The Department of Veterans Affairs underestimated how much it’ll cost to make a variety of physical infrastructures upgrades needed to support the new electronic health record at its medical facilities.

VA’s previous physical infrastructure estimates were unreliable, the department’s inspector general said earlier this week, raising questions about the overall costs of the EHR modernization effort.

VA is updating the electrical work, cabling, heating, cooling and ventilation to prepare for the Cerner Millennium suite at its medical facilities. The Veterans Health Administration estimated the costs of performing that work on two previous occasions — once in June 2019, when it projected the upgrades at $2.7 billion. VHA offered a second estimate later that year in November, when it said physical infrastructure upgrades would cost $1.1 billion.

But the actual costs for EHR physical infrastructure upgrades are likely more, potentially $3.1-to-$3.7 billion, according to the VA inspector general.

VA has consistently said its massive electronic health record modernization effort will cost $16.1 billion.

But that figure, which includes the 10-year contract with Cerner Corporation, $4.3 billion for IT infrastructure upgrades and an additional $1.8 billion for program management and other support contracts, didn’t include physical infrastructure costs. And VA has never included those costs in quarterly reports to Congress about the project.

Those investments are separate from VA’s IT infrastructure upgrades, which include things like buying new computers or network equipment.

It’s unclear why exactly VA’s previous physical infrastructure estimates varied so significantly, the IG’s report describes a wide variety of discrepancies and omissions between the two cost projections.

The department’s November estimate, for example, didn’t include costs of upgrading cabling at VA facilities across the country. Fiber optic cabling costs represented 17% of the June 2019 budget but 41% of the November estimate, according to the IG.

And while the June estimate did include anticipated escalation costs for VA to complete these upgrades over several years, the November figure left them out. VA agreed the omission was an error.

The IG said VHA used similar methodology to prepare both estimates but based those projections on different cost assumptions for data center investments and others.

Those discrepancies were based, in part, on underestimated costs at two of VA’s initial go-live sites for the EHR, the IG said.

The department underestimated physical infrastructure costs by 57% at the Seattle facility and 108% at the American Lake VA Medical Center.

Poor planning at the start of the EHR modernization project didn’t help either, the IG added.

“Inadequate planning for physical infrastructure upgrades from the time the EHRM contract was awarded to Cerner in May 2018 also contributed to unreliable estimates,” the IG said. “VHA did not have enough information about the state of VHA facilities or the infrastructure the system required to make fine-tuned cost predictions.”

Both VA and EHRM leaders said they didn’t know the scope of the department’s physical infrastructure deficiencies when the contract was signed.

Members of Congress on both sides of the aisle are concerned — and frustrated — with the changing EHR cost estimate.

The “report from VA’s inspector general raises serious questions about the financial management of the EHRM program,” Frank Mrvan (D-Ind.), chairman of the House Veterans Affairs Technology Modernization Subcommittee, said in a statement. “It appears that decisions where made, whether intentional or not, that obscured the complete costs of the program from Congress and the American people.”

At a hearing on VA’s overall infrastructure needs on Thursday, VA said it didn’t have an updated figure detailing EHR physical infrastructure costs and didn’t have a timeline for when one might be available.

“Republicans have been sounding the alarm about the accuracy of VA’s electronic health record modernization cost estimates for years,” Mike Bost (R-Ill.), ranking member of the House Veterans Affairs Committee, said in a statement. “The IG has proven us right. This was already going to be the most expensive electronic health record overhaul in America. Now we know VA has been underestimating it by at least $3 billion. VA must be upfront with Congress about the true costs of this effort. That is why I have been calling for the ongoing strategic review to include a complete, updated cost estimate.”

The department launched a strategic review of the EHR program after hearing concerns from employees and clinicians at the VA medical center in Spokane, Washington, the first go-live site for the project.

“We’re looking really closely at this report,” VA Secretary Denis McDonough told reporters Thursday. “I’m going to refrain right now from making additional commitments about what’s happening on EHR until our strategic review is completed, which I anticipate in the next several weeks.”

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