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Report: Federal Health IT Spending Will Increase to $6.4 Billion in 2021

January 6, 2017
by Heather Landi
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The federal government is forecasted to spend $6.4 billion on vendor-furnished health IT products and services across all agencies in fiscal year 2021, a $400 million increase from the $6 billion on technology spending in fiscal 2016, according to a report from Deltek.

Deltek, a Herndon, Va.-based enterprise software and information solutions vendor, examines the trends and drivers shaping the federal health IT marketplace and provides a forecast for the next five years in its report, Federal Health Information Technology Market, 2016-2021. The increase in health IT spend from $6 billion to $6.4 billion in the next five years reflects a compound annual growth rate of 1.4 percent.

Data from the Centers for Medicare & Medicaid Services (CMS) projects national health spending will reach $5.6 trillion by 2025. The federal portion of national health expenditures is expected to grow from $920 billion in 2015 to $1.7 trillion in 2025, reflecting an 86 percent growth rate, according to the Deltek report. As the need for improvements in health care quality, interoperability and privacy grows, federal agencies acting as payers, promoters and providers will continue to invest in technologies and solutions to improve health outcomes and reduce waste, fraud and abuse.

Lead author Angie Petty, Deltek senior principal research analyst, wrote in an accompanying blog post that although future health initiatives remain largely uncertain under the new presidency, “Deltek believes efforts to digitize, share, analyze and secure health information will support strong federal spending this market segment over the next five years.”

The U.S. Department of Defense (DoD) is in the midst of implementing a new electronic health records (EHR) system worldwide and the U.S. Department of Veterans Affairs (VA) is in the process of developing an entire digital health platform. “Investments such as these solidify the spending forecast for this market area, offering a degree of protection from the budget tightening that other areas of federal IT will experience over the same time period,” Petty wrote. “Federal investments to support medical innovation, betterment of population health, health care cost containment, and a reduction in medical fraud will also strengthen contract spending on Health IT goods and services.”

In the short-term, the federal health IT market will experience a significant decrease in funding for fiscal year 2017, a $700 million dip to $5.3 billion, according to the report. Deltek researchers attribute this decrease in spending for the Federally Facilitated Marketplace at CMS which supports the Affordable Care Act (ACA), and “a reduction in spending at VA while they formulate a strategic direction for agency health IT.” However, “spending will rebound over the forecast period supported by DoD’s implementation of MHS Genesis and likely VA investments in a digital health platform,” the researchers wrote.

Key findings from the report include:

·  Growth in federal health IT contractor addressable spending will be supported by agency investments in EHRs and continued investments to improve population health and combat disease.

·  Future health initiatives remain largely uncertain under the new presidency. However, previous comments and newly appointed senior leadership by the Trump administration suggest a decrease in funding for health care mission oriented agencies. However, DOD and VA spending will likely see an increase in funding under the new administration to support the nation’s veterans and military forces.

·  Top federal health IT areas of focus include data standardization, data integrity, information exchange, interoperability, analytics, storage, infrastructure modernization, legacy system modernization, cloud adoption, telehealth and mobile applications.

·  Legislative and administration policy, such as the HITECH Act, MACRA, and the 21st Century Cures Act, promote population health and the use of health IT on a nationwide level, but provide relatively limited funds to agencies for the implementation of health IT.

·  The provider market segment is expected to show the most year-over-year growth due to VA and DOD EHR initiatives, as well as VA efforts to implement its digital health platform.

 

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