IT Health Care Budget Black Holes

Talk of health care reform is inescapable as the Obama administration presses its case for initiating a massive overhaul of the medical insurance and patient care delivery system that accounts for one-seventh of the U.S. economy. Health care is also a major component of the Obama economic recovery plan, through which as much as $2 billion is already circulating to modernize health care systems.

All told, Obama’s plans could infuse the health care system with tens of billions of dollars for electronic medical records, data security, storage, communications and collaboration systems.

But who will reap the bulk of these health care reform and stimulus funds?

Many solution providers, integrators, vendors and distributors are hungrily awaiting the windfall into the health care system to provide the necessary funding for their expensive new IT systems and services. Government money—through grants and direct funding—is already available in many areas, but it’s not the torrent that’s been promised. And when the spigot is finally opened, some question whether the money will go to the right place.

While flying home from San Francisco the other day, I sat next to an executive of an international health care integrator. His remarks were quite contrary to conventional wisdom.

While many solution providers and vendors are crowing about the money being spent by health care providers and hospitals, he says that most of the health care system integrators he’s talking to are near broke and don’t have the money to spend on next-generation systems. Spending on isolated upgrades and capacity expansion is always going to happen, but that’s not a reflection of huge influx of spending.

Likewise, he expressed a huge concern about who will get the tens of billions of dollars that will flow from government coffers into the health care system. His fear: government and defense contractors.

Big government contractors including Lockheed Martin, Northrup Grumman, Raytheon, Boeing, McKesson and United Technologies either have or are launching health care practices in anticipation of the federal government health care spending. As this health care solution provider notes, large government integrators are best at one thing: taking the government’s money and not necessarily reforming technology systems.

Equally worrisome is how government health care money will get spent. This health care solution provider says most of his customers—hospitals, regional medical centers and large physician practices—don’t have the money for major technology upgrades. Funding IT overhauls will require government grants and supplemental funding. If large government contractors are given responsibility for administering and distributing these funds, solution providers looking for health care work would be subject to the complexity of prime-subcontracting engagements.

Granted, not all health care dollars will go to or through large government contractors and integrators. However, these contractors are large enough to tie up volumes of greenbacks. And that could definitely complicate opportunities for solution providers.