Federal health IT spending expected to reach $4.5B by 2013

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Increase in federal spending for health IT predicted. Source: Health Care Information Technology  

Federal health IT spending will grow from $3.2 billion in 2008 to more than $4.5 billion in 2013 at a compound annual growth rate (CAGR) of 7.1 percent, which is faster than the overall federal IT market, according to a report by government business market research firm INPUT. 

Spending by the departments of Defense (DoD) and Veterans Affairs (VA) on modernization projects, as well as plans by those departments to expand the scope of health IT into pharmacy and laboratory operations, should help create an annual growth rate of 7.1 percent in federal health IT spending, the report stated.

One concrete sign of market growth is the VA’s budget request for fiscal 2009, said Lauren Jones, an INPUT analyst. The department is requesting a 19 percent increase for its IT budget relative to this fiscal year, for a total of $2.4 billion, and a large sum of that money would go toward funding an enhanced version of the VA’s clinical EHR system.

“This market, as well as the national health IT market as a whole, will accelerate after standards are adopted and the vast volume of medical records are digitized, enabling them to be shared among healthcare providers,” Jones said.
The DoD has yet to release detailed budget specifications for its health IT plans, but INPUT expects that it likewise “will also be asking for a good-size percentage increase over what they asked for last year,” Jones said.

The report also found that vendors with domain expertise in health IT, specialized technology and established qualifications and relationships with key agencies are in the best position to influence and profit from market growth.

The strain of dealing with a growing baby-boomer patient population enrolling in the Medicare program, aging veterans, and returning military personnel will also drive the modernization, enhancement and expansion of federal health IT systems.

“Many healthcare processes still need to be automated or modernized over the next few years in order to realize cost savings and, more importantly, to create comprehensive patient EHRs that can be used to improve the quality of healthcare,” said John Slye, principal analyst at INPUT and co-author of the report.