contract.

A sole-source add-on to the contract will task Cerner, the health IT vendor on Leidos’ winning team, with data-hosting services through the fourth quarter of 2017, to the tune of $73.7 million.

The Pentagon had initially estimated commercial data hosting for the Defense Healthcare Management Systems Modernization push would cost roughly $50 million over 10 years.

DOD may recompete the hosting service as early as next year. The hike won't increase the $4.3 billion ceiling value of the deal, according to contracting documents, and Pentagon officials say that the significantly higher costs are warranted.

Leidos declined to comment to FCW for this story.

The health record provider's proprietary stockpile of clinical data helps deliver the advanced analytical capabilities that the Pentagon wants to use. Cerner won't connect that data to outside data centers, and the Pentagon can't force them to do so, according to add-on justification paperwork.

Further, the Cerner systems offer more than 99 percent uptime, a substantial improvement on the minimum 98.5 percent availability that DOD stipulated in its initial contracting documents, a Defense Healthcare Management Systems spokesperson noted in a July 7 call with reporters.

"When we're talking about clinical data, that availability can be the difference between life and death," the spokesperson said.

The spokesperson also said that, despite the "significantly higher" price of Cerner hosting compared to initial estimates, the cost is actually within 10 percent of what the cost would have been to host data through the Defense Information Systems Agency, which had been part of the initial plan.

The data hosting modification was first announced in December 2015.

The cost announcement comes months after the Pentagon shot down objections from IBM, Computer Sciences Corp, Amazon and General Dynamics.

The DHMS spokesperson stressed that the Cerner modification is only through next year, and the Pentagon could open up the hosting portion of the contract for bids in July 2017.

The spokesperson indicated that the Pentagon would not try to force Cerner to accept outside hosting, but said Cerner could change its mind or the marketplace could provide a better clinical analytics offering.

Having Cerner host for DHMSM's initial operating phase will allow the Pentagon to evaluate functionality, the spokesperson said.

"What makes sense to us right now may not make sense to us in a couple of years," the spokesperson said, noting the value of keeping options open in coming years. "We feel very secure, this is absolutely the best solution for us now."

The spokesperson said work is on track for the first DHMSM functionality, dubbed Military Health System Genesis, to roll out in the Pacific Northwest in December.