1st Quarter February 2013
Vol 27 No. 1
INFORMATION MANAGEMENT & COMMUNICATIONS
CANADA
www.HealthcareIMC.com
Procuring A Health
Information System: Avoiding
the $300 Million Lawsuit
Mark J. Fecenko
Mark J. Fecenko B.Sc., LL.B. MBA, LL.M. (Intellectual Property) is the National
Leader of the Borden Ladner Gervais LLP Health Informatics Practice
1.
2.
Its mandatory and rated criteria with
respect to ongoing maintenance and
support and other related ongoing
services; and
to purchase. The pre-determined process
of scoring these optional components
would need to be considered as part of the
evaluation process.
4.
Its methodology for the scoring of
price with respect to the total cost of
ownership for the applicable software
licenses, implementation services
and ongoing maintenance and
support and other related services –
perhaps based on a net present value
calculation. Further, a rate card
may or may not be requested and
form part of the scoring criteria for
overall price. Of course, other service
delivery models may vary how price
will be calculated.
Though the RFP should specifically
provide the health care institution with
the ability to “normalize” bids based on
the information provided by bidders, the
exercise can be a difficult one, and result
in a bid dispute or other actions being
taken by a bidder that takes exception to
the scoring of price and the exercise of
normalization undertaken by the health
care institution.
The calculation of price can be complicated
based on a good number of factors
including:
1.
A bidder incorporating assumptions
into their pricing that impacts the
ability to make an “apples-to-apples”
comparison with other bidders;
2.
One or more bidders having
components in their proposal that
form part of the current solution
at the health care institution –
elements of which they may wish to
incorporate into their bids; and
Its mandatory and rated criteria
for its specifications (including, as
applicable, for interoperability with
other systems, functionality, up-time
and transaction speed);
Its mandatory and rated criteria
with respect to the provision of
implementation services and
implementation timeline, including
for data conversion and interface
development;
3.
Inviting bidders to bid “alternative
solutions” or “Value Adds”.
Further complicating the proposals could
be a request by the health care institution
for the pricing of “optional components”
or “services” that it may or may not elect
The purpose of this article is to briefly
describe a lawsuit (the “Statement of
Claim”) brought by Allscripts Healthcare
Solutions, Inc. (“Allscripts”) in the
Supreme Court of the State of New York
on December 11, 2012 against each of
New York City Health and Hospitals
Corporation (the “Hospital” or “HHC”)
and Epic Systems Corp. (“Epic”) arising
out of a procurement decision by the
Hospital to award a $303 million contract
for an Integrated Clinical Information
System comprised of computer hardware,
software and services to Epic.1
Allscripts specifically states in the
Statement of Claim that the Hospital’s
award:
“ …for myriad reasons, is arbitrary,
capricious, an abuse of discretion, and lacks
a rational basis. HHC failed to follow the
evaluation criteria which required that
award be based, in part, on the comparative
Total Cost of Ownership (“TCO”) of offerors.
1st Quarter • February 2013 • HIM&CC
The procurement will require, among
other things, for the health care institution
engaging in the procurement to determine
and then describe in its procurement
document:
3.
Procuring A Health Information System
Procuring a health information system is a
complex, time-intensive process. The time
reasonably required to plan and gather the
information to prepare and issue the RFP
(including perhaps an RFI and supplier
demonstrations before RFP preparation),
and to then evaluate proposals, and
ultimately negotiate a contract can exceed
two years. The complexity increases if the
procurement involves multiple health care
institutions under a single RFP, and also
if it invites multiple methods of making
the health information system available
to the health care institution, such as the
“traditional” licensing model hosted by the
health care institution, as well as through
a supplier-hosted model or through a
“software as a service” model. The greater
the possible procurement permutations, the
greater the complexity the procurement
process will entail.
1st Quarter • February 2013 • HIM&CC
Procuring A Health Information System
Properly calculated, the TCO of Allscripts’
proposal represents savings of up to $535
million in comparison to Epic’s proposal. The
little consideration that HHC gave to cost
was plainly irrational. For example, HHC
awarded point scores to offerors under the
undisclosed evaluation criterion of “overall
cost.” Although Allscripts’ proposed cost was
indisputably lower, Epic’s point score under
this criterion was 27% higher than Allscripts’.
As explained herein, HHC’s evaluation of
non-cost factors was equally flawed and
wholly unsupported by the administrative
record.”
In the Statement of Claim, Allscripts
appears to make reference to a number of
mandatory functional requirements in the
original RFP, and a statement in the RFP
that the applicable selection committee
will rank proposals, “based on, but not
necessarily limited to:
a.
Experience with Clinical Information
Systems
b.
Vendor’s financial profile
c.
Ability of vendor to meet
requirements without customization
In our view, best practices would include:
1.
2.
d. Vendor resources and support;
e.
System demonstrations
f.
Client references
g.
Total Cost of Ownership (TCO) to
purchase, implement and maintain
the system.”
Allscripts alleges that the Hospital did
not follow the evaluation procedure
found in the RFP, and that the evaluation
conducted was “marred by errors and
unsupported determinations”. In respect of
comparing Epic’s and Allscripts’ proposed
costs, Allscripts alleges that, “HHC failed
to normalize the TCO of the two offers
and presented the Board with an inflated
and misleading presentation of Allscripts’
base proposed costs.”
HHC provided Health Data Management2
with the following statement: “Allscripts’
claim that it underbid Epic by more than
half a billion dollars is absurd and strikes
us as an ill-fated attempt to reassure
investors and inflate its sagging stock price.
Unfortunately, as our multi-year review has
revealed, Allscripts lacks a truly integrated
EMR solution and has repeatedly lost
business to Epic and other vendors as a
result. HHC will defend its well-supported
decision and prevail in this lawsuit.”
Without commenting specifically on the
positions being taken by either HHC
or Allscripts, the Statement of Claim
nevertheless reaffirms the need for all
health care institutions to apply best
practices to avoid such a claim and in any
event to otherwise be in a position to assert
clear and specific defenses.
3.
4.
5.
For a complex procurement such
as for a hospital information
system, expressly provide in
unequivocal terms in the RFP or
other procurement document that
the purchase or sale of goods and
services is NOT legally binding on
either the health care institution or
any potential bidder until, and only
if, a contract is executed by both
parties. In other words, permit either
party to step away at any time before
a contract is signed. On this basis,
arguably the health care institution
would not be subject to a duty of
good faith, and the bidders would
not have a basis upon which to make
a legal claim for damages or other
remedies.
Invest appropriate “upfront” time
and resources in developing
comprehensive objective evaluation
criteria before the RFP is issued. This
would include “stress testing” the
evaluation criteria by vigorously
walking through various potential
bidding scenarios to determine the
scores that might be obtained, and
examining the desirability of the
results.
Provide specific high level scoring
in the RFP for each major category
of the evaluation criteria, including
stating how the total cost of
ownership of each bidder will be
scored against the maximum points
available for price.
Consistent with 2, consider carefully
various cost of ownership criteria,
including the costs and savings that
may apply should an incumbent win
or lose the procurement process. It is
appropriate to consider the costs and
savings should an incumbent win in
the total cost of ownership. That said,
it is also appropriate to make this
clear in the RFP, together with some
description of who the incumbent
is, and the scope of their current
activities.
Be prepared to normalize the total
cost of ownership to reflect differing
assumptions made by bidders, and
one ought to specifically state the
health care institution’s ability
to apply such normalization in
the RFP. Normalization is often
not an easy exercise, and ought
reasonably to be considered in
concert with an experienced fairness
advisor - preferably one who had
input into, and “signed-off” on, the
evaluation criteria and process prior
to the issuance of the procurement
document.
6.
Be cautious before permitting bidders
to bid “alternative solutions” or to
suggest “value add” options in their
bids, as these may result in bids that
may be wholly incomparable to other
bids, nor otherwise easily scored in a
manner consistent with the evaluation
model.
7.
Carefully document all scoring
as against the evaluation criteria,
including any assumptions or other
actions taken to normalize bids.
All evaluation criteria and scoring
templates should, at a minimum, be
settled before proposals are received
and preferably before the RFP is
issued.
8.
Have bidders accept, as part of their
Proposal package, their inability
to seek damages from the health
care institution, or otherwise have a
limitation of liability provision in the
procurement document.
9.
Provide for clear debriefing and
dispute resolution processes in the
procurement document, to facilitate
timely and appropriate processes
to address legitimate grievances
and otherwise address supplier
misunderstandings before they
culminate in a lawsuit.
10. Consider whether, for reputational
and other reasons, a particular
procurement exercise should simply
be terminated before completion.
In conclusion, health IT procurements
can often be complex and require rigorous
attention to process and detail. It is critical
to apply public sector best practices in
procurement to endeavour to avoid supplier
claims and, in any event, to provide for
clear and specific defenses should a supplier
claim be brought.
1
is article is based in part on the
Th
allegations in Allscripts’ pleadings in
the Statement of Claim, which have not
yet been proven or disproven before a
Court. This article points to aspects of
the Statement of Claim which focusses on
particular issues with selected allegations.
As such, readers are encouraged to
consider the full and complete Statement
of Claim at http://iapps.courts.state.ny.us/
iscroll/SQLData.jsp?IndexNo=6543622012&Submit2=Search.
2
“Allscripts Sues NYC Provider and Epic
After Losing Contract Bid”, Health
Data Management, http://www.
healthdatamanagement.com/news/
Allscripts-sues-Epic-45395-1.html.