Healthcare Providers Will More Than Double Their Spending on IT Services in 2017, Says Everest Group

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New MACRA policies will stimulate IT investments as healthcare providers seek to document quality of care and ramp up patient engagement under new Medicare reimbursement model.

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Ongoing technology adoption by US healthcare providers ... will translate directly into four IT investment trends we’ll see develop over the course of the next 24 months.

By 2020, healthcare providers will more than double their spending on technology services, which represents an incremental opportunity of over US$9 billion dollars for the healthcare IT outsourcing (ITO) market, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing. The healthcare provider segment is poised to be one of the fastest growing segments in the healthcare IT services market in coming years.

Accelerated IT investments on the part of healthcare providers will be driven in large part by new reimbursement policies taking effect under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Under MACRA, providers will earn more or less depending on the quality and effectiveness of the care they provide. As a result, healthcare providers will continue investing heavily in technology that supports initiatives such as compliance, legacy modernization, electronic health records (EHR) and patient engagement.

“MACRA encourages ongoing technology adoption by US healthcare providers by mandating specific tech-related measures,” said Abhishek Singh, practice director of Information Technology Services at Everest Group. “This will translate directly into four IT investment trends we’ll see develop over the course of the next 24 months. First, performance improvement and cost takeout will be a strategic focus; both are critical for compliance and to raise capital from the market. Second, patient engagement will drive the differentiation strategy. Third, we’ll see a growing urgency for data security. And, finally, we’ll see a market crying out for interoperability, nimbleness and innovation with respect to EHR.”

These results and other findings are explored in a recently published Everest Group report: “IT Outsourcing in the Healthcare Provider Industry – Annual Report 2016: The Big Bang MACRA-economic Theory of Provider IT Transformation.”

The full report provides an overview of the ITO market for the healthcare provider industry, which comprises large health systems, stand-alone hospitals and clinics, pharmacists, physician practices and diagnostic laboratories. Everest Group analyzes the current trends and future outlook of large, multi-year ITO relationships in the provider market, covering market dynamics, the current state of the market, and the future state of the provider IT industry.

Other key findings:

  • The global healthcare (payer and provider combined) ITO market is expected to grow at 12 percent CAGR during 2014-2020, reaching US$68.3 billion in 2020.
  • Demand in the provider ITO market has been concentrated in the larger health systems.
  • Currently, application, development and maintenance (ADM), testing and network services rank highest among the IT services included in ITO deals within the provider segment.
  • Given the consolidation and convergence tailwinds in the market, systems integration (SI), testing and asset rationalization work streams are expected to get a boost in 2017.

About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empower clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-depth content are available at http://www.everestgrp.com.

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Contact:
Andrea M. Riffle, Everest Group
andrea.riffle(at)everestgrp(dot)com

Robert Cathey, Cathey Communications
+1-865-386-6118
robert(at)cathey(dot)co

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Andrea M. Riffle

Robert Cathey
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