VA drives growth of health IT market to $8.5B

The federal health IT market is expected to peak in 2022. New Deltek analysis points the way to where the opportunities are.

The federal health IT market is expected to grow at a strong rate before it peaks at $8.5 billion in 2022, according to a new analysis by Deltek.

Deltek's new report has health IT pegged at $6.1 billion in 2018 and the growth forward is being pushed by major electronic health record initiatives at the Veterans Affairs and Defense departments.

Spending at the VA and DOD is expected to peak around 2022 and both agencies are expected to scale back spending on existing EHRs as the new systems come online, according to Deltek. Health IT spending in 2023 is expected to drop slightly to $8.1 billion.

The report overall covers a broad swath of the health IT market and Deltek breaks the market into three segments:

  • Promoter -- Agencies charged with protecting people from health risks such as epidemics and communicable diseases.
  • Provider - Agencies that provide health care services, for example, VA serves veterans through hospitals, clinics and other facilities. This category would also include DOD, corrections facilities, clinics and community health centers.
  • Payer -- The payer of health care services such as Medicare, Medicaid and Children’s Health Insurance Programs.

The provider portion has the biggest spend and has all of the growth with Deltek estimating it to grow from $3.3 billion in 2018 to $5.4 billion in 2023.

Spending in the promoter vertical will hold steady at $1.1 billion, while the payer segment will drop from $1.8 billion to $1.5 billion.

The main reason for the decline is that IT spending for the health insurance marketplaces is expected to drop.

The VA is the biggest provider of health care services and is expected to grow significantly from $1.1 billion in 2018 to $3.2 billion in 2023. The Department of Health and Human Services is expected to shrink slightly from $2.6 billion in 2018 to $2.4 billion in 2023.

Deltek has DOD holding steady at $2.1 billion and others also holding steady at $300 million.

HHS spending is dropping as it returns to pre-ObamaCare spending levels.

Spending priorities inside some of the HHS agencies such as the Centers for Medicare and Medicaid Services include IT modernization, program integrity and cybersecurity.

At the Centers for Disease Control and Prevention, the priorities are more data driven such as collecting data, data management, improving accuracy and analytics.

The major initiative at the Defense Department driving spending there is the Military Health Systems implementation of Genesis, a massive EHR implementation being led by Leidos and Cerner. Full deployment is expected by 2022.

Other health IT priorities at DOD include building and upgrading its IT infrastructure and cybersecurity.

VA also is in the midst of its own EHR implementation and is expected to sign a sole-source contract with Cerner. No formal word yet on what role Leidos may play.

Other priorities include cyber, cloud and digital platforms and access and interoperability, according to Deltek’s analysis.

For contractors looking to crack this market, Deltek offers several recommendations:

  • Get on major health IT contracts such as CIOSP3, CIO-CS, VA’s T4NG, NASA SEWP V and GSA Schedule 70.
  • If you are on Schedule 70, participate in the Health IT Special Item Number, which simplifies the procurement process.
  • Look for opportunities adjacent to electronic health record initiatives such as interoperability, application development, and infrastructure upgrades.
  • Be diligent with cybersecurity efforts.
  • Look for modernization projects with shared service offerings, cloud computing and commercial technologies.
  • Don’t forget opportunities around telemedicine, telehealth and mobility, and the systems architecture and infrastructure that support them.