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Healthcare IT Budgets Forecasted to Increase by 8.8%

The consultancy group Forrester Research has forecasted that healthcare IT budgets will increase by 8.8% in 2019 due to increasing investment in technology. However, Gartner - while agreeing with the forecast growth - suggests most of the increased budget will be spent maintaining existing infrastructures rather than supporting new business models.

Comparing forecasts for healthcare IT budgets can lead you in all directions. Whereas some forecasts predict substantial growth, others report a decline in investment. However, when two of the largest and most respected consultancy groups - Forrester Research and Gartner - produce figures within a tenth of a percentage point of each other, there is reason to believe these are likely the most accurate forecasts.

Forrester's predictions are published in its “U.S. Tech Budget Outlook” report - a report across all industry sectors in which the research company forecast healthcare IT budgets to increase by 8.8% ahead of the national average of 6%. Gartner forecast an average increase of 8.9% - noting that healthcare IT spending as a percentage of revenue is almost twice as much as it is in other industries.

Gartner's “Healthcare IT Key Metrics Data” is the deeper of the two reports - analyzing how healthcare IT budgets are allocated and delving further into determining what proportions of the budgets are used to maintain existing infrastructures (74%), grow the business (16%), and transform the business (10%) - where transforming the business relates to developing new revenue-generating business models.

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Other Metrics in the Gartner Healthcare IT Budget Forecast

Other metrics in the Gartner healthcare IT budget show a higher percentage IT spend on software than in most other industries, which is hardly surprising considering the continuing investment in electronic health record or EHRs and measures to comply with HIPAA and other regulatory acts. However, spending on decentralized “shadow” IT is also much higher in the healthcare industry, while the distribution of IT spending by functional area also shows a marked difference compared to an average of other industries.

Distribution of IT Budget by Function

Function

Healthcare

Other (Av)

Data Center

20%

25%

IT Service Desk

5%

5%

Application Development

9%

33%

Application Support

32%

15%

End-User Computing

10%

8%

Network

13%

9%

IT Management & Administration

11%

5%

 

Gartner notes that, due to the high percentage of healthcare IT budgets allocated to personnel (typically more than one-third of the IT budget), it is important IT departments evaluate whether they are staffed adequately, whether their human resources are effective, and whether personnel are sufficiently trained to meet requirements. It is also highlighted that the healthcare industry spends a much lower percentage of its IT budget outsourcing IT skills (16%) than an average of other industries (27%).

Takeaways from the Healthcare IT Budget Forecasts

The takeaways from the healthcare IT budget forecasts are that, even though bigger IT budgets are being made available, healthcare organizations need to study where the money is being spent and how it could be used more effectively. Even though 10% of healthcare IT budgets is being allocated to “transforming the business”, the large proportion of the budget used to maintain existing infrastructures is limiting innovations that could reduce waste, improve efficiency and enhance security.

We value your insights as a healthcare leader. Please answer a few quick questions about communication and emergency preparedness at your organization. Your answers will help shape 2020’s top trends and allow us to better meet your expectations for employee safety. We thank you for devoting 6 minutes of your time to our survey.

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Andrea Lebron
Andrea Lebron

Andrea is Rave's Director of Digital Marketing, a master brainstormer and avid coffee drinker. Andrea joined Rave in August 2017, after 10 years of proposal and corporate marketing at an environmental engineering firm. You'll find her working with her amazing team in writing and producing blogs like this one, improving your journey to and through our website, and serving you up the best email content. When she's not in front of a keyboard, she's chasing after her three daughters or indulging in her husband's latest recipe. Andrea has a Bachelor's degree in Marketing/Management from Northeastern University and an MBA from Curry College.

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