Deltek Predicts Federal Contractor Addressable Health IT Spending to Reach $9.2B by FY 2022

Published: September 02, 2020

Federal Market AnalysisCoronavirus (COVID-19) PandemicDEFENSEHHSHealth ITVA

In a new report released Friday, Deltek forecasts federal spending on contractor-supplied health IT products and services will grow from $7.8 billion in FY 2020 to $9.2 billion in FY 2022 at a compound annual growth rate (CAGR) of 8.7%.

Key Takeaways:

  • Deltek forecasts the federal health IT market will show strong growth over the next few years as health mission agencies upgrade health IT systems and implement new capabilities due to the COVID-19 pandemic.
  • Top spending on health IT solutions and services will come from DOD, VA and HHS, and DOD and VA EHR implementations, along with associated IT infrastructure upgrades, will predominantly drive market growth.  
  • The COVID-19 pandemic is fueling a renewed federal focus on health and medical research, disease surveillance, and public health security and innovation, which will likely result in additional health IT investments.

Fueled by rising health care costs, efforts to modernize federal electronic health records systems, limitations for disease tracking revealed by the pandemic, and the need to speed biomedical research, federal health mission agencies will continue robust investments in IT solutions over the next three years.  

Increasing enrollment in Medicare and growth in the volume of services under Medicaid will raise federal health care expenditures. The CMS Office of the Actuary projects federal healthcare expenditures will increase 78% from 2018 to 2027, growing from $1 trillion to $1.8 trillion with an average annual growth rate of 6.5% over the 10 year period.

Additionally, the implementation of new Electronic Health Records (EHRs) and associated IT infrastructure at DOD and VA further drive federal health IT spending over the forecasted period.  In fact, the largest increase in federal contractor addressable health IT outlays will stem from DOD and VA EHR implementations, which are relying heavily on contractor provided products and services. After many years of effort, DOD and VA are on the verge of creating a single health record for all service members and veterans, moving beyond the aspiration of interoperability.

Health mission agencies are also facing unprecedented challenges, demands and opportunities precipitated by the COVID-19 pandemic.  Prior to the pandemic, these agencies focused on investing in health IT to improve outcomes, lower costs, prevent disease and better public health. However, due to the novel coronavirus, the administration and federal agencies have a renewed focus on the use of IT to empower care, propel biomedical research, track disease permeation, monitor medical supply chains, and drive therapeutic and vaccine development.

Deltek’s new report also analyzes provisions of the 21st Century Cures Act and CARES Act, which are providing extra funding for health mission agencies, some of which will be funneled toward health IT investments such as telehealth and IT to speed treatment development. Additionally, recent rules from CMS and ONC stemming from the Cures Act, aim to reduce provider burden, eliminate data blocking, and allow patient access to their own health data.

Deltek’s research shows that data standards, interoperability, sharing, curation, management, security, and immutability are critical for achieving the future benefits of health IT. In addition, Deltek found that health mission agencies are working to integrate emerging and modern technologies such as Artificial Intelligence (AI), cloud computing, analytics, data lakes, and Application Programming Interfaces (APIs) into health IT applications and solutions.

For more information, access Deltek’s “Federal Health Information Technology Market, 2020-2022” report.