Despite Woeful Economy, Health IT Investing Up

By Ken Congdon, editor in chief, Health IT Outcomes

The week of February 14 was not a banner week for the U.S. economy. First, the Obama administration released its budget for the 2012 fiscal year. The budget contained several spending cuts designed to reduce the $1.1 trillion U.S. deficit over the next decade. (I'll keep my political views to myself as to whether I feel these cuts are too deep or not significant enough). Next, it was announced that the string of wacky weather experienced over the past few months, both domestically and abroad, will lead to a price hike in several human essentials — from food to clothing to gasoline. Looks like I should finally think about buying some new underwear before the price goes up 30%.

However, strangely enough, amidst all this painful economic news, some positive financial reports emerged for the health IT industry. For example, a study conducted by DowJones VentureSource found that venture capital investment in medical software rose from $387.5 million in 2009 to $460 million in 2010, representing a growth of approximately 19%. Furthermore, an estimated 77% of venture capitalists predict that investment in health information technology will continue to increase this year, according to the results of a 2011 Venture View survey.

Apparently, investors are banking on the impact ARRA and HITECH stimulus funds, HIPAA 5010 and ICD-10 mandates, and other government regulations will have on health IT spending over the next few years. Obviously, these factors will motivate many healthcare facilities to invest in the necessary technology systems (e.g. EHRs, storage and security systems, etc.) to comply with these mandates. However, the healthcare industry is not immune to economic pressures. In fact, healthcare facilities often feel the pinch more severely than other types of businesses. Just how much healthcare providers will be able to invest in IT systems in the coming years (and still be profitable) remains to be seen. I'll be attending the HIMSS conference in Orlando Sunday, February 20 through Wednesday February 23, and I'll be interested to see if the attendees are in a serious short-term "buying mode" or simply "tire kicking" for potential future IT deployments. Will the healthcare provider community validate the health IT investor community's instincts? I'll let you know what I find in my HIMSS post show report in our email newsletter on March 3.

Ken Congdon is Editor In Chief of Health IT Outcomes. He can be reached at ken.congdon@jamesonpublishing.com.