Sequestration Can’t Halt Government’s ‘Historic’ Health IT Spending


Civilian health agencies fueled health IT spending the most.

Federal health IT spending grew 27 percent annually from fiscal 2011-2015, with the market jumping from $2 billion four years ago to $6.5 billion in fiscal 2015, according to research from big data and analytics firm Govini.

Civilian health agencies fueled health IT spending the most. The Health and Human Services Department increased its annual health IT spend by a compound annual growth rate of 34 percent, with about half of its total obligations driven by the Centers for Medicare and Medicaid Services, which is preparing for a major modernization effort and call center upgrade.

Not surprisingly, the Veterans Affairs Department also upped its spending. Since 2011, health IT spending jumped an average of 25 percent annually, though some this growth was because of a failed effort to better share health data with the Defense Department.

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According to Govini, the health IT federal market is only going to get stronger. The Defense Health Agency, which actually spent less on health IT under sequestration constraints, is about to start shelling out money for its Defense Healthcare Management Systems Modernization contract, with a life cycle value of some $9 billion.

“DHMSM is now the marquee [electronic health records] program across the federal government,” the report states. “DHA will have a leading role in driving patient-focused systems modernization with DHMSM and other interoperability initiatives.”

Citing the Obama administration’s proposed fiscal 2017 budget, it appears other agencies aside from HHS – the big civilian spender at this point, shelling out $13 billion since 2011 – will follow suit. VA’s planned investments in health IT will rival those made at HHS, with $370 million allocated to providing information security to veteran health data. VA's telehealth initiative calls for $1.2 billion, much of which will fund modernization and upgrades across the agency.

The growth of the federal health IT market has “profoundly reshaped” its industry competitors, with mergers and acquisitions – such as Leidos' acquisition of Lockheed’s IT business in February – becoming the norm. Post-acquisition, Leidos is the top dog in health IT and has its paws in every federal health agency, capturing $2.5 billion in health IT spending since 2011.

While the civilian health agencies and industry players are more or less set, Govini’s analysis suggests the next few years will be interesting. Agencies are exploring alternative contracting options, including DHA’s decision to leverage Alliant 2 to satisfy its health IT needs rather than release its own contract.