$1.65 Trillion Federal Health Market Will Be Boon For IT Industry

Federal spending on health care is expected to balloon over the next seven years, providing ample opportunity for health IT—and its vendors—according to a report from the Federal Market Analysis team at GovWin from Deltek.

The report—Federal Health Information Technology Market, 2018-2023—notes health care spending is only going to rise, even if efficiencies are built into the system. Deltek projects federal health spending will increase by 80 percent over 10 years, from $918 billion in 2015 to $1.65 trillion by 2025.

“Federal health care expenditures are expected to climb as the Medicare population grows and as health care costs for the military and veterans continue their upward trajectory,” the report states. “Federal agencies must find a way to increase efficiency and effectiveness, lower costs and improve outcomes.”

Enter the health IT industry, which could presumably help efficiency efforts through new technologies, Deltek points out.

Analysts looked at the 2019 budget request for areas with money set aside for health IT programs in the executive, legislative and judicial branches, as well as “government-owned corporations such as the U.S. Postal Service.” The study did not look at federal grants to state and municipal governments.

The biggest spending areas will be at the Defense and Veterans Affairs departments, both of which are in the midst of major electronic health records projects, thought the former is much further along than the latter.

“Federal health IT spending over the forecast period will be greatly influenced by VA and DOD deployment of the Cerner EHR solution, in addition to associated IT services and network and infrastructure upgrades,” the report states. Spending is projected to peak at $8.5 billion in 2022 when the Defense Department’s Military Health System Genesis is at full deployment.

While spending from Defense will be high, it will also remain largely flat by the end of the five-year projection, according to the analysis. Veterans Affairs, on the other hand, is expected to balloon from $1.1 billion in 2018 to $3.2 billion in 2023.

Spending at the Health and Human Services Department is expected to decline slightly over the same period, from $2.6 billion to $2.4 billion, as leftover costs from the Affordable Care Act insurance marketplaces peter out.

But health IT is an ever-changing marketplace and new technologies are revolutionizing the industry.

“The medical field often lags behind other industries in adopting new technologies. However, the industry is poised for radical change due to disruptive, computer-based technologies such as artificial intelligence, machine learning, blockchain, [fast health care interoperability resources, or FHIR], big data, robotics and 3-D printing,” the report states. “Expect demand for health IT solutions based on these technologies to remain strong over the next five years.”

The report also cites cybersecurity, data privacy and mobile and telehealth as significant growth areas to watch.

Notably, the report only includes funding for IT used for specific health care areas, such as electronic health records. The report does not include other kinds of IT being used by the health sector. “For example,” the report states, “email across the department of HHS would not be considered health IT but the use of cloud storage or analytics applications for genomic modeling at [National Institutes of Health] would be.”