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Spending by federal government agencies on health IT systems and services will grow from $4.5 billion in 2011 to $6.5 billion in 2016, a new report projects.

At an anticipated compound annual growth rate of 7.5 percent during the five-year forecast period, total federal health IT spending will increase an estimated 44 percent, according to the new GovWin report from research firm Deltek.

The forecast, Federal Health Information Technology Market, 2011-2016, looks at trends that are likely to affect the federal health IT market as well as the expected impact on vendors, systems integrators and federal contractors over the next five years.

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 major transformation.
• The federal government is the single largest payer of health care services in the U.S., 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.

Among the factors that will spur increased federal health IT spending in coming years are rising health care costs, aging population, and continued high unemployment, the report says.

In addition, the HITECH Act and the Affordable Care Act are driving government agencies to adopt health IT. "Agencies will be forced to spend money to save money in the long run by investing in electronic health record (EHR) systems, IT infrastructure modernization for health-related agencies, payment system transformation, and IT to promote advancement in population health," the report says.

GovWin is an industry information service of Deltek, a "provider of enterprise software and information solutions for professional services firms and government contractors."