VA EHR Modernization Program Cost Underestimated By Up to $2.6B

The Department of Veterans Affairs’ ongoing EHR modernization effort is likely to cost $1 billion to $2.6 billion more than originally estimated, as the department did not account for some physical infrastructure costs in its original projections, according to an audit from the VA Office of Inspector General (OIG).

The VA’s Electronic Health Record Modernization (EHRM) program began in 2018 when the department signed a contract with Cerner. The Veterans Health Administration (VHA) previously reported that the EHR implementation across VA care facilities nationwide would cost about $16 billion over the course of ten years.  

However, using VA and Government Accountability Office (GAO) cost-estimating guidance, the OIG team found that VHA’s two formal physical infrastructure cost estimates for the EHRM from June 2019 and November 2019 may have been underestimated by $1 billion and $2.6 billion, respectively.

“The lack of reliable cost estimates was caused in part by insufficient planning at the outset of the program,” the OIG wrote. “OEHRM leaders stated that at the beginning of the program the focus was on the EHRM contract and the system itself, rather than infrastructure.”

“VHA staff further clarified that it was not until November 2018, nearly six months after the EHRM contract award to Cerner to procure the new electronic health record system, that key VHA staff were first made aware of a need for physical infrastructure upgrades.”

Therefore, VHA did not know enough about what physical infrastructure the new EHR system would require to accurately predict costs at the time they developed the two estimates. It was not until November 2019 that OEHRM and VHA collaborated on an initial set of infrastructure requirements, and requirements continued to be defined up until January 2021.

“In preparation for the system’s deployment, VA medical facilities need significant upgrades to their physical infrastructure, such as electrical work, cabling, heating, ventilation, and cooling,” the IG wrote.  “These upgrades are critical to successful deployment of the new system and are likely to cost billions of dollars.”

The audit also found that the Office of Electronic Health Record Modernization (OEHRM), the entity responsible for reporting program costs to Congress, did not include critical physical infrastructure upgrade costs in the program’s life cycle cost estimate.

“Although VHA provided OEHRM with an approximately $2.7 billion estimate for physical infrastructure upgrade costs in June 2019, OEHRM did not include them in its life cycle cost estimates,” the OIG wrote.

This goes against the Veterans Benefits and Transition Act of 2018 which requires the VA Secretary to submit reports that include life cycle cost predictions to Congress quarterly.

While seven out of eight of OEHRM’s quarterly reports submitted by January 2021 included language indicating the inclusion of physical infrastructure estimates, none of them included infrastructure costs.

“OEHRM officials stated physical infrastructure upgrades were the responsibility of VHA,” the OIG wrote. “Accordingly, OEHRM stated it did not disclose these to Congress as part of the program’s reported cost estimates because funding and completion of these upgrades were outside OEHRM’s responsibility, and because these upgrades within VHA facilities had been long-standing.”

Additionally, the OIG team found that the VA did not receive an independent, third-party cost estimate for the project as required by VA financial policy. Such an estimate would have allowed VHA to take earlier action to improve the reliability of its estimates, OIG explained.

The OIG team recommended that OEHRM’s executive director ensure an independent cost estimate is performed for program life cycle cost estimates (including physical infrastructure costs).

The OIG also recommended that VHA’s director of special engineering projects for the Office of Healthcare Environment and Facilities Programs develop a reliable cost estimate for physical infrastructure upgrades in accordance with VA cost-estimating standards.

The director of special engineering projects should incorporate costs identified in facility self-assessments and scoping sessions to continuously update the estimate, as well.

Lastly, OIG called for OEHRM’s executive director to disclose the costs for physical infrastructure upgrades funded by VHA or other sources in its life cycle cost estimates presented to Congress. 

“Reliable cost estimates for these upgrades are imperative to ensuring that Congress has the information needed to make informed budgetary and investment decisions,” the OIG wrote.

When complete, the new system will be interoperable with the EHR used by the Department of Defense, allowing healthcare providers access to more comprehensive patient health data for the over nine million veterans enrolled in the VA’s healthcare program.