Policy & Value-Based Care

Report: VA, DoD EHR Contracts to Spur Federal Health IT Spending

April 16, 2018

The federal government has estimated that federal healthcare spending will increase 80 percent, from $918 billion in 2015 to $1.7 trillion in 2025, with one of the key IT-related factors being the VA's and DoD's implementations of new EHR systems.

Rajiv Leventhal

The estimation, coming from Deltek’s Federal Health Information Technology Market report, noted that “Federal health IT spending over the forecasted period is greatly influenced by these new EHR platforms as well as potential solutions by the Coast Guard and Department of State. Efforts to increase medical innovation, mobile health, healthcare cost control and combat public health issues such as the current opioid epidemic will also solidify investments in health IT products and services.”

The report’s authors also stated that requirements for improved quality, interoperability, data sharing and privacy will drive federal agencies taking on the role of promoter, provider or payer to invest in more IT solutions for enhanced health effects and to thwart waste, fraud and abuse.

Deltek also forecasted that spending on vendor-provided federal health IT goods and services will increase from $6.1 billion in 2018 to $8.1 billion in 2023, at a compound annual growth rate (CAGR) of 5.6 percent.

Both the DoD and VA have awarded their EHR modernization contracts to the Kansas City-based health IT vendor Cerner, among other companies involved in the project. Reports have surfaced that the VA-Cerner contract, which has not yet been signed, will be in the $10 billion range, making it one of the largest health IT implementations in history. The hefty cost has concerned Congressional members since that $10 billion figure doesn’t even include infrastructure improvements or implementation support.

Meanwhile, the DoD has begun to implement the Cerner system across a few of its sites, but recently it was announced that they will be suspending the rollout for a few months so that the successes and failures of implementations that have been deployed can be reviewed. The Coast Guard also just recently stated their intentions to join the DoD in transitioning its service members’ and clinics’ health records to the DoD’s MHS Genesis EHR system. The Department of Defense has a 10-year, $4.3 billion contract to build and rollout the Cerner EHR.

Other findings from the report included:

A growing Medicare population and increased military and veteran health costs will cause federal healthcare expenditures to continue to rise, forcing agencies to prioritize costs in areas of efficiency and improved outcomes.
Federal agencies are using COTS, shared services, cloud and cyber solutions for health IT infrastructure and legacy system upgrades.
Legislation and policies such as the HITECH Act, MACRA, the 21st Century Cures Act and MyHealthEData will continue to pave the way for health IT on a nationwide level. However, budget cuts in related federal health agencies will temper their spending on health IT solutions.
A growing demand in mobile health solutions such as telehealth and telemedicine will drive growth in mobile healthcare products and applications.