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Military Health System and TRICARE Lose Control Over IT Budget

Frank Kendall, under secretary of Defense for acquisition, technology and logistics

Frank Kendall, under secretary of Defense for acquisition, technology and logistics // U.S. Army

The Defense Department has quietly shifted management and oversight of health information technology, including procurements from the Military Health System and the TRICARE Management Activity, to Frank Kendall, under secretary of Defense for acquisition, technology and logistics, Nextgov has learned.

Multiple industry sources confirmed the shift. One official said the move reflects frustration among senior Pentagon leaders with MHS efforts to procure new health IT systems, both independently and in partnership with the Veterans Affairs Department to develop the integrated electronic heath record. The departments have spent at least $1 billion over the past five years pursuing an integrated system.

Kendall will exercise tight control and oversight of the health IT procurement budget, the official said, noting the shift is a major blow to MHS and TRICARE. Pentagon officials did not respond to a request for comment.

Defense Secretary Chuck Hagel told lawmakers at a hearing of the House Appropriations Committee’s Defense panel on April 16 that he had taken personal responsibility for the iEHR and said in late March he had “deferred” a request for proposals for a new Defense electronic health record because “I didn’t think we knew what the hell we were doing.”

J. Michael Gilmore, the Pentagon’s director of operational test and evaluation, wrote in a March 28 memo reported by Nextgov on April 22 that MHS preferred to buy commercial health IT software rather than develop systems based on open standards as mandated by President Obama in 2009.

“Unfortunately, [the Pentagon] preference is to purchase proprietary software for so-called ‘core’ health management functions. This will be an expensive, complete replacement that may or may not succeed and that may or may not result in a system that adheres to open standards,” Gilmore told Deputy Secretary of Defense Ashton Carter.

Gilmore said that MHS planned to issue requests for proposals for a commercial software pharmacy system, lab system and immunization system.

Those proposals, issued over the past year, never made it past the request-for-information stage to the procurement stage, and now fall under Kendall as Hagel works on the overall plan for the integrated electronic health record system. That plan is slated for completion next month.

MHS requested an iEHR budget of $204 million in 2014 and said it anticipated spending another $254 million on the project through 2018, with management now transferred to Kendall.

The Pentagon did not respond to requests to provide further details on the shift in management off health IT procurement to Kendall.

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