The VA's FY2027 budget request landed April 3. Every outlet led with EHRM: $4.24 billion, up 24.7%, Oracle contract, Michigan go-lives this month.
The number that tells you where the VA is going is $56.2 billion.
Medical community care. Seventeen percent growth in one budget cycle. Eight billion dollars added to a single account.
The VA has been arguing about its own identity for most of the last decade. Hospital system or network manager. The FY2027 budget does not continue that argument. It allocates.
The community care account is the strategy
The growth rate is one part of the story. The official explanation is the other.
The VA's FY2027 budget document states it directly: "VHA is assuming that staffing levels will decrease, which is expected to reduce VHA capacity to provide for the growing demand for VA direct care services." The next sentence: "Projected changes in VHA capacity are modeled with complementary changes in community care utilization."
The VA has built workforce reduction into its budget model and priced community care as the offsetting mechanism.
Optum Health manages the East and South. TriWest Healthcare Alliance manages the West. Those two incumbents currently hold the mechanism through which $56.2 billion moves in FY2027. The CCN Next Gen medical re-compete, solicitation 36C10G26R0003, closes April 17. The dental companion, 36C10G26R0004, approximately $47 million, closed March 16.
Community care has grown from $7.9 billion in FY2014 to $40.7 billion in FY2025 to $56.2 billion in this request. In FY2014, roughly 1.1 million veterans used community care. In FY2024, roughly 3.1 million did. Community care now accounts for approximately 44% of VA care delivery across all settings.
The community care program generated 39.6 million referrals in the six years following its June 2019 launch. The 17% growth is not an anomaly. It is the continuation of a structural shift the VA has now formally acknowledged it is budgeting around, not resisting.
CCN Next Gen is not a continuation of the current contract structure. VA CFO Richard Topping testified that the next vehicle will implement value-based payment models, beginning with episode-based payments for lower-extremity joint replacements, with at least three additional VBP models over the performance period. The contract will also introduce utilization management across ED visits, inpatient admissions, concurrent hospital reviews, and high-cost drug administration oversight. None of those mechanisms exist in the current CCN structure. The IDIQ ceiling on the medical vehicle is approximately $700 billion over ten years. That is the statutory maximum authorized to accommodate the volume a workforce reduction assumption and persistent demand growth are projected to push through the network.
Organizations that currently support network coordination, care navigation, or utilization review under the existing CCN will be operating under different rules on day one of the new contract. VBP models require episode attribution, outcome tracking, and data reporting infrastructure that the current network does not mandate. Utilization management oversight requires clinical decision support at the point of authorization that the current network does not require. Incumbency on the current contract does not automatically translate to readiness for the next one. That gap is where the award decision will be made.
Medical Support and Compliance, the account that funds oversight and compliance infrastructure for all of this, is down 5.1% in FY2027. FTE in that account dropped from 65,750 in FY2025 to 59,590 in FY2026, a 9.4% reduction in the staff responsible for managing quality and accountability in the same network growing at 17% annually. Of the $11.1 billion increase in total VA medical care funding this cycle, $8.1 billion (roughly 73%) flows outside the VA system into the community network. The oversight function responsible for monitoring that money is contracting.
The FY2028 proposal confirms the structural direction. The VA wants to consolidate four medical accounts into two: Direct Care and Community Care. Once that consolidation happens, year-over-year comparison of the current account structure becomes impossible by design.
The FY2027 figures are where you operate. VA has also requested $138.2 billion in FY2028 advance appropriations for medical programs and $53.8 billion in Toxic Exposures Fund advances. Those are the forward commitments contractors are actually building three-year assumptions against.
EHRM: three estimates, one deadline, one outage
Three lifecycle cost estimates exist for EHRM.
The VA's original 2019 figure: $16.1 billion. GAO called it severely incomplete. The Institute for Defense Analyses put the number at $49.8 billion in October 2022, split $32.7 billion for implementation and $17.1 billion to sustain. The VA revised to $37.2 billion in September 2025. Deputy Secretary Paul Lawrence delivered that number to Congress on December 15.
GAO's position as of December 2025: all three are outdated. GAO had not received the VA's September 2025 revision at the time of the December hearing. GAO's Carol Harris said it plainly: "We have not received that estimate, so I would ask the department to provide that to us so we can review it."
Michigan goes live this month. Four sites simultaneously: Ann Arbor, Battle Creek, Detroit, and Saginaw. Ann Arbor and Detroit are Level 1A complex facilities, the highest classification in the VA system. No Oracle EHR deployment has attempted facilities at this complexity level. This is the first multi-site simultaneous deployment in the program's history.
Three weeks before the planned go-live window, on March 4, the Oracle federal EHR went down from 8:37 AM to 2:05 PM Eastern across all six VA live sites, 26 community clinics, and installations serving DoD and the Coast Guard. Nearly six hours. The cause was a database performance issue.
Congress withheld 30% of EHRM's FY2026 appropriation, approximately $1.02 billion, pending three conditions by June 1: an updated lifecycle cost estimate, a facility-by-facility deployment schedule through full deployment, and the Secretary's certification of four or more consecutive successful go-lives. The Michigan sites are the four consecutive deployments being counted.
The cost estimate condition has a structural problem. GAO has said all existing estimates are outdated and has not received the VA's latest revision. A credible new independent lifecycle assessment takes months to produce. The VA will file what it can file by June 1. Whether that document satisfies the condition as Congress intended it will be answered in committee correspondence, not in the budget.
The "successful go-live" condition has a definitional problem. The withhold language requires certification of deployments "without delays or patient harm." No quantitative threshold defines delay. No threshold defines patient harm. Certification rests on the Secretary's judgment. For context on what prior deployments looked like: the VA OIG found 149 instances of patient harm at Spokane, 826 major performance incidents across the first five live sites, and a veteran's death linked to scheduling failures at Columbus. All of those sites were counted as go-lives.
GAO-25-108091 surveyed current EHRM users in September 2024. Seventy-five percent disagreed the system enables efficient care. Thirteen percent believed it makes the VA efficient. Fifty-eight percent said it increased patient safety risks. Those numbers come from sites already live. The FY2027 deployment schedule calls for 26 more this fiscal year, then 28, 32, 32, and 33 through FY2031.
The $4.24 billion request breaks into three subaccounts. The Oracle EHR contract: $2.768 billion, covering sustainment of 19 live sites, 26 new go-lives, help desk, training, data hosting, and 28 FY2028-targeted sites. Infrastructure support: $745 million. The PMO: $727 million, 313 FTE authorized.
Approximately 250 of those 313 positions are filled heading into the most intensive deployment phase in the program's history. The program lost 24 more staff to probationary firings and deferred resignation offers in early 2026. The contract expires May 2028. Full deployment runs to end of FY2031. GAO's Carol Harris told Congress that completing all remaining sites on the contract timeline is "impossible." When Michigan completes, fewer than one in six sites will be live. Total EHRM obligations through the second quarter of FY2025 already reached $13.84 billion.
GAO-26-108812, December 2025: 16 of 18 prior recommendations unimplemented. Twelve carry priority status.
The program goes forward. Political and contractual realities require it. The $4.24 billion request does not answer what changes at site 46 that did not change at site 12. Congress is paying to find out.
HHS: what Congress will and won't accept
The FY2027 HHS discretionary request is $111.1 billion, down $15.8 billion, a 12.5% reduction. The proposal collapses 28 divisions to 15, built around a new Administration for a Healthy America absorbing OASH, HRSA, SAMHSA, ATSDR, and NIOSH. NIH faces a proposed $5 billion reduction. NIMHD, the Fogarty International Center, and NCCIH are proposed for elimination. ARPA-H is zeroed.
Senator Collins, April 3, 2026: Congress had "decisively rejected these particular cuts last year."
The history is on her side. For FY2026, Congress enacted approximately FY2025 funding levels across most contested HHS lines. NIH remained whole. ARPA-H was funded. Defense received $10.6 billion above the Pentagon's own request. CRS R48891. The Congress that rejected the FY2026 version is voting on FY2027.
ONC's standalone name was restored April 1, 2026, through Federal Register 2026-06284. The AI, data, and CTO functions shifted to HHS OCIO. ONC confirmed its programs and priorities are unchanged. The structural change is where governance authority sits, and that change is already in effect.
TEFCA exchanged nearly 500 million health records across 14,214 organizations as of February 2026. Thirteen months earlier, the number was 10 million. That is a 50-fold increase in active exchange volume, driven by 81,000 unique connections across eight Qualified Health Information Networks. The infrastructure is not theoretical and it's running at scale.
The policy function and the CIO function used to sit in different chains of command. A regulation governing information blocking and the IT contract governing Qualified Health Information Network operations reported to different principals. They report to the same principal now.
HHS consolidated from more than 40 separate IT departments under this reorganization. Organizations with active TEFCA integrations should assume technical certification requirements may shift on the next contract cycle. The authority writing those requirements changed last week. The proposed HTI-5 rule, published December 29, 2025, proposes removing 34 of 60 certification criteria and revising seven more. Comment period closed February 27. That rule is moving under OCIO authority now.
ARPA-H ADVOCATE awards for agentic AI in cardiovascular care are expected June 2026, funded from FY2026 appropriations already enacted. The awards are executing regardless of the FY2027 budget outcome.
The pharmaceutical tariff variable
The president signed the Section 232 pharmaceutical tariff executive order April 2. The ceiling is 100% on imported patented pharmaceuticals. Thirteen companies, including Eli Lilly, Pfizer, GSK, and Novo Nordisk, signed most-favored-nation agreements at zero tariff through January 20, 2029. Large companies onshoring to the United States face 20%. Non-compliant large companies face 100% beginning July 31 for Annex III companies listed in the order, September 29 for all others.
The order applies to patented drugs. Generics are exempt for now. A mandatory reassessment is built into the order with a deadline of April 2, 2027. That timing matters for VA and TRICARE because the VA obtains significantly lower prices on generics than Medicare Part D. That competitive advantage depends on generic markets that remain intact. Approximately 72% of FDA-approved API manufacturing facilities sit outside the United States. India supplies roughly 61% of U.S. generic oral solid dose volume. APIs account for 50 to 52% of total generic manufacturing cost. If the reassessment extends tariffs to generics, the supply chain math changes across the entire VA formulary.
VA pharmacy operates through the Federal Supply Schedule and VHA formulary at negotiated federal pricing. The VA's statutory Federal Ceiling Price protection under 38 U.S.C. Section 8126 guarantees prices no higher than 76% of non-FAMP. Short-term exposure on patented drugs from the 13 MFN signatories is bounded within the window.
Three timelines converge between April 2027 and January 2029. The generic reassessment. The MFN protection window closing. The TRICARE copay schedule established by the FY2018 NDAA expiring, after which SecDef holds discretionary authority over copay rates. The brand-name retail copay today is $48 for a 30-day supply. The intersection of those three deadlines has not appeared in any VA or DoD public budget document reviewed for this issue.
Capture Intelligence: This Issue
For contract-specific capture intelligence tied to the budget lines covered here, see the Capture Intelligence page.
A VA clinician in Michigan goes live on a new EHR system this month. The system went down for nearly six hours across every live VA site three weeks before her go-live date. Her community care referral volume is growing at 17% annually. The VA's own budget document states that workforce reductions are assumed and community care will compensate. The oversight account monitoring the network she refers into is contracting.
She is the one who has to make it work.
