In his FY 2013-2015 Executive Biennium Budget, Hawaii Governor Neil Abercrombie highlighted the daunting challenges that faced his administration during the last biennium, including a $1.3 billion potential budget shortfall that threatened deep programmatic cuts to department operations statewide. The governor utilized a fiscal strategy to only address pressing needs while investing in the state’s future, with goals to improve government efficiency and transparency. For this biennium, Hawaii’s gross domestic product (GDP) is expected to increase by 2.4 percent in 2013, while unemployment rates continue to decrease.

The new biennium budget (seen above in Figure 1) has several areas of investment, including:

• Early learning and early childhood health
• Education IT and digital curriculums
• Increased resources for Hawaii’s aging population
• Environmental sustainability and protection

The biggest gains by department from FY 2013-2014 include the Department of Human Services ($309 million), Department of Budget and Finance ($251 million), and Department of Transportation ($52 million). The Department of Hawaiian Home Lands saw a budget decrease of $140 million. Investments for FY 2014-2015 include $151 million for the Department of Human Services and $91 million for the Department of Budget and Finance.

Although the numbers in Figure 2 look as if Hawaii has invested millions in information technology, the numbers actually represent more transparency into Hawaii’s IT reporting. Deltek was able to gather more data on the total value of IT projects in the state for the biennium budget. Health IT was a major investment, including $2 million for its health information exchange (HIE), $45 million for Medicaid IT initiatives, and $15 million for an electronic medical record (EMR) system. The Department of Taxation is also investing nearly $32 million into its tax system modernization project for FY 2013-2015.

Despite tough times that followed the economic recession, Hawaii has laid the groundwork for a stable foundation and is continuing to increase both its GDP and IT spending. Vendors working in the education, health, and environmental space should check out Deltek’s analysis on Hawaii’s budget here, and brush up on the Aloha State in our state profile application. For a free trial, please click here.

April saw the release of a tenth round of Health Insurance Exchange (HIX) Establishment Grants, awarded to Arkansas ($16.5 million), Hawaii ($128.1 million), Illinois ($115.8 million), New Hampshire ($5.4 million), and Rhode Island ($9.8 million). Details about states’ plans for these funds are explained here. On a related note, the Centers for Medicare and Medicaid Services’ (CMS) also announced the availability of new funding to support navigators in states with federally-facilitated or state-partnership HIX models. Activity also picked up in states that received funding for model design through CMS’ state innovation model (SIM) initiative, including Texas and Iowa.

Notable solicitation releases in April included:

• The District of Columbia Department of Health Care Finance (DHCF) released an RFP for a Medicaid Information Technology Architecture (MITA) State Self-Assessment (SS-A). Deltek will provide updates about the future procurement of a Medicaid management information system (MMIS) here.
• The Rhode Island Department of Administration, on behalf of the Department of Human Services (DHS), released an RFP for maintenance and operations of the InRHODES eligibility system.
• Three states released RFPs for pharmacy benefits management (PBM) services, including the Kentucky Cabinet for Health and Family Services (CHFS), Mississippi Department of Health (DOH), and the Indiana Department of Administration (DOA).
• New Hampshire’s Department of Health and Human Services (DHHS) released an RFP for SIM planning services.

Notable contract awards in April included:

• The Mississippi Department of Health (DOH) awarded its Patient Information Management System (PIMS) contract to Siemens Medical Solutions for just more than $3 million.
• The Hawaii Department of Human Services awarded the Electronic Health Record (EHR) Incentive Program contract to Xerox for nearly $9 million.
• The Kentucky Cabinet for Health and Family Services (CHFS) awarded its Health Insurance Exchange (HIX) Call Center project to Xerox. Deloitte is building the state’s HIX through  a contract awarded in October 2012 for more than $100 million.
• The Alabama Department of Mental Health and Mental Retardation awarded the Integrated Health Record System contract to CoCentrix.
• The Connecticut Health Insurance Exchange awarded its Small Business Health Options Program (SHOP) project to HealthPass.

Big news surfaced in Louisiana with the cancelation of a $29 million contract with Deloitte for the replacement Medicaid Eligibility Determination System (MEDS), originally awarded in April 2011. The state’s Office of Contractual Review cited the original RFP included a preference for a .net solution while Deloitte's contract proposal uses Microsoft Dynamics. The Department of Health and Hospitals (DHH) asked for an additional requirement for the system that was outside the original scopeand warranted a new RFP release. Prior to becoming the secretary of DHH, Bruce Greenstein was managing director of Worldwide Health for Microsoft. Greenstein also hired another Microsoft employee, Zachery Jiwa, to be DHH's chief technology officer, but he left the department in November 2012. DHH now plans to release a new RFP for the replacement MEDS.

Looking to May and the upcoming summer months, we anticipate activity will pick up in states participating in the SIM initiative as CMS approves states’ proposals, of which many have now undergone changes after initial review from CMS. We also anticipate an influx of contract awards for HIX navigator programs, particularly with CMS’ announcement of the availability of federal funding for navigators. States in federally-facilitated or partnership HIX models may also begin to draft legislation and plan for takeovers of additional HIX functions in the future, such as the recently enacted House Bill 1508 in Arkansas.

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Since February 2013 the media has focused considerable attention on the cancellation of the DoD-VA joint effort to develop a new Integrated Electronic Health Record (iEHR). Focusing on iEHR, however, misses the point that out of the $1.3B proposed FY 2014 development budget for the Military Health System (MHS), the iEHR represents a paltry $64M. Approximately $423M will be spent on medical technology development, advanced concepts development, and medical products support, making those the true areas of business opportunity.

In today’s climate of ongoing federal budget cuts, government contractors can be forgiven for feeling unsettled.  The good news is that the fiscal climate has stabilized somewhat, allowing us to peer ahead for potential business opportunities.  One of the areas attracting vendor interest is in military health.  Both the DoD and Department of Veterans Affairs have made the creation of an Integrated Electronic Health Record (iEHR) a priority.  Therefore, iEHR gets the lion’s share of media attention.  The iEHR initiative is only one aspect of Defense Health Programs (DHP), however, so this post will provide a high-level look at the shape of the DHP budget situation and where vendors might want to focus their business development efforts in the months ahead.

Starting with what remains of FY 2013, funding for the DoD’s Military Health System (MHS) in the 2013 Consolidated Appropriations Act (CAA) provided $32.7 billion, a $16 billion drop from the $48.7 billion called for in the President’s FY 2013 Budget Request.  The funding in the 2013 CAA represented a stunning 38% cut in the MHS’ budget, which received $52.8 billion in fiscal 2012.

Despite these cuts, the 2013 CAA also provided up to $16 billion for contracts for the remaining 5½ months of fiscal 2013.  This includes $522 million for TRICARE/MilHealth procurement until the end of September 2015 and $1.3 billion for TRICARE/MilHealth RDT&E until the end of September 2014.  Digging into the RDT&E number we find the following top 10 priorities outlined in the FY 2014 DoD Budget Request.

As we can see from this list, proposed RDT&E funding for iEHR in fiscal 2014 amounts to $64 million.  This is the issue that everyone is so narrowly focused on.  Meanwhile, there are potentially several larger pools of money that very few people are paying attention to.  For example, the proposed budgets for Medical Technology Development and Medical Products Support/Advanced Concept Development equal approximately $423 million.  Then there is the $43 million budget for basic IT Development not related to TMIP-J.

These budget areas are where opportunity at MHS can be found.  For the last few years $2.4 billion worth of MHS/TRICARE IT and concept development requirements have flowed through the Defense Systems Integration, Design, Development, Operation, and Maintenance Support (D/SIDDOMS) III contracts.  These contracts expire in December 2013 and the MHS has already stated that a follow-on contract vehicle will not be put into place.  This means that contracts for IT and concept development requirements like those listed on the TRICARE Acquisition Forecast will be competed in other ways, providing opportunities for large and small businesses alike. The TMA acquisition forecast for FY 2013 shows $225.4 million in planned procurements, equivalent to 43% of the procurement budget provided through FY 2014.  This suggests that ample procurement dollars have been provided to move ahead with a number of the technology acquisitions that are listed in the forecast.

Lastly, readers will notice that in my focus on the procurement of technology requirements I have not mentioned the $72.5 million budgeted for Medical Program-Wide Activities.  Assuming these activities comprise program management, acquisition support, and other professional services, I believe most of those budget dollars will find their way into task and delivery order contracts competed among holders of the Tricare Evaluation Analysis and Management Support (TEAMS) contracts.  A quick look through the TMA Acquisition Forecast for FY 2013 shows that the projected value of requirements which fall under the TEAMS scope of work equals $201 million out of $225 million.  This leaves $24 million in pure IT requirements available for competition in FY 2013.  Keep in mind that these are just the requirements listed on the TMA acquisition forecast.  More IT efforts are likely in the pipeline.

The Department of Health and Human Services (HHS) recently awarded a tenth round of Health Insurance Exchange Establishment Grants. Awardees this time include Arkansas ($16.5 million), Hawaii ($128.1 million), Illinois ($115.8 million), New Hampshire ($5.4 million), and Rhode Island ($9.8 million).  

States are able to use these grants to improve and enhance key functions of their insurance exchange. Each grant is made through an extensive examination of funding requested by the state, in addition to an analysis to determine reasonable funding from the federal government. Establishment grants will continue to be awarded through 2014.

Here’s a look at key insurance exchange initiatives from this month’s awardees:

Hawaii: The state will be using funds to hire staff, develop and execute contracts as it continues to develop a robust insurance exchange system. CGI was awarded a $53 million contract in December 2012 to build Hawaii’s exchange. The state has also plans to procure for a Small Business Health Insurance Options Program (SHOP) exchange in the near future.  

Arkansas: The state will be using its award to fund an Arkansas In-Person Assister (IPA) Guide program to assist in the deployment of more than 500 certified IPAs to assist consumers across the state during open enrollment. The state chose the partnership model for its exchange and is currently in the process of securing health connector outreach and education campaign services.

Illinois: The state will be using funds for a variety of tasks including recommending qualified health plans, operating its IPA program, raising awareness for its exchange, and implementing systems. Illinois will also be utilizing the partnership exchange model and is in the final evaluation stages for selecting its insurance exchange project vendor.

New Hampshire: The state will be using funds to continue planning and developing its consumer partnership marketplace, which includes hiring consultants to add capacity and manage activities. New Hampshire will be moving forward with a partnership model for its exchange.

Rhode Island: The state will be using funds to assist in the design of its comprehensive IPA program, in addition to developing a product and delivery system for its state-based insurance exchange, which it awarded Deloitte a $105 million contract to build. Rhode Island is also in the process of securing contact center services for its exchange.

Want more? Be sure to check out Deltek’s latest report on insurance exchanges. Deltek’s database contains a wealth of information about states’ efforts in implementing insurance exchanges. Not a Deltek subscriber? Learn more and sign for a free trial, here. 

With an overall increase of just more than 4.5 percent, Pennsylvania Governor Corbett’s $66.7 billion fiscal year (FY) 2014 budget shows signs of increasing economic strength for the commonwealth. Major reform initiatives include selling the state liquor system to invest in education, modernizing Pennsylvania’s transportation infrastructure and overhauling state pension systems. The sale of the state liquor system is anticipated to generate $1 billion and will fund the Passport for Learning Block Grant for school districts that can use the funding to enhance access to science, technology, engineering and mathematics (STEM) programs as well as for other initiatives.

From a vertical standpoint, health care, primary and secondary education and justice and public safety all saw increases hovering around 5 percent. The increase in health care can be attributed to expansion of services for disabled and older Pennsylvanians and children, and increased funding for state health centers. According to Acting Secretary of Health Michael Wolf, “In Pennsylvania, two million people live in communities that the federal government has designated as medically underserved.” 

Table 1: Pennsylvania Total Fiscal Year IT Line Items Budget

Overall spending on information technology projects increased 15 percent from FY 2013, much of which was designated toward general departmental IT modernization efforts, including shared service delivery under the Office of Enterprise Technology Services. The Technology Innovation Investment Fund received $7.7 million for enterprise and agency-specific innovation initiatives. The Governor’s Innovation Office has also prioritized specific IT projects in FY 2014 include the streamlining of print, imaging and mail operations, and implementation of electronic grants processing, which are expected to save the state $7 million and $50 million, respectively.

For a full analysis of Pennsylvania’s FY 2014 budget, see Deltek’s analysis, available here.

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Harris announced this week that it has been authorized to deploy an enterprise service bus to connect VA and DoD electronic health records (EHR) systems.

VA and DoD received much criticism from Congress last month at the announcement that they were cancelling their joint EHR development effort due to ever-increasing cost estimates.  The original joint iEHR had been pegged around $4 to $6 billion, but new estimates from September 2012 skyrocketed to nearly $12 billion.  However, DoD and VA still plan to improve and integrated existing EHR systems in order to be able to share information across departmental health care facilities.  VA CIO Roger Baker told NextGov in a press call last week that the two departments plan to spend the same $4 to $6 billion on as many as 50 joint and shared medical applications such as pharmacy and laboratory systems.

In early February, DoD released an RFI for an EHR system, entitled Medical Electronic DoD Integrated Core System (MEDICS).  In response, VA proposed that they adopt its Veterans Health Information Systems and Technology Architecture, known as VistA, which would lead to plug and play compatibility.  DoD is considering this option along with other commercial solutions.

Meanwhile Harris has been hard at work conducting a Critical Design Review in order to implement a Service Oriented Architecture (SOA) suite to support information sharing across VA and DoD platforms.  The Harris contract was awarded in April 2012, after the abrupt cancellation of a previous award to ASM Research due to a possible organizational conflict of interest.  Harris Healthcare Solutions received the $80 million task order under the VA’s T4 contract vehicle to provide an architecture and joint execution strategy for the two agencies.  The multi-year task order calls for the development of a middle layer of software called an enterprise service bus that was to serve as the “heart of the new iEHR,” according to Baker.  Although the development of a completely new iEHR has been scrapped, the service bus will enable integration of legacy data, real-time information exchange, and new types of clinical collaboration. 

Harris’ Authorization to Operate enables deployment of the SOA suite in facilities in San Antonio, TX and Hampton Roads, VA, for testing purposes before it is more broadly deployed.  According to a Harris press release, “The SOA Suite provides a single solution for the two agencies. It will integrate existing and future systems, applications and medical data utilizing state-of-art Commercial Off-the-Shelf and Open Source technologies to provide secure, reliable, and high-performance implementation for health record data exchange across the DoD and VA healthcare systems.”

Although Congress and GAO have their doubts as to whether integration of existing DoD and VA health records systems can deliver the same results as a completely new iEHR in a shorter period of time and at a lower cost, the two agencies continue to plod toward that goal. 

• Total discretionary budget authority of nearly $1.2 trillion, including
• Full-year appropriations for Defense and Military Construction/Veterans Affairs committees
• Defense – $518 billion in non-war funding for the DoD, $87 billion for overseas contingency operations (OCO)
• MilCon/VA – $72 billion in discretionary funding for military construction and the Department of Veterans Affairs, with some shifting of funds away from military construction to support increase in veterans’ programs, which are exempt from sequestration
• The remaining federal agencies would be funded at fiscal 2012 levels under a continuing resolution covering the remaining 6 months of fiscal 2013

• Veterans Benefits Administration – Provides $3.3 billion for information technology, including $1 billion for staff pay, $1.8 billion for operations and maintenance, and $494 million for systems development, modernization, and enhancement. This DME funding is 2-year money available through FY 2014 but requires the VA Secretary or CIO to submit to Congress a certification of the amounts to be obligated for each project. Further, Congress requires approval of any transfers between the three funding sub-accounts or individual project funding increases/decreases of more than $1 million.
  
• No more than 25% of any joint DoD-VA integrated electronic health record (iEHR) may be obligated until the DOD–VA Interagency Program Office gets the approval of both Congressional Appropriations Committees on the planned costs, timelines, acquisition, etc.
  
• Of the $60.5 billion appropriated for veterans compensation and pension benefits programs no more than $9.2 million “shall be reimbursed to ‘General operating expenses, Veterans Benefits Administration’, ‘Medical support and compliance’, and ‘Information technology systems.’”
  
• $115 million for the VA’s the Office of Inspector General, to include information technology costs and for constructing, altering, extending, and improving any of the facilities.
  
• Only upon approval of Congress may the VA Secretary transfer funds to/from the VA’s ‘‘Information technology systems’’ account to/from the ‘‘Medical services’’, ‘‘Medical support and compliance’’, ‘‘Medical facilities’’, ‘‘General operating expenses, Veterans Benefits Administration’’, ‘‘General administration’’, and ‘‘National Cemetery Administration’’ accounts.
  
• Department of Justice, General Administration, Justice Information Sharing Technology receives $22 million, the National Protection and Programs Directorate, United States Visitor and Immigrant Status Indicator Technology receives $279 million, and the Office of Health Affairs receives $132.5 million, of which $85 million is for the BioWatch program.

• None of the DoD appropriation can be used for new multiyear procurement contracts for any systems or components if the value of the multiyear contract would exceed $500 million, unless specifically provided in the bill. A cursory review finds these are predominantly weapons systems, with some mention of commercial SatCom for naval vessels.
  
• The DoD provisions further stipulate that no multiyear procurement contract can be terminated without 10-day prior notification to the congressional defense committees.
  
• Defense Intelligence Agency funds may be used for the design, development, and deployment of General Defense Intelligence Program intelligence communications and intelligence information systems for the Services, the Unified and Specified Commands, and the component commands, unless otherwise stated.
  
• $12 million for mitigation of environmental impacts on Indian lands resulting from DoD activities, including training and technical assistance, related administrative support, the gathering of information, documenting of environmental damage, and developing a system for prioritization of mitigation and cost to complete estimates for mitigation.
  
• None of the funds in the Act may be used for research, development, test, evaluation, procurement or deployment of nuclear armed interceptors of a missile defense system. 
  
• $519 million in multi-year funds for  Cooperative Threat Reduction for the elimination and secure transportation/ storage of nuclear, chemical and other weapons; to prevent the proliferation of weapons, weapons components, and weapon-related technologies, etc.
  
• RDT&E New Starts Justification – Funds appropriated under ‘‘Research, Development, Test and Evaluation, Defense-Wide’’ for any new start advanced concept technology demonstration project or joint capability demonstration project may only be obligated 45 days after a report, including a description of the project, the planned acquisition and transition strategy and its estimated annual and total cost, has been provided in writing to the congressional defense committees. (The Secretary of Defense may waive this restriction on a case-by-case basis.)
  
• Funds appropriated for research and technology for programs of the Office of the Director of National Intelligence shall remain available until the end of fiscal year 2014.

• Federal Emergency Management Agency receives $35 million for the National Urban Search and Rescue Response System, $22 million shall be for capital improvements at the Mount Weather Emergency Operations Center, and not less than $5 million directed to the modernization of automated systems. 
  
• United States Citizenship and Immigration Services (USCIS) receives $112 million for the E-Verify Program. 
  
• DHS’s National Protection and Programs Directorate, Infrastructure Protection and Information Security receives $1.1 billion, with $328 million slated for Network Security Deployment and $218 million for Federal Network Security to establish and sustain essential cybersecurity activities, including procurement and operations of continuous monitoring and diagnostics systems and intrusion detection systems for civilian federal computer networks. $213 million (40%) of the combined $546 million is tagged as multi-year funding through FY 2014.