Software firm protests upgrade contract for UI's Chicago med school

Software firm protests upgrade contract for UI's Chicago med school

CHICAGO — A $100 million-plus upgrade of electronic records systems at the University of Illinois medical center in Chicago has come under state scrutiny after a protest filed by a software company that lost out on the lucrative contract.

Cerner Corp. filed a protest with the state's Chief Procurement Office for Higher Education over the $62 million, seven-year contract awarded Sept. 7 to rival software firm Epic Systems Corp., claiming the bidding process was unfair and tainted by a possible conflict of interest.

The Integrated Information Infrastructure project, or "3i," would update and unify the 20-year-old electronic medical records and billing systems at UI Health.

Cerner currently handles about 70 percent of the UI's health records, and Epic has a smaller share, according to Cerner'sattorney, Mara Georges.

In a seven-page protest filed in late September, Cerner argued that its bid was $1.5 million lower than Epic's, at $60.5 million, and included all implementation costs whereas Epic's didn't.

It suggested the total price could rise substantially if Epic wins the contract.

Cerner also said it was unfairly denied a chance to demonstrate its product; Epic was the only bidder to provide a demonstration.

The protest letter said Impact Advisors — the Naperville firm hired by UI Health to evaluate its IT needs — could benefit if Epic receives the contract because it has worked closely with that firm on the implementation of similar projects.

However, Impact Advisors said Wednesday that it is an independent company and works with numerous software firms, including Cerner and Allscripts, another bidder on the UI Health project.

Cerner and Epic are the two big players in U.S. health care electronic records systems, sharing about half of the U.S. market, according to KLAS Research, which collects data on the industry. Both have increased their market share over the past five years, but Epic's growth has outpaced Cerner's, said KLAS research director Erik Bermudez.

"They compete head to head very frequently, especially in the large end of the market," he said.

Officials from the UI and Epic declined to respond to Cerner's allegations while the protest is still being reviewed.

But in documents obtained from the state's chief procurement officer through the Freedom of Information Act, the university said its process was fair and complied with state procurement rules.

"We believe ... we followed proper processes throughout," Mike Zenn, chief financial officer for UI Health, told UI trustees last month.

'Doesn't make any sense'

The UI's response cited problems with Cerner products in the past and said Epic outscored Cerner in the evaluation of the contract proposals.

The UI said the contract was awarded through a Request for Proposals, rather than a strict competitive bidding process, so proposals were evaluated on technical merit first, then pricing. Cerner didn't meet the threshold to be considered for a presentation, and even though its price was lower, Cerner still finished behind Epic in the scoring, the UI said.

In its protest, Kansas City-based Cerner said the university's RFP required that "all costs" for the implementation of the project be included. Cerner's price included design, implementation, training and support. Epic failed to include "millions of dollars of implementation costs" that UI Health would incur, it said.

As evidence, Cerner pointed to a Sept. 15 Request for Information issued by the UI after the contract was awarded to Epic, seeking information about how to use outside consultants to help with the implementation.

Cerner also cited estimates put together by Impact Advisers that long-term costs of the project could reach $135 million to $165 million — $73 million to $103 million above Epic's contract bid.

But Impact Advisors said that analysis was a "high-level estimate" of the long-term budget, including vendor costs and other expenses, such as internal UI labor and ongoing operating costs.

Cerner questioned how it could have failed to meet the technical requirements of the proposal, given its track record. It said it currently partners with more than 30 percent of U.S. academic hospitals.

"Epic and Cerner both provide the same kinds of systems," Georges said. "But when you're talking about Illinois, a state that has budgetary issues, and a system provided by Epic that costs at least $75 million more without any rationale for using that system, it just doesn't make any sense."

Cerner said it has "deep-rooted knowledge" of UI Health's technology requirements and could leverage that to provide cost-savings.

But the university countered: "We have twice tried to deploy a particular Cerner ambulatory software component and twice had to back it out since it brought the entire Cerner system to a halt." It cited a letter from Cerner in which the company "essentially concluded that they do not know why that software component does not work at UI Health."

Project now on hold

The UI noted that KLAS "consistently rates Cerner well below Epic" in relevant software products.

Georges blamed any problems on the fact that UI Health hasn't upgraded its systems as recommended by Cerner.

Regarding Impact Advisors, Cerner said the company provided "key findings and recommendations" to UI Health about the project and also helps hospitals implement electronic records system.

"Impact Advisors stands to gain financially by ousting the incumbent and replacing the Cerner system with an Epic system," the protest said.

But the UI and Impact Advisors said the company played a strictly advisory role in the design of the 3i project and the RFP. Implementation services were bid separately, and Impact Advisors played no role in the evaluation of proposals or the ultimate decision, the UI said. The 17-member evaluation committee was made up of UI hospital staff.

"Impact Advisors is not assured of any additional role in this process," the company said.

The project is on hold until the protest is resolved. Zenn told trustees that UI Health had hoped to finalize the contract with Epic and move ahead with implementation services by the end of December, but that's unlikely now.

If the state upholds the protest, UI Health would have to re-issue the original RFP with some changes, Zenn said.

UI trustees expressed some concerns in September about the huge investment in the multi-year project and the potential risks, given the relatively short life span of technology and cost overruns in similar projects at other health centers.

Zenn reassured trustees in November that administrators took those concerns to heart in designing the "rules of the road" for the project.