Opportunities for Electronics as US Hikes Health IT Spending

I'm sure that in this election year, many politicians will continue their rants about the US government needing to trim its spending as a way to achieve the goal of fiscal responsibility. However, one recently published study shows that at least in one area — health information technology — federal spending is poised to grow for many years to come.

According to a GovWin IQ study released by Deltek Inc., federal spending on Health IT will increase from $4.5 billion in 2011 to $6.5 billion by 2016. The funds will be spent to purchase a variety of hardware, software, and IT skills to design an IT infrastructure that supports payment systems, the exchange of digitized health information over Internet networks, and database systems that operate federally funded health research.

The study notes that several shifts are occurring, most notably the transition away from patient paper charts to the adoption of electronic health records (spurred on by federal government incentive programs). The government has also increased its focus on access to care through telemedicine, and is steadily spending on upgrades to its legacy infrastructure.

As federal health agencies modernize their systems and find new ways to deliver healthcare services, companies like {complink 2376|Hewlett-Packard Co.} — which recently won a contract to provide advanced technology solutions across multiple functional areas at the US Department of Veterans Affairs (VA) — and {complink 3153|Lockheed Martin Corp.} — which provides the US Department of Health and Human Services (HHS) with hardware, software, and technical support under a five year $170 million contract it won in 2009 — are a few of the many companies tapping into new opportunities that the transformation in healthcare delivery offers.

Furthermore, as healthcare costs continue to rise, the federal government views purchasing technology as a way to drive greater operational efficiency, which will save money in the long run. Key findings of the report include:

  • Technology advances, as well as potential long-term cost savings and better health outcomes, drive demand for mobility, telehealth, informatics, decision support, interoperability, and common EHRs. Federal agencies possess the most advanced EHRs in the world; however, due to their age and legacy architectures and technologies, they are overly ripe for a major transformation.
  • The federal government is the single largest payer of healthcare services in the US, and as such must transform from a “pay for service” model to a “pay for health” model in order to reduce costs and improve population health outcomes. Data security, program integrity, care coordination, political agendas, and the deficit present challenges to federal and nationwide health IT adoption and implementation.

As high-tech executives explore opportunities at federal agencies providing health-related services, Angie Petty, Deltek's senior principal analyst, advises that OEMs familiarize themselves with the agency's current and planned IT environment.

According to Petty, as OEMs approach this market, they need to ask a few critical questions, such as how might the agency's current workflow change with healthcare practice transformation; what problems might transformation and change bring; and what process improvements can OEMs devise as they bring technology to bear on clinical decision-making, population health analytics, collaboration, and coordination of care and change management training?

“Move fast,” Petty advises high-tech executives. “This will get very competitive since health IT is one of a few bright spots in a declining federal IT market.”

That's the kind of advice that should bring good cheer to high-tech executives as they ponder their business strategy in the year ahead.

14 comments on “Opportunities for Electronics as US Hikes Health IT Spending

  1. Eldredge
    January 3, 2012

    Interesting – I didn't know that Lockheed-Martin was involved with Health IT programs, but not surprised that HP is a player. I would have expected IBM and GE to be major player (and they probably are).

  2. stochastic excursion
    January 4, 2012

    I knew making medical records more readily available to providers was a key element of Obama's stimulus package #1, but I wasn't aware the infrastructure was to be maintained by federal agencies.  Much of the stimulus money remains unspent, but it rings true that the government will soon be parted from it.  No point in waiting around and risk missing out on this kind of funding!

  3. Daniel
    January 4, 2012

    I think electronic equipment manufactures and data solution providers can make use of a share in this increased IT expenditure. They can make use of the requirements in health data depository system and implementation of health automation system by medical electronic equipments.

    January 4, 2012

    I looked at some MRI scans remotely recently and it was very easy to diagnose the issue even though I was 300 miles from the patient.  This kind of technology could provide great savings to cash strapped health services.

  5. Jay_Bond
    January 4, 2012

    I was surprised to find out Lockheed-Martin was involved in the IT business, always associated them with aircraft. The fact that the government is giving incentives and helping to fund the change over should eventually be very cost effective across the board. Doctors and specialists can view patients files from hundreds of miles away and save time and money. The elimination of paper records will also help the environment out and reduce huge file rooms for record retention.

  6. Barbara Jorgensen
    January 4, 2012

    I've been impressed by an effort that I learned about from Avnet: its systems business has formed a vertical markting team that takes vendors, VARS and VADs into hospitals to learn about the IT requirements and needs. One of the biggest problems is the cut-and-paste style of disparate systems that are purchased with little or no forward planning. There is a huge opportunity here for any company that has the ability to solve real-world problems in healthcare.

  7. bolaji ojo
    January 4, 2012

    Hello Flyingscot, I prefer you up in the air and in the electronics business. I won't be including you on my medical team — I don't trust you to read my MRI scan from miles away. I get what you are saying, though. Health IT is big business. I went to the doctor recently and right in the examination room he whipped out his ipod and forwarded the prescription to my pharmacy. That's becoming basic health care support nowadays but imagine what other advances is taking place in the industry.

  8. _hm
    January 4, 2012

    Canada is also spending large some for Health IT and they are going to increase it further. Will this type of work eventually gets outsourced?


  9. The Source
    January 4, 2012

    Eldredge ,

    There are so many high tech companies expanding their reach into the health IT space.  This is a natural thing, and many in the business will tell you that health care is the last industry to adopt technology for their work processes. 

    For example, the banking industry, the retail industry and the airline industry have all computerized their data which has created greater efficiency and reduced costs.  Digitizing patient information has lagged behind, and now, with the adoption of electronic health records, the need for hardware, software and IT skills is in great demand.  

    Thanks for reading my article, and have a wonderful New Year.



  10. The Source
    January 4, 2012

    stochastic excursion ,

    You said of the government health IT related systems alluded to in the article that you were not “ aware the infrastructure was to be maintained by federal agencies.”  Yes they are!!  Indeed , when you think of the Centers for Medicare and Medicaid Services (which is part of the U.S. Department of Health and Human Services) and the reimbursements they provide to millions of patients to cover health care costs or the U.S. Department of Veterans Affairs, which provides health care to veterans of foreign wars, these government departments and agencies manage these services and the systems that support them for tens of millions of patients.  As health care reform continues to unfold, the federal government needs to spend more on health IT to modernize these systems.

    Thanks for reading my article, and have a Happy New Year.


  11. The Source
    January 4, 2012

    Dear Bolaji,

    It seems that examples of the move toward digitizing medical records and the use of them are popping up everywhere.    Your story reminds me of an aunt of mine who told me over the weekend that her doctor has installed an electronic health record that stores all of her medical lab tests and a lot of other information besides.  Just this week I went to the ophthalmologist and at the check-in desk was a note to inform patients that the medical facility will install electronic health records soon.

    Thanks for reading the article, and have a Happy New Year.


  12. bolaji ojo
    January 5, 2012

    Nicole, The government mandated the use of electronic health records and as a result may have to chip in towards the installation and maintenance of the equipment, etc. However, in a free market economic system, does the government have to bear the full cost or are there other reasons for its direct involvement?

  13. The Source
    January 5, 2012

    Dear Bolaji,

    At the federal level, spending on health care services is enormous, and yes, the federal government bears the cost of heath care for many Americans.  For example, the Centers for Medicare and Medicaid Services (CMS), is the agency in the Department of Health and Human Services responsible for providing health coverage to almost 100 million beneficiaries including seniors and people with disabilities, individuals and families with limited-income, and children who do not have health insurance coverage. To meet its obligations CMS processes more than 3 million eligibility inquiries and makes more than $1 billion in fee-for-service payments daily.

    The federal government believes that it can create greater efficiency and reduce costs by modernizing the nation's health information technology infrastructure, which is why it set aside $19.2 billion dollars in the American Recovery and Reinvestment Act for the adoption of health IT such as electronic medical records.

    Hope this helps.


  14. JADEN
    January 12, 2012

    This is a good spending to increase health outcome and also to improve on the health of individual in United States.  A great opportunity indeed for the high tech.

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