Watchdog: VA underestimated cost of new electronic health record system by billions

VA is nearly three years into a 10-year modernization effort to replace its aging electronic health record system. Photo credit Alex Wong/Getty Images

A second Department of Veterans Affairs Office of Inspector General audit report has found that the cost of the electronic health records modernization project has been underestimated by billions of dollars.

The OIG found the estimate of about $4.3 billion for information technology upgrades was not reliable, and a lack of complete documentation made it difficult to determine the accuracy of estimates.

VA is nearly three years into a 10-year modernization effort to replace its aging electronic health record system. The new system is designed to be interoperable with the Department of Defense’s system, which will allow healthcare providers to access more comprehensive medical histories for the more than nine million veterans enrolled in the VA healthcare program.

The electronic health record modernization program manages VA’s transition to the new system.

VA announced a strategic review of the EHRM program in March. This is the second OIG report this year examining VA’s development and reporting of cost estimates for infrastructure upgrades needed to support the EHRM program.

“This report makes clear the Electronic Health Record Modernization program needs strong oversight by VA and Congress to ensure it delivers reliable support to Department medical staff and the veterans they serve,” said Sen. Jon Tester (D-MT), chairman of the Senate Veterans Affairs Committee. “While Secretary McDonough has taken positive steps to get this program back on track, the Senate needs to confirm a VA deputy secretary to help manage this effort, protect taxpayer dollars, and deliver for all veterans.

The OIG also determined that VA did not report to Congress other, critical program-related IT infrastructure upgrade costs totaling about $2.5 billion, thus underreporting the program life-cycle costs by a significant amount.

“This lapse in reliable reporting occurred because certain IT infrastructure upgrade costs are assumed by VA’s Office of Information and Technology (OIT) and the Veterans Health Administration (VHA), and there were inadequate procedures for determining if a cost-estimate update is needed in the office’s congressionally mandated reports and, if so, when this update should occur,” the report reads.

VA reported to Congress in 2018 that the program would cost approximately $16.1 billion over 10 years to implement the new system across VA facilities nationwide.

The OIG made six recommendations for OEHRM’s executive director to

(1) ensure an independent cost estimate is performed

(2) reassess the cost estimate for program-related IT infrastructure upgrades and refine it as needed to comply with cost-estimating standards

(3) develop procedures that align with VA cost-estimating guidance

(4) ensure costs for all IT infrastructure upgrades needed for the program and funded by OIT and VHA or other sources are disclosed in program life-cycle cost estimates presented to Congress

(5) formalize agreements with OIT and VHA to identify the expected funding contributions from each entity, and

(6) establish procedures that identify when life-cycle cost estimates should be updated and ensure those updates are disclosed in the program’s congressionally mandated reports management comments.

OEHRM’s executive director concurred with the six recommendations and provided action plans to address all of them.

Sen. Tester will lead a full committee hearing on July 14 to review VA’s roll-out of the EHRM program and hear directly from VA officials on the outcome of their strategic review.

Update: at the Senate hearing on July 14th, Sen. Tester described the roll out of the records modernization program to be, "alarming, or something far worse."

Veterans Affairs has instituted a strategic pause in order to get their modernization program back on track.

Reach Julia LeDoux at

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