IT spending in health care grows

Federal spending for information technology in the health care sector is expected to grow by a steady but sure-footed 5.5 percent during the next five years, according to a new forecast by the Government Electronics and Information Technology Association (GEIA).

GEIA predicts that homeland security spending and the demands of an aging population will fuel solid IT spending at the Defense Department's health affairs services and at the departments of Health and Human Services and Veterans Affairs.

The total IT budget for those departments is projected to increase from $6.6 billion in fiscal 2003 to $8.4 billion in 2007, according to Mary Freeman, manager of business development for Verizon Communications, who conducted the study for GEIA. The full study — a summary of which was presented at a press briefing April 18 — will be released April 30 at a GEIA conference in Washington, D.C.

"One of the drivers for this growth is the continued need to put many additional resources [to work] processing Medicare and Medicaid applications, and the other is simply a need to make sure health care [staff members] have the products they need to share resources and have the best systems available," Freeman said.

Although the data is not yet available, she said many agencies are feeling pressure to develop backup systems and sophisticated disaster recovery technology after Sept. 11.

Meanwhile, the new mantra is collaboration and consolidation across agencies, said Kari Garell, vice president of business development at EER Systems Inc. However, "it simply cannot happen without using technology as the enabler."

Health care spending on IT will affect both civilian and military populations, according to the GEIA study. Pentagon officials are looking at delivering battlefield medical care using the latest technology as the United States continues its war against terrorism, said Ed Allen, vice president for e-business and homeland security at Oracle Corp.

"Readiness to DOD is like revenues to a company," Allen said. "You are already seeing an increase in lightweight, mobile and wireless [technology] on the battlefield."

In addition, DOD's health care spending on military personnel and their dependents in the United States is likely to increase as well, Allen said.

At the VA, an agencywide enterprise architecture may limit spending in the long run and create greater efficiency and better service.

"It's tough to do new IT initiatives when you are trying to pay the doctors who take care of the veterans," said Leslie Barry, director of business development at Computer Sciences Corp., whose responsibilities include the VA.

HHS is expected to see steady growth as well, according to Robert Sheahan of Donath-Sheahan Associates Inc., an IT consulting group. But much of that growth in spending will go to keep legacy systems alive.

"There are many pressures on the budget, and getting to new procurement is just tough," Sheahan said. "The successful IT contractor is the contractor who has specific solutions and knows specific offices down in the center level of the agencies."

Larry Allen, executive director of the Coalition for Government Procurement, an industry group representing more than 300 vendors, said GEIA's forecast is a conservative one, especially for the VA.

"If I had to guess, VA spending would increase by more than 5 percent," he said. "They are fully integrating IT into what they do."

He said DOD's health care system will have to figure out how to communicate with the VA since the departments service virtually the same population at different points in their careers.

Verizon's Freeman said the forecast is conservative because of deficit spending and the impact of the recent tax cut on the federal budget. Nevertheless, she said, IT "products and services are seen as a key tool to help manage rising costs and demand for health care services."