Oracle’s $5 Billion Health IT Contract Adds Penalties, Oversight

The VA announced it has modified its electronic health records modernization contract with Oracle-Cerner after pausing the program last month amid ongoing issues with the systems.

The agreement changes the contract term from one five-year term to five one-year terms to give the Department of Veterans Affairs an annual chance to review and renegotiate as needed and included additional monetary penalties if Oracle fails to meet expectations, according to a copy of the annoucement obtained by Bloomberg Government.

Last month, VA said it expected to save $400 million after negotiations were completed. The announcement didn’t project financial impacts of the new terms and it is unclear if that expectation has been realized in the new agreement.

VA said the changes to the contract allow the department to bring added accountability to Oracle across key areas—reliability, responsiveness, interoperability with other health care systems, and interoperability with other applications—but didn’t go into detail beyond contract term change.

The department said it has built 28 performance metrics into the contract, but only specified one: system outages.

Sen. Jon Tester (D-Mont.), chair of the Senate Veterans’ Affairs Committee, called the announcement a step toward making the electronic health record system workable for veterans, but he said that more had to be done.

“I’ve said from day one that the EHRM system has to deliver for veterans, VA medical professionals, and the American taxpayer—and this new contract is a step in that direction,” he said in the statement. “But this is just the start of what’s needed to get this program working in a way deserving of our veterans and taxpayers.

The VA announced it was stopping plans for rollouts to new sites of the EHRM program last month while it attempts to fix issues previously recognized at the five locations that currently have the software.

The VA has already obligated more than $5.5 billion to Oracle-Cerner for EHRM, according to Bloomberg Government data.

Lawmakers have continued to call for an end to the program entirely as recently as last week.

To contact the reporter on this story: Caleb Harshberger at charshberger@bloombergindustry.com

To contact the editors responsible for this story: Amanda H. Allen at aallen@bloombergindustry.com; Andrew Childers at achilders@bloomberglaw.com