Fed expenditures for health IT services hit $6.5B in 2015

Spending on IT services by federal health agencies reached $6.5 billion in 2015, up significantly from $2 billion in 2011, according to research firm Govini.

Not surprisingly, the Department of Health and Human Services—particularly the Centers for Medicare and Medicaid Services—led spending from 2011 to 2015 with nearly $13 billion in prime contract obligations.

Govini notes that, with $6.8 billion in total prime contract obligations, CMS accounts for about half of HHS’ spending on IT services during that time period.


“The agency has been preparing for modernization by making foundational investments in call centers, IT infrastructure and data centers,” states Govini’s report. “The major drivers have been operational services contracts for call centers and data centers, as well as migration to virtual data centers.”

Overall, federal health IT services grew 27 percent annually in spite of sequestration-driven budget constraints, finds the report.

“The Department of Health and Human Services grew at a 34 percent compound annual growth rate and the Department of Veterans Affairs (VA) grew at a 25 percent CAGR,” states the report. “Defense Health Agency (DHA) spending decreased during this time period at -6 percent CAGR amid sequestration constraints and the reorganization of the Military Health System.”

Looking ahead, Govini’s report notes that the outlook in the President’s Fiscal Year 2017 budget proposal is strong, with technology investment geared towards systems modernization, electronic health records, networks and cybersecurity.

In particular, the firm says VA and DHA in FY17 are “planning major IT investments that rival HHS’s in scope.” Specifically, Govini mentions that DHA is leading the way in EHR modernization through its Defense Healthcare Management System Modernization (DHMSM) program. Last year, the Pentagon awarded a $4.3 billion contract award to the Leidos-Cerner team to modernize DoD’s EHR system.

Nonetheless, according to the report, CMS continues to drive HHS IT modernization. “Its major initiative is to improve the usability and functionality of the Marketplace by improving eligibility, plan management and payment functions,” states the firm. “In the proposed FY17 budget, $333 million is devoted to modernizing claims processing systems and call centers,” while “networks and security are driving VA investment.”

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