Fed Health IT Spending: $6.5 Billion By 2016

Government must upgrade systems that support clinical and business operations to drive efficiencies and curb the cost of healthcare.

Nicole Lewis, Contributor

December 28, 2011

3 Min Read

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Federal health IT spending will increase from $4.5 billion in 2011 to $6.5 billion in 2016, which represents a compound annual growth rate of 7.5%, according to a GovWin IQ research study released by Deltek.

The GovWinIQ report--Federal Health Information Technology Market, 2011-2016--noted that unlike the overall federal market, which faces budget cuts, the health IT market will continue to grow due to rising healthcare costs, an aging population, and continued high unemployment which will drive up federal healthcare expenditures during the next decade.

To curb the rising cost of healthcare, the federal government will be forced to spend on health IT to create greater efficiencies and save money. Much of the focus of health IT spending at federal agencies that have health-related departments, such as the Department of Veterans Affairs (VA), Department of Defense (DOD), and Department of Health and Human Services (HHS), will go toward investing in electronic health record (EHR) systems, IT infrastructure modernization, transformation of payment systems, and IT to support advancements in population health.

[ The feds aren't the only ones looking to replace aging health IT. See Health Insurers Hindered By Outdated IT. ]

According to the report, a significant factor driving increased health IT investment spending is a projected near doubling of federal healthcare expenditures, from $766 billion in 2011 to $1.4 trillion in 2020.

"The most growth in federal investments will occur in the payer category to modernize the Centers for Medicare and Medicaid Services' (CMS') infrastructure in order to advance payment transformation, as well as efforts to increase program integrity and reduce waste, fraud, and abuse," Angie Petty, senior principal analyst at Deltek, told InformationWeek Healthcare.

Petty also said the demand for mobile access to medical records is increasing, as well as the need for mobile health applications. Additionally, technology is allowing patients to actively participate in their own care, causing a shift in the role of the patient from a passive to an active care role.

Among the key findings of the report are:

-- Technology advances, as well as potential long-term cost savings and better health outcomes, drive demand for mobility, telehealth, informatics, decision support, interoperability, and common EHRs.

-- Federal agencies such as the VA possess advanced EHRs, however due to their age and legacy architectures and technologies, they are overly ripe for major transformation.

-- The federal government is the single largest payer of healthcare services in the United States, and must transform from a "pay for service" model to a "pay for health" model in order to reduce costs and improve population health outcomes.

-- Data security, program integrity, care coordination, political agendas, and the deficit present challenges to federal and nationwide health IT adoption and implementation.

"It is Deltek's belief that implementation of health IT will ultimately lower healthcare costs and expenditures while at the same time, improving population health," Petty said. "For all of the reasons cited [in the report] the federal government will continue to push health IT within its own agencies and to states, localities, and commercial providers."

When are emerging technologies ready for clinical use? In the new issue of InformationWeek Healthcare, find out how three promising innovations--personalized medicine, clinical analytics, and natural language processing--show the trade-offs. Download the issue now. (Free registration required.)

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