VA underestimated Cerner EHR modernization costs by billions, OIG report finds

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The Department of Veterans Affairs' $16 billion plan to modernize its EHR with Cerner was underestimated by between $1 billion and $2.6 billion, as the budget didn't account for the physical infrastructure costs of the project, according to a May 26 report by the Office of Inspector General.

The OIG initiated the audit to determine if the VA developed and reported reliable cost estimates for the physical upgrades needed to support the EHR upgrade. The team also examined if the Office of Electronic Health Record Modernization reported estimates to Congress that were in accordance with statutory mandates, the report said.

Five report findings:

  1. Reliable cost estimates are vital in ensuring Congress has the information needed to make informed budgetary decisions. Within the VA, senior leaders rely on accurate estimates to budget programs, the report said.

  2. The current estimates failed to account for the physical infrastructure costs needed through VA hospitals. VA medical facilities need significant upgrades, such as electrical work, cabling, heating, ventilation and cooling, the report said.

  3. The OIG's projections found the VA's formal estimate for physical infrastructure costs in June 2019 was underestimated by as much as $1 billion. Its November 2019 physical infrastructure estimate was off by about $2.6 billion.

  4. The OIG found the VA did not complete an independent cost estimate, as required by VA financial policy. Doing so would have revealed many of the issues discovered during the audit and would have allowed the VA to improve the reliability of its estimates.

  5. The VA initially budgeted $10 billion for the EHR modernization in 2018, but by 2019 the cost was forecasted to cost $16 billion. The VA wasn't aware that it needed physical infrastructure upgrades until nearly six months after it awarded its EHR contract to Cerner in 2018.

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