Federal Health IT Market Slated for Growth Over the Next Five Years

Published: December 22, 2016


Deltek forecasts the demand for vendor-furnished Health IT products and services by the U.S. federal government will increase from $6.0 billion in FY 2016 to $6.4 billion in 2021 at a compound annual growth rate (CAGR) of 1.4%.

CMS data predicts that 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% growth rate. As the initial impacts associated with the Affordable Care Act’s (ACA) coverage expansions fade, growth in health spending is expected to respond to changes in economic growth, faster growth in medical prices, and population aging.

In order to combat increases in federal expenditures for health, the federal government is seeking to reduce costs, gain efficiencies, improve care quality, promote interoperability, cure disease, and improve overall population health.  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.

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 in this market segment over the next five years. The Department of Defense is in the throes of implementing a new electronic health records system worldwide and the Department of Veterans Affairs is in the midst of creating 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. 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.

Federal Health IT Contractor Addressable Spending:

Federal health IT contractor addressable spending is expected to dip in FY 2017 due to a decrease in spending for the Federally Facilitated Marketplace at CMS which supports ACA, and a reduction in spending at VA while they formulate a strategic direction for agency health IT.  Spending will rebound over the forecast period supported by DoD’s implementation of MHS Genesis and likely VA investments in a digital health platform.

More insight and a view of the diverse factors driving the federal spending on health IT can be gained from Deltek’s newly release report entitled Federal Health Information Technology Market, 2016-2021. The report also identifies major health IT investments and activities by agency. The report provides recommendations to guide solutions providers in maximizing their market positioning to best take advantage of federal business opportunities.