Local government HIT spending expected to grow by $2.7B, study finds

By Diana Manos
10:00 AM

Fueled by the needs of the Affordable Care Act, healthcare IT spending among state and local governments is projected to grow by $2.7 billion through 2017, according to a new report.

The study, released Dec. 18 by Deltek, Inc., a provider of software and information solutions for professional services firms and government contractors, shows the demand for information technology among U.S. state and local health and human services agencies will increase from $16.6 billion in 2012 to $19.3 billion in 2017, bringing $2.7 billion in new spending to the market at a compound annual growth rate of 3.1 percent.

According to the report, key forces currently shaping this market include:

  • Renewed efforts (by most states) to implement health insurance exchanges (HIX) and quality-based care systems for Medicaid, following the recent U.S. Supreme Court decision on the Affordable Care Act;
  • Gradual stabilization of state and local revenue streams;
  • Implementation of architectural guidelines to incrementally modernize systems supporting mean-tested benefit programs;
  • Increased federal direction and mandates to reduce waste, fraud, and abuse (i.e., improper payments).

[See also: Half of states go with government HIX.] 

“Despite the political rancor over federal health care reform, federal, state, and local leaders are committed to reducing the burden of healthcare costs on Medicaid, children’s health insurance, and public health care facilities,” says Chris Dixon, Deltek’s senior manager of state and local industry analysis. “The real question is how governors want to use IT to attack the major concerns of reducing improper payments and moving the health insurance programs toward quality-based care.” 

“With sustained high levels of unemployment, states and localities will continue to see increased demand for social services programs,” says Dixon, “And we’re already seeing a renewed debate in the presidential campaign over the future of welfare-to-work programs that faded during the economic boom.”

[See also: EHR incentives top $9B.]

“This bodes well for further integration and architectural efforts at the national level to bring increased coherence to a historically fragmented IT environment,” Dixon says, adding that current evidence of this trend includes increased federal funding participation for systems integration efforts and the release of the Medicaid Information Technology Architecture 3.0.

The report also includes a spreadsheet with supporting data for many charts in the report. A free summary of the report is available at: “State Health Care and Social Services Market, 2012-2017.”