Healthcare spending on IT services starts to look a little sickly

Posted by Mike Vizard on Apr 23, 2015 10:44:00 AM

11929391836_9558c901b1_zThanks largely to government initiatives such as the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA), consumption of IT service in the healthcare sector has been nothing but robust for the early part of this decade.

But a new report issued this week by Technology Business Research (TBR) says that demand for IT services among healthcare providers might finally be saturated. The report finds that in the fourth quarter of 2014 demand for IT services in the healthcare sector only grew 1.3 percent, compared to 5.4 percent in the same period a year ago.

Given the massive surge in healthcare IT spending  that the U.S. government has fostered, not being able to maintain the same high level of growth over time is understandable.

Is the healthcare vertical still lucrative?

The TBR report also suggests that most of the electronic health record (EHR) systems required under HIPAA have been built. And now that all the healthcare exchanges that are likely to be built under ACA have been completed, most of the IT services revenue being generated by these projects would fall under the heading of ongoing maintenance.

Although, the report notes that demand for IT services in the healthcare space is still outpacing overall demand for IT services, which has fallen largely because of the shift to the cloud. Because of privacy and security concerns, however, the healthcare sector still tends to favor on-premise deployments of IT systems that generate more revenue opportunities for IT service providers.

All things considered, the healthcare sector might simply be returning to its historic levels of spending. The challenge that presents IT service providers is that when it comes to equipment, healthcare providers tend to prefer to invest in medical devices that improve patient care rather than classic IT investments such as deploying a new enterprise resource planning (ERP) system. 

The good news is that healthcare providers are more conscious of fines associated with violating HIPAA requirements. As such, the level of spending allocated to IT security has improved even if the processes surrounding how patient data is handled is still often flawed.

The good news for IT service providers

Despite those concerns, TBR analysts suggest that investments in analytics, new requirements surrounding how medical billing is processed, and the next phase of meaningful use requirements surrounding EHR systems all bode well for generating new IT services opportunities. Add in a large dose of mobile computing applications, and the opportunity to provide IT services to healthcare customers gets even larger.

The real issue, is that there is no shortage of IT services providers targeting this segment, which makes competiton in this vertical industry especially fierce. The good news is that a recent survey conducted by the Healthcare Information and Management Systems Society (HIMSS) found that 81 percent of the 330 executives surveyed deemed IT to be a strategic part of their business.

Given those beliefs, it may behoove the average IT service provider to come up with some IT prescriptions of their own to help improve not only IT environments but also by extension the quality of the care enabled by those IT investments.

Photo Credit: Maryland GovPics on Flickr. Used under CC 2.0 license. 

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Topics: HIPAA and Healthcare IT, Cloud Trends

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