Healthcare IT Spending Priorities Include Big Data Analytics, AI

January 22, 2019 - Top IT spending priorities for healthcare executives are accelerating digital transformation, investing in big data analytics and artificial intelligence, and modernizing IT infrastructure, according to the third annual Healthcare IT Demand Survey report by Damo Consulting.

At the same time, spending on EHR systems will dominate technology spending budget this year, the report found.

Damo Consulting surveyed 64 healthcare executives, many of whom said they are struggling to make sense of the changing healthcare IT landscape.

Healthcare IT budgets are expected to grow by 20 percent or more, with healthcare executives more positive about growth in IT spending than vendors.

The report suggests that technology vendors will continue to struggle with long sales cycles as they aggressively market digital and AI. In addition, vendors face challenges with product/service differentiation and brand visibility.

The rise of non-traditional players such as Amazon and Google is expected to have a strong impact on the competitive environment among technology vendors, while EHR vendors such as Epic and Cerner will grow in dominance.

“Digital and AI are emerging as critical areas for technology spend among healthcare enterprises in 2019. However, healthcare executives are realistic around their technology needs vs. their need to improve care delivery. They find the currently available digital health solutions in the market are not very mature,” said Damo Consulting CEO Paddy Padmanabhan. “However, they are also more upbeat about the overall IT spend growth than their technology vendors.”

Cybersecurity issues continue to be a challenge in the healthcare sector, but not the biggest driver of technology spending or the top area of focus for health systems in 2019, according to the survey.

The chief information officer remains the most important buyer for technology vendors; however, IT budgets are now sitting with multiple stakeholders.

“While technology vendors are aggressively marketing ‘digital’ and ‘AI,’ healthcare executives note that the currently available solutions in these areas are not very mature. They are confused by the buzz around ‘AI’ and ‘digital,’ the changing landscape of who is playing what role and the blurred lines of capabilities and competition,” said Padmanabhan.

“Health systems are firmly committed to their EHR vendors. Despite the many shortcomings, EHR systems appear to be the primary choice for digital initiatives among health systems at this stage,” he added.

The survey also found that healthcare executives are more likely than vendors to say there will be a significant growth in healthcare IT spending.

A full 79 percent of healthcare executive said that there will be significant growth in healthcare IT spending in 2019, while only 60 percent of vendors expect significant growth in healthcare IT spending this year.

Three-quarters of healthcare executives said that the rapid change in the healthcare IT landscape makes buying/technology spending decisions harder, while 80 percent of vendors had that view.

Around 71 percent of healthcare executives said that federal government policies boosted to healthcare IT spending last year, while only 55 percent of vendors thought that was the case.

Three-quarters of healthcare executives said that data management and interoperability are their biggest challenges to digital transformation; 71 percent said that their organization is committed to digital transformation but is constrained by internal capabilities and/or budgetary issues.

Two-thirds of healthcare executives said that they are on tracking and leading their peer group in digital transformation.

Half of healthcare executives said that they see a lack of maturity in technology solution choices for digital initiatives, and 42 percent said they lack internal capabilities to manage digital initiatives.

Around half of healthcare executive believe that digital transformation is mainly an IT-led initiative, and 63 percent said that the fee-for-service reimbursement model will remain the dominant payment model for the foreseeable future.