The prognosis is good for state and local health IT

Opportunities for systems integrators in the state and local health care market have never been better than right now, thanks to a growing commitment to cutting costs and $20 billion in the federal stimulus package for health information technology.

“There is really a great appetite growing to use technology to not only decrease the costs of health care but also to improve quality and health outcomes,” said Dr. Robert Wah, chief medical officer at Computer Sciences Corp.

Market research firm Input published a report last year that projects that health IT will grow from $6.9 billion, or 15.7 percent of total state and local IT spending, in 2007 to $10.8 billion, or 16 percent, in 2012.

IT systems in this sector include Medicaid Management Information Systems (MMIS), disease management and surveillance systems, e-prescribing, telehealth, electronic health records, health information exchanges, and case management applications.

The stimulus funding for health IT will be used to give providers an incentive to invest in EHR systems; health information networks that link payers, providers and other data sources; and health IT training programs for medical and technical personnel. The spending will provide more momentum in the market and neutralize any cuts that states might have considered to their health IT projects this year, industry executives said.

“It’s a great catalyst to get the whole health IT effort moving forward,” said Christopher Deelsnyder, managing director and senior vice president of Affiliated Computer Services Inc.’s Government Healthcare Solutions. “The challenge we’ve always had is one of getting states to move forward quickly in their rate of adoption. Now we’re seeing states become more aggressive, wanting to piggyback on other states’ success.”

The use of technology to address health care concerns is creating much of the expected growth in state and local IT spending and activity, said Barbara Anderson, vice president of EDS Health and Human Services. Historically, states have turned to technology to improve administrative functions, such as speeding claims processing.

“Over the past few years, they’ve focused much more on managing their overall populations as a health plan,” Anderson said.

States are more proactive in using their resources to improve the overall health of their residents, and they are using technology to do that.

Many states want to overhaul and modernize their MMIS by outsourcing the administration of those systems and adding functions that improve provider and recipient access to eligibility and claims information, enable e-prescribing, act as a hub to connect patient data with EHRs, facilitate quality reporting and transparency, and provide more sophisticated fraud and abuse detection.

The MMIS market is dominated by a few companies, including EDS, ACS and CSC, which captured a $265 million contract in January to modernize North Carolina’s MMIS.

“There are probably more [requests for proposals] in the pipeline for replacement systems in the next 12 months than there have been in any 12-month period in the past 10 years, so that’s a lot of activity,” Anderson said. EDS has replaced more than 10 management systems in the past five years, including five in 2008.

One of its most recent wins was a seven-year, $391 million contract to modernize Georgia’s MMIS.

This year, California, Virginia, New York, Oklahoma and Texas plan to award contracts for MMIS work.

States are also looking to fund other health IT projects this year. They include integrated Web sites that provide consumers with price and performance information on providers and statewide disease alerting systems. States are also expected to spend money on point-of-sale systems that let pharmacists access patient data in MMIS.

Other projects include telehealth systems that give physicians the ability to keep closer tabs on Medicaid and State Children's Health Insurance Program beneficiaries who have chronic conditions, such as asthma, diabetes and coronary heart disease.

Although health information exchanges are often associated with private funding, information-sharing initiatives are another growing area of investment for states. Georgia is a leading player and expects to use stimulus money to lay the foundation for a statewide exchange. Oregon is implementing a health record bank, and Kentucky has issued an RFP for a statewide HIE.

Chris Dixon, state and local industry analysis manager at Input, said states are also investigating less typical areas for savings. For example, many are looking for IT applications that can cut health care costs associated with their prison populations. California is expected to release the first major procurement in that category later this year.

“Where the states are feeling the greatest pain in terms of spending is where they’re going to be willing to invest more money in IT,” Dixon said. “Given the tight budgets, integrators who offer up share-in-savings type arrangements will definitely get a hearing.”