Spending on IT by Federal Health Care Providers to Drive Market Growth
Published: April 12, 2018
Deltek forecasts spending on vendor-provided federal health IT goods and services will increase from $6.1B in 2018 to $8.1B in 2023 at a compound annual growth rate (CAGR) of 5.6%, reaching a peak of $8.5B in 2022.
Federal government spending on health IT is driven by the desire to control costs, improve outcomes, combat disease and better population health. CMS estimates that the federal portion of health care expenditures will increase 80% from $918B in 2015 to $1.7T in 2025 fueling the need to derive more value and contain costs.
For the purposes of Deltek’s analysis of the market, federal agencies are organized in the health care vertical as providers, promoters or payers, according to the mission areas served. Providers include government agencies that serve veterans, military families, uninsured and lower-income citizens through a variety of federal and federally subsidized facilities. Promoters include federal agencies charged with promoting wellness, healthy lifestyles and medical research. These agencies also aim to protect citizens from health risks such as communicable diseases, smoking, diabetes and obesity. Payer agencies pay insurance premiums through Medicare, Medicaid, and the Children’s Health Insurance Programs (CHIP).
Deltek’s study of agency initiatives and planned investments in health IT revealed that the majority of the growth in this market will be due to implementation of new electronic health records systems (EHRs) and associated infrastructure upgrades at VA and DoD acting in their health care provider role. The contractor-addressable portion of the federal provider market is expected to grow from $3.3B in 2018 to $5.4B in 2023 at a CAGR of 10.6%. Other provider agencies include Indian Health Service, Coast Guard, and Department of State which are also planning EHR procurements over the next five years.
Additionally, federal agencies with health related missions are focused on data sharing, interoperability, patient access to their records, lowering health care costs, paying for performance, eliminating fraud, modernizing health IT systems, and using emerging technology to solve health problems and cure diseases (e.g. artificial intelligence, blockchain, big data, APIs, FHIR, etc.). Agencies are using commercial-off-the-shelf (COTS) solutions, shared services, and cloud technology for health IT infrastructure and legacy system modernization efforts.
Legislative and administration policy, such as the HITECH Act, MACRA, the 21st Century Cures Act, the Federal Health IT Strategy and MyHealthEData 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.
Vendors looking to maximize health IT opportunities should target contracting vehicles being used by agencies with health missions (e.g. CIOSP3, CIO-CS, T4NG, GSA Schedule 70, SEWP V, etc.). Additionally, contractors should consider participation under Health IT Services Special Item Number (SIN 132-56) under IT Schedule 70. Agencies are ramping up use of this SIN because it simplifies the procurement process, and provides easier access to innovative, emerging, and specialized health IT services.