EMR spending expected to double in 4 years

Analysts say government incentives are prompting health care organizations to take the leap, but vendors are struggling to meet demand.

By — Posted Feb. 1, 2011

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Government incentives for using electronic medical records will result in spending on systems doubling by 2015, according to a report by IDC Health Insights. However, the study notes that much of that growth will come closer to end of that projected period, because vendors are having trouble keeping up with the orders.

Total EMR spending, which is expected to grow from $1.9 billion in 2009 to $3.8 billion by 2015, is about twice the growth rate analysts are seeing over the health information technology market and the general IT market, said Judy Hanover, research director of provider IT strategies for the Framingham, Mass.-based market research company and co-author of the report.

The report notes that a separate IDC survey in August 2010 found that 44% of health care organizations plan to accelerate or aggressively accelerate their plans to deploy EMRs because of financial incentives in the 2009 economic stimulus package. The stimulus provided incentives of up to $44,000 under Medicare and nearly $64,000 under Medicaid for meaningful use of an EMR.

But this rapid deployment is causing a vendor backlog that has resulted in unanticipated delays of up to six months for some practices and hospitals. Hanover said this has been a bigger issue for inpatient system deployments, but analysts are starting to see it on the ambulatory side as well.

The authors of the report predicted that the largest chunk of EMR investments will come in 2015. Not only is the backlog expected to cause delays, but some physicians will put off purchasing until it gets closer to 2015, when incentives turn to penalties.

The forecast shows clinics and physician practices will spend $335 million on EMRs in 2011 and $490 million in 2015. Ambulatory EMR spending overall was $633 million in 2009 and is expected to reach $1.4 billion in 2015.

Making an early decision on an EMR will help ensure that staff members are available for its installation, Hanover said. Practices might want to consider looking at third-party vendors if their primary vendors are experiencing a backlog, she said. Many third parties can provide installation and training services with the help of the vendor, she said.

After 2015, vendors are expected to enter a "maintenance cycle" in which revenue will come mostly from replacement systems or upgrades. Not only could the government require EMRs to perform more functions than they do today to qualify for incentives, health system reform may have an impact.

"We do expect to see, as health care reform goes into effect, a massive consolidation in the provider community in terms of acquisitions and reductions in the total number of providers," Hanover said. "And that will drive some replacements and upgrading and reinvestment in EMRs."

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