Federal health IT market set to grow to $6.5B by 2016

By Mike Miliard
11:05 AM

Federal spending on healthcare IT will reach $6.5 billion by 2016, according to a new survey from Deltek, Inc. That represents a compound annual growth rate of 7.5 percent -- outpacing forecasted growth of just 1.1 percent for overall federal non-health IT spending for the same period.

Federal health IT spending includes funding for payment systems, technology used to deliver healthcare services including electronic health records (EHR) systems, and IT to support federally-funded health research and promotion, according to the survey, conducted by Deltek, which develops IT for professional firms and government contractors.

[See also: CDW: Healthcare sector to lead IT spending.]

In Deltek’s GovWinIQ report, “Federal Health Information Technology Market, 2011-2016,” 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 healthcare costs, the aging U.S. 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 Angie Petty, senior principal analyst at Deltek. “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 increased investment in health IT is a projected near-doubling of the federal healthcare expenditures, from $766 billion in 2011 to $1.4 trillion in 2020, due largely to an expected 123 percent increase in the population of those age 65 and older by 2050, the survey shows.

[See also: Core needs, mobility to fuel health IT spending.]

Additionally, authors note, the U.S. government – having spurred EHR adoption with federal incentives through the HITECH Act – appear to be "taking their own medicine" by accelerating deployment of healthcare IT in Veterans Affairs (VA), Department of Defense (DoD) and Indian Health Service hospitals and clinics.

Finally, the report finds that, as the healthcare industry and care delivery 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 Lauren Jones senior principal analyst at Deltek. “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."