A report recently released by the Framingham, Mass.-based advisory services and market research firm IDC Health Insights has projected spending on both ambulatory and inpatient EMR software to nearly double between 2009 and 2015, driven forward strongly and primarily by the stimulus monies to be made available through the federal American Reinvestment and Recovery Act/Health Information Technology for Economic and Clinical Health Act (ARRA-HITECH). Using a double-foundation methodology based on both a survey of healthcare IT leaders from provider organizations, and on an analysis of healthcare IT vendor revenues, the report found the following :
- Ambulatory EMR software spending by all types of providers was $633.5 million in 2009, and is expected to grow to $1,406.9 million ($1.4 billion) by 2015.
- Inpatient EMR software spending by all types of providers was $1,343 million ($1.343 billion) in 2009, and is expected to grow to $2,382.8 million (nearly $2.4 billion) by 2015.
- Total EMR software spending by all types of providers was $1,976.5 million (nearly $2 billion) in 2009, and is expected to grow to $3,789.7 million (nearly $3.8 billion) in 2015.
Further, the report found the following, in surveying healthcare IT leaders regarding the effect that ARRA-HITECH was having on their EMR deployment plans:
- 12.6% of respondents said they were “aggressively” accelerating EMR deployment in order to maximize potential HITECH incentive payments
- 31% of respondents were accelerating EMR deployment to qualify for HITECH payment
- 19.5% of respondents reported no change in timelines for their EMR deployments in order to qualify for HITECH incentive payments
- Another 19.5% had already implemented an EMR, and reported that HITECH would have no influence on their organizations
- 17.2% said they were not sure what effect HITECH might have on their organizations
Judy Hanover, research director at IDC Insights, and the lead author of the report, titled “Business Strategy: U.S. Electronic Health and Medical records 2009-2015—Meaningful Use Spending Forecast and Analysis,” concludes the report by saying that “The incentives provided by ARRA as well as the future penalties for non-implementers have clearly tipped the balance toward investment and driven healthcare providers along a path to implement these technologies at record levels.” Hanover spoke recently with HCI Editor-in-Chief Mark Hagland regarding the findings of the report, and her perspectives on EMR/EHR spending in the next several years.
Healthcare Informatics: How did you derive the money numbers in your organization’s report?
Judy Hanover: IDC publishes an IT spending guide for healthcare—it’s a top-down view of the entire healthcare IT industry; it’s a total look at the IT spending picture in the U.S., and we also do other ones for other countries. We started with that document, and did an extensive survey of over 200 provider organizations about their spending sentiments, what they were currently spending on, and so on. We used that survey, our top-down methodology, and a bottom-up analysis of vendor revenues, in terms of license and maintenance revenues, as well as revenues from software as a service, to derive the figures. We feel the numbers we derived are strong numbers.
HCI: Can you comment on the considerable growth you’re projecting?
Hanover: Sure. Both inpatient and ambulatory EMR spending are both growing at about 11 to 12 percent annually. And we’re seeing investment and growth in healthcare IT of about 6 percent per year; and these particular application activities are really driven by meaningful use, as well as healthcare reform—many of the improvements and efficiencies that providers will have to make under healthcare reform really start with these applications. And we did run a branch office survey in which we asked people, if they weren’t investing in EMR, why not? And the vast majority were physicians about to retire.
HCI: Many providers are implementing their first CPOE and eMAR systems; in that context, perhaps 11-12 percent might not even be that much?
Hanover: Well, there’s definitely additional spending going on, on the hardware side as well; so there’s a lot of investment in many areas.
HCI: What proportion of all this investment might end up being for replacement EMR systems?
Hanover: For certain application vendors like Meditech, when providers are looking to upgrade, they’re looking at spending 80 to 90 percent of what they would spend to completely replace their existing system—so it’s significant. And most hospitals have done significant customization along the way.
HCI: Are you seeing any particular patterns among types of hospitals, medical groups and health systems?
Hanover: We’re seeing some general patterns here. Your large academic medical center generally already has some type of EMR or CPOE [computerized physician order entry] system in place; now they need to upgrade that system and fine-tune it, and make sure it can be used by all their clinicians. We are seeing some replacements going on among the larger hospitals as well. Among the smaller hospitals, some may have had some level of CPOE or electronic medication administration record (eMAR) systems, but most don’t have clinical documentation systems, and are adding that type of EMR functionality, and they’re turning mostly to their existing vendors for that.
In the ambulatory space, we’ve seen 70-percent-plus spending growth among physician groups. And the software-as-a-service option and managed application hosting option are really becoming popular among the smaller groups.
HCI: Are there any things you’re seeing that are concerning or surprising?
Hanover: Not really. I guess there are still some providers that are concerned or not quite sure what to do. The fact that the final rule of Stage 1 of meaningful use scaled back a bit made things more in reach, and that helped somewhat. And the first checks are now going to physician groups, and that’s very encouraging. I saw a picture attached to an article in which people in scrubs were smiling and holding checks; so there’s more of a drive to do the work now, that’s encouraging.
HCI: Based on all this, do you have any particular advice for healthcare CIOs?
Hanover: I would say that the deadlines are approaching; and if they’re bothering to read your magazine, they’re probably a bit ahead of the game. They should be doing assessments, beginning to put things into place; and really doing 360-degree assessments and looking at opportunities, such as data center modernization and application virtualization; those will be important. They’ll see problems if they’re not able to deliver services remotely.
But it’s really a positive time. I think services are a little hard to come by in certain situations; so, it will be important for CIOs to look to their EMR providers for service level commitments. Also, start dates and time and staff commitments in terms of implementation are very important, so CIOs need to make sure those resources are available from the vendor. So they should move forward in those areas, because it doesn’t make a lot of sense to do it late and get paid less.