VA Signs New, Tougher Contract with Company Handling Faulty Electronic Health Records Rollout

The Mann-Grandstaff VA Medical Center in Spokane, Washington.
The Mann-Grandstaff VA Medical Center in Spokane, Washington. (Dept. of Veterans Affairs)

The Department of Veterans Affairs will continue its adoption of the Oracle Cerner Electronic Health Records System under a new contract that the department says will hold the company more accountable for program failures, officials announced Tuesday.

One day before the VA’s contract with Oracle Cerner was set to expire, the parties agreed to a one-year contract, renegotiable and renewable for up to five years, for the EHR modernization program, which is designed to improve recordkeeping across the VA while being interoperable with Defense Department and other private-sector health records systems.

The software, currently used at five VA medical centers and their affiliated clinics in the Pacific Northwest and Ohio, has been linked to numerous patient safety issues, including four patient deaths. The troubles forced the VA to halt further rollout of the system last month and renegotiate the terms of the contract.

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Dr. Neil Evans, chief of the Veterans Health Administration’s Office of Connected Care, said Tuesday that the new contract "dramatically increases" the department's ability to hold the company accountable for outages and other issues, requiring improved reliability and responsiveness and interoperability with other health care systems, as well as the VA's website and mobile apps.

One of the keys in the contract to ensuring performance, Evans said, is instituting stronger performance expectations and larger penalty fines when the system misses the mark.

"The system has not delivered for veterans or VA clinicians to date, but we are stopping at nothing to get this right -- and we will deliver the efficient, well-functioning system that veterans and clinicians deserve," Evans said in a statement released Tuesday.

From 2020, when the program was first introduced in Spokane, Washington, through June 2022, the Oracle Cerner program has been down more than 500 times, and the company paid roughly $325,000 of the $4.4 billion it has received to date in performance penalties, according to a report last year by FedScoop.

"If these new terms had been in place since the start of the contract, VA would have received approximately a 30-fold increase in [monetary] credits for the system outages," Evans said Tuesday. "And outage-free time is only one of the 28 performance metrics that are now built into the contract, so Oracle Cerner is heavily incentivized across the board to improve performance for veterans and clinicians."

The system was introduced in October 2020 at Mann-Grandstaff VA Medical Center in Spokane, following several delays. Nearly immediately, it ran into trouble, causing headaches for staff and depriving veterans of timely access to medications and appointments.

After pauses to address the problems, the system was rolled out at the Walla Walla, Washington, VA hospital and clinics in March 2022, and later, Columbus, Ohio; White City, Ohio; and Roseburg, Oregon.

The VA paused further implementation last year after the VA inspector general released a report outlining major concerns with the system. That pause was later extended until June 2023.

In March, however, VA officials told Congress the system had contributed to six cases of "catastrophic harm" to patients, including four deaths. The next month, the VA announced it had halted all future deployments as it moved to fix the system at the facilities where it currently is used.

Lawmakers have moved to ensure that the VA improves its oversight of Oracle Cerner and holds the company accountable. Rep. Mike Bost, an Illinois Republican who chairs the House Veterans Affairs Committee, and Rep. Matt Rosendale, R-Mont., have introduced several bills to address the issues, including one that would scrap the program if progress is not made to ensure that the system is safe and effective.

The pair also have sponsored legislation that would require hospital leaders to sign off on the program before it is introduced at additional sites.

On Tuesday, Bost and Rosendale, who chairs the House Veterans Affairs technology modernization subcommittee, released a statement saying that, despite the VA’s announcement on the new contract, their questions about the program are still unanswered, such as concerns over the division of labor between Oracle and the VA and how the contract changes would improve veteran care.

“This shorter-term contract is an encouraging first step, but veterans and taxpayers need more than a wink and a nod that the project will improve,” they said in a statement. “We will continue closely overseeing this effort to get veterans and VA staff the fully functional electronic health record they deserve.”

Sen. Jon Tester, D-Mont., also has introduced a bill that would require the VA to restructure the system to make improvements and be more transparent with Congress.

In a statement Tuesday, Tester said he welcomed the new contract terms but said the changes are just the start.

"I've said from day one that the EHR [Modernization] system has to deliver for veterans, VA medical professionals, and the American taxpayer – and this new contract is a step in that direction," said Tester, who chairs the Senate Veterans' Affairs Committee. "I'll keep holding VA and Oracle Cerner's feet to the fire in implementing these changes while we work to pass stronger reforms under my [proposed bill]."

The VA reached a $10 billion deal with Cerner in May 2018 to develop and oversee adoption of an electronic health records system compatible with the Department of Defense's electronic medical records system, also an Oracle Cerner product.

The cost has risen to an estimated $16 billion, with at least one independent nonprofit, the Institute for Defense Analyses, projecting that the total cost could run as much as $50 billion over 28 years.

In a statement provided to, Oracle Global Industries Executive Vice President Mike Sicilia said the contract reiterates both parties’ commitment to modernizing the VA’s health record system.

“This new agreement reflects Oracle's commitment to Veterans’ health care as well as complete confidence in our technology and our partnership with the VA to deliver an EHR that far exceeds the expectations of users,” Sicilia said.

VA officials said Tuesday afternoon that they were unable to provide any additional information about the contract or the negotiations, declining to comment on any new cost or calendar projections.

Evans, the chief of the Veterans Health Administration’s Office of Connected Care, said the new contract lays a foundation for the VA and Oracle to resolve system issues now and make sure it works better at future sites.

"Ultimately, we believe that this new contract gives VA the tools we need to hold Oracle Cerner accountable to deliver an EHR that will meaningfully improve Veterans' health outcomes and benefits," Evans said.

– Patricia Kime can be reached at Follow her on Twitter @patriciakime

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