Healthcare providers will spend as much as $39.5 billion on information technology by 2008, according to new research by Datamonitor.

Care providers and payers in the United States and Canada are accelerating their spending on IT, largely driven by national initiatives toward electronic medical record adoption, said Jocelyn Young, who authored the report Technology Opportunities in the North American Healthcare Market. It forecasts spending for the years 2005 to 2010.

Young, a research director at Datamonitor, predicts physician practices IT adoption will fuel much of the anticipated 7.4 percent five-year compound annual growth rate. Spending among healthcare providers in Canada will experience an 8.1 percent five-year CAGR, according to the report.

Hospitals have been at the center of healthcare IT adoption, Young said, and will continue to embrace information technology. Over the next few years an increasing number of medical groups will come on board, too, she said.

“Overall that’s the next level of IT investment,” Young said. “Part of it will be convenience and workflow. We’ve certainly come a long way in past years in recognizing the value of technology.”

Both consumers and physicians are becoming savvy about technology, she said, calling the trend “grassroots.”

“Consumers and physicians are playing a more active role in the selection, management and delivery of healthcare,” she said.

Industry experts estimate about 14 percent of all U.S. physicians have automated their medical records. The push to automate records comes at a time when physicians are feeling financially squeezed, they note.

Medical Group Management Association President and CEO William F. Jessee has called for creative thinking to encourage the adoption of electronic records by financially strapped medical groups.

Finding the money to implement the technology in the first place is no easy task for physicians in small practices, Jessee said at the association’s annual meeting in October. Many physicians remain uncertain about return on investment, he said.

Young acknowledged that barriers to physician adoption of electronic technology still exist. One of the major ones, she said, is physician concern over IT support.

“A lot of the vendors I talk with are looking into how they can better serve the physician market,” she said, and those vendors are focusing on ease of use and low maintenance.

Another critical driver of physician uptake, as Young sees it, is the national attention that has been focused in the past few years on healthcare information technology and the benefits of changing paper records to digital ones.

A report released in December by New York-based research firm Kalorama forecast similar market growth. Kalorama pegged the U.S. market for hospital-based clinical IT at $25 billion by 2009.

“While IT has been successfully implemented and widely used on the administration side of hospitals for years... adoption by actual clinical providers has been slow,” notes Steven Heffner, the publisher of Kalorama Information. “However, the promise of improved patient care with fewer mistakes and greater efficiencies and cost savings is too big to ignore. In this environment, we should see the use of clinical information systems – particularly EMRs – really take off.”