Angie Petty, Deltek: Federal Health IT Spend to Reach $6.5B By 2016

January 2, 2011

Federal spending on Health IT will reach $6.5 billion by 2016, which represents a compound annual growth rate of 7.5%. This spending outpaces Deltek’s overall federal IT forecasted spending growth of only 1.1% for the same time period.

Federal Health IT spending includes funding for payment systems, technology used to deliver health care services including electronic health records (EHR) systems, and IT to support federally-funded health research and promotion.

In Deltek’s GovWinIQ report, “Federal Health Information Technology Market, 2011-2016,” Deltek analysts noted that while the overall federal market will be facing budget shrinkage over the next few years, the Health IT market will continue to grow due to rising health care costs, the aging US population, proven cost reduction and the efficiency gains that IT promises.

“Federal agencies possess the most advanced EHRs in the world, however due to their age and legacy architectures and technologies, they are overly ripe for major transformation,” says Deltek senior principal analyst Angie Petty. “The Department of Defense and Veterans Affairs are on the cusp of creating a joint records system that will serve soldiers from their induction into the military through the rest of their lives.”

A key driver for the expected increase in investment in Health IT is a projected near doubling of the federal health care expenditures from $766 billion in 2011 to $1.4 trillion in 2020, due largely to an expected 123% increase in the population of those age 65 and older by 2050. Additionally, the government that promulgated health care reform incenting private sector doctors to adopt EHR’s to drive down the cost of health care and improve citizen health appears to be taking their own medicine by accelerating deployment of the same advanced technologies in VA, DoD and Indian Health Service hospitals and clinics, the report noted. Lastly, as the healthcare industry and how care is delivered changes and becomes more preventative and patient-centric, business processes that can be automated and made much more efficient are enabled by information technology.

“Agencies are being forced to spend money to save money in the long run by investing in electronic health records systems, IT infrastructure modernization for health-related agencies, payment system transformation, and IT to promote advancement in population health,” says Deltek senior principal analyst Lauren Jones. “This creates a large opportunity for vendors to bring their combined agency knowledge and technology expertise in such areas as business process re-engineering, mobility, telehealth, data consolidation, informatics and analytics, and decision support systems to the market.”