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It's no wonder the health care vertical is such a hot opportunity for solution providers. In no other industry is there growth as explosive behind an opportunity so clearly telegraphed.
That was the message Thursday from Scott Lundstrom, vice president of research for IDC Health Insights, who said that the combination of stimulus funding, health care reform and the move to a post-reform marketplace of more efficiently deployed health care technology resources is creating a massive market opportunity. It's not only an opportunity for investment, Lundstrom noted, but thanks to government regulation, it's also a market opportunity where solution providers are able to say with certainty what customers will be buying and by when they'll need to have bought it.
"We have an evolving market," said Lundstrom, addressing a packed audience of VARs, integrators, vendors, CIOs and analysts at XChange Public Sector in Jacksonvile, Fla. "The requirements of that evolution are well understood and well documented and mandated by government regulation. We have significant investment. We have dramatic consolidation."
Both the payer side -- insurance companies -- and the health care provider side are in transition, Lundstrom noted. With the federal government pouring money into the participant segment of the health care market -- the HITECH bill within American Recovery and Reinvestment Act of 2009 (ARRA) calls for $20 billion in incentives -- both sets of health care organizations have to adapt their technology to meet cost pressures, address a rapidly growing aging population, address staff shortages, consider patient safety and comply with a laundry list of government regulations.
It won't be easy, Lundstrom said.
"Some of the vendors think they're on their way to the gold rush. Many are on their way to the Colosseum," he said, referring to competition in the segment. "This is a tough, tough market."
But the needs are obvious, said Lundstrom, who cited statistics that there are 1.5 million preventable adverse drug events every year that result in some 7,000 deaths of patients, and also an estimated $700 billion in wasted time, energy and resources poured into health care.
The health-care spend overall? Ballooning, Lundstrom said -- there's $2.7 trillion spent in the U.S. on health care, which is now 17 percent of GDP and rising.
A combination of stimulus funds, government regulations and other factors is catalyzing a transformation of health-care organizations into what Lundstrom described as accountable care organizations (ACO).
That transformation means payers have a sharpened focus on controlling spiraling health-care costs, and are dealing with market, product, process and technology fragmentation, and they must be more transparent in how they conduct business. It also means, Lundstrom said, that providers are under pressure to implement electronic health records (EHR), Health Information Exchanges (HIE) and computerized physician order entry (CPOE) systems, make those systems comply with the definition of meaningful use, and drive patient safety and quality initiatives that have penalties for failed performance.
"It's a different business model and it's shaking things up," Lundstrom said.
But the money is there. The total health-care IT provider spend on a global basis is $25.6 billion: a mix of hardware, software and services. Forty percent of that is in the U.S. and expected to be 53 percent by 2014, Lundstrom noted.
"The U.S. market for health care now, on a pure economic basis, is the most attractive single market in the U.S.," Lundstrom said.