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TECHNOLOGY BUSINESS RESEARCH, INC.
Where Healthcare Payers and Providers are Headed
How IT vendors can capture opportunity
Technology Business Research Webinar SeriesJuly 31, 2013
TBR SourceIT℠ Reports
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Where Healthcare Payers and Providers Are Headed
Allan KransSenior Analyst, TBR’s Software [email protected] @allankrans
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Healthcare organizations are leveraging IT to meet changing regulations and modernize their businesses, sometimes simultaneously
3
“There are things like HIPAA and PPACA that have a big role to play when it comes to the cost incurred by the patients on the treatment. … We are continuously looking for funding from government’s side to help us provide better services.”
— IT Manager Big Healthcare Data
Constrained Budgets
New Regulations and Mandates
$26.3 billion in ‘14 vendor addressable IT spend
Where Healthcare Payers and Providers Are Headed
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IT vendors can best target shifting pockets of IT spend by helping healthcare organizations address regulatory and budget pressures
Healthcare organizations are investing in business applications, analytics and necessary infrastructure.
IT investments are seen as a necessity and opportunity for healthcare organizations.
Vendors need to adapt to an environment where healthcare expertise is critical and a flexible sales approach is required to address two different camps of purchasers.
Where Healthcare Payers and Providers Are Headed
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THE NEED FOR HEALTHCARE SOLUTIONS AND SERVICES
“Regulatory compliance funds take priority, absolutely, for the healthcare industry. For example, ICD10 is not a project, it’s a program with an estimated end-to-end budget of $2.5 million. A large part of that is based on consultants’ contributions, because we’re not relying on people who are unfamiliar with this.”
— IT Project Manager, Healthcare, Large Enterprise, N. America
Where Healthcare Payers and Providers Are Headed
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Healthcare organizations view IT investments as an opportunity to improve customer experiences and drive growth
Business Summary: What Respondents Reported:
• Regulatory compliance• Electronic healthcare
data growth • Consolidation of back-
office systems• Increasing cost of
healthcare• Increasing role of
analytics and automation
External forces
• Improve capabilities via IT investment: Increase investment in business applications, BI and analytics, and IT infrastructure to better leverage data.• Improve bottom lines: Investment in
information management upgrades, with workloads such as EHR/EMR, allows healthcare organizations to qualify for Medicaid and Medicare incentives.
How healthcare organizations react
What healthcare organizations see• Increasing trend of
mobile/telemedicine• Growing opportunity for
process improvements through IT purchases• Potential to improve
patient care and experience• Need for increased
investment for compliance reasons
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
Where Healthcare Payers and Providers Are Headed
“Our health plan IT department is swamped; they’ve had to pull in a ton of contractors just to meet regulatory requirements and there are a ton of things we’d like to do to improve the user experience.”
—Manager, Healthcare, Large Enterprise, N. America
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Business Applications,
20%
Industry Applications,
24%
Productivity Applications,
12%
BI/Analytics, 17%
Database & Middleware,
13%
Systems Management,
14%
Overall IT Project Priorities, by Workload Category (Total Mentioned %)
SOURCE: TBR Large N. American Healthcare SourceIT Study; N = 225.
Discretionary opportunity centers on applications and analytics, as healthcare organizations focus on business outcomes
The direct correlation between applications and analytics with the desired healthcare outcomes drives top-of-mind awareness.
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
Respondents: Workload Priorities for Discretionary IT Spending
Where Healthcare Payers and Providers Are Headed
“All areas seem to be increasing their allocation, in particular BI and systems management, operations and security. Discretionary spending is almost nonexistent at this point. All our money is tied up in fixed existing projects, which are quite large for the most part.”
— IT Manager, Healthcare, Large Enterprise, N. America
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9% cc
91%
Large firms and agencies that anchor a community of smaller players comprise the highest share of healthcare IT spend and opportunity
Respondents: Planned 2014 Total IT Budgets
$23.4M -0.4% $(94K)
$12.3M3.1%
$371K
Firms with 10,000+
employees
Firms with 1,000 to 9,999
employees
Average 2014 YTY Increase
Average 2014 Total IT Budget
Average 2014 Total IT Budget: All Firms
$13.2M
Percentage of 2,100 Firms in Segment
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
Total IT Budgets include:• Business Applications• Industry Applications• Productivity Applications
• BI & Analytics• Database and Middleware• Systems Management
• IT Infrastructure
• IT Professional Services• IT Overhead & Personnel
Where Healthcare Payers and Providers Are Headed
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Healthcare organizations will build on regulatory investment mandates to modernize their businesses within tight budget limits
2014 TBR SourceIT Large N. American Healthcare Model — IT Spending and Key Priorities
What vendors need to know:1. Healthcare IT investments
are driven by regulation but spur follow-on spending for non-regulation related use cases.
2. Analytics and big data issues are in the early stages of market development for healthcare and will lead in spending growth.
3. Vertical expertise is a strong differentiator in healthcare, bolstering the positions of niche software providers.
Optimize IT:• Information
Management & Databases• Development & Test• Operating Systems &
Productivity
Key Priorities:• Electronic Health
Records (EHR)• Telemedicine• Clinical Decision
Support• Patient Billing &
Scheduling
Total IT Spend:$34.8 billion
Vendor Addressable Spend: 75.5%,$26.3 billion
Personnel and Overhead:24.5%,$8.5 billion
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
Where Healthcare Payers and Providers Are Headed
TBR
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IT vendors can best target shifting pockets of IT spend by helping healthcare organizations address regulatory and budget pressures
Healthcare organizations are investing in business applications, analytics and necessary infrastructure.
IT investments are seen as a necessity and opportunity for healthcare organizations.
Vendors need to adapt to an environment where healthcare expertise is critical and a flexible sales approach is required to address two different camps of purchasers.
Where Healthcare Payers and Providers Are Headed
TBR
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Business Applications, $4.2 billion
Industry Applications, $4.2 billion
Productivity Applications, $2.2 billion
BI/Analytics, $1.4 billion
Database and Middleware, $2.7 billion
Systems Management,
$2.5 billion
Infrastructure, $4.6 billion
Professional Services,
$4.4 billion
Healthcare Organizations: IT Spending in 2014
SOURCE: TBR Large N. American Healthcare SourceIT Study; N = 225.
16%
16%
8%
5%10%
10%
18%
17%
The vendor addressable opportunity is weighted toward fixed spending consistently across workloads2014 Vendor Addressable Opportunity Breakdown
Discretionary Spend in 2014 is$9.6 billion
Fixed Spend in 2014 is $16.7 billion
Vendor Addressable Opportunity is $26.3 billion WorkloadsFixed IT Spending in
2014Business Applications $2.7 billionIndustry Applications $2.7 billion
Productivity Applications $1.4 billionBI/Analytics $0.9 billion
Database and Middleware $1.7 billionSystems Management $1.6 billion
Infrastructure $2.7 billionProfessional Services $2.9 billion
WorkloadsDiscretionary IT
Spending in 2014Business Applications $1.4 billionIndustry Applications $1.5 billion
Productivity Applications $0.8 billionBI/Analytics $0.5 billion
Database and Middleware $1 billionSystems Management $0.9 billion
Infrastructure $1.9 billionProfessional Services $1.5 billion
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
Where Healthcare Payers and Providers Are Headed
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Respondents: 2013 to 2014 Bridge: IT Spending Growth by Category
Business applications, analytics and the necessary services and infrastructure frame out pockets of growth in the healthcare market
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
$13,336
$13,438
$31 -$27 $4 $12$9
$2 $32
$24
$13$11 -$9
$13,300$13,320$13,340$13,360$13,380$13,400$13,420$13,440$13,460$13,480$13,500
2013
Busi
ness
Appl
icati
ons
Indu
stry
Appl
icati
ons
Prod
uctiv
ityAp
plic
ation
s
BI/A
naly
tics
Dat
abas
e an
dM
iddl
ewar
e
Syst
ems
Man
agem
ent
Infr
astr
uctu
re
Prof
essi
onal
Serv
ices
IT S
ervi
ces
IT P
erso
nnel
Ove
rhea
d
2014
IT sp
end
(in th
ousa
nds)
Projected Average Change in IT Spending for Healthcare Organizations 2013 - 2014
TBR
SOURCE: TBR Large N. American Healthcare SourceIT Study; N = 225.
Where Healthcare Payers and Providers Are Headed
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Vendors can expand their opportunities and drive larger core initiatives by connecting offerings to top priority workloadsRespondents: Hotspots and Top-of-Mind Vendors
Top Targeted Workloads: Broadly Driven Largest Budgeted Workloads: Driven by IT
Area Average 2014 Project Budget
Top-of-Mind Vendors
Area Average 2014 Project Budget
Top-of-Mind Vendors
Electronic Health Records
$1,048,000 EPIC, McKesson, GE, Siemens
Governance, Risk & Compliance
$2,191,000Microsoft, Symantec, VMware
Telemedicine/Mobile Healthcare
$325,000 McKesson, Siemens, GE, EPIC
PC Operating Systems $1,370,000 Microsoft, Red
Hat, Oracle
Clinical Decision Support
$365,000EPIC, GE, McKesson, Oracle, Siemens
Information Management & Databases
$1,329,000 Microsoft, IBM, Oracle
Patient Billing & Scheduling
$550,000 EPIC, Siemens, Oracle
Development & Test $1,032,000 Microsoft,
VMware, Oracle
Top Priority Workloads Largest Core IT Workloads
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
Where Healthcare Payers and Providers Are Headed
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Healthcare IT budgets are structured first around priority-zero projects, with remaining funds allocated to road-mapped efficiency projects
Respondents: IT Spending Transitions
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
$
$ $Patient-facing
• Leverage internal and priority zero initiatives
• Much smaller focus for discretionary investment
Internal-facing • Scheduling, analytics• Driven by efficiency and cost reduction
initiatives• Majority of discretionary budget spending
Priority Zero• Regulatory requirements —
compliance, EHR• “No choice” but to implement• Many firms have previously
implemented and are in maintenance mode.
Total IT Budget (~1% increase YTY)
Discretionary Budget (~34% of total Budget)Connected to road-mapped agenda
Where Healthcare Payers and Providers Are Headed
“There are often imperatives that will come down, which we call priority zeros. These really move us, and while they don't necessarily break our processes, they can certainly fast-track our short-circuit thoughts.”
— IT Director, Healthcare, Large Enterprise, N. America
TBR
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IT vendors can best target the shifting pockets of IT spend by helping healthcare organizations address regulatory and budget pressures
Healthcare organizations are investing in business applications, analytics and the necessary infrastructure.
IT investments are seen as a necessity and opportunity for healthcare organizations.
Vendors need to adapt to an environment where healthcare expertise is critical and a flexible sales approach is required to address two different camps of purchasers.
Where Healthcare Payers and Providers Are Headed
TBR
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Respondents: IT Budgets by Customer Character
Centralization of IT Spending
Two strongly contrasting IT cultures require IT vendors to have flexible sales approaches and appropriate messaging for each camp
Empowered Healthcare Organizations include companies that are highly aggressive adopters and highly distributed in IT spending.Structured Go-getters include companies that are highly aggressive adopters and have a highly centralized approach for IT spending.Laissez-faire Healthcare Organizations are late adopters of technology and their IT spending is highly distributed.Bureaucrats include companies that are late adopters and have a highly centralized IT spending approach.
Average ’13 IT Spend: $13 million
Healthcare organizations show a strong correlation between the distribution of IT purchasing and the aggressiveness of IT adoption (centralized purchasers more conservative IT adopters and distributed purchasers more aggressive). 3% 54%
42% 1%
Aggr
essi
ve
Highly Centralized with IT
IT A
dopti
on A
ggre
ssiv
enes
s
Highly Distributed Across IT and LOBs
Late
-ado
pter
Structured Go-getters
Laissez-faireBureaucrats
Empowered
Average ’14 IT Spend: $16.3 million
Average ’14 IT Spend:$6.1 million
Average ’14 IT Spend: $13.3 million
Average ’14 IT Spend:$13.6 million
Distribution of Respondents by Character
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
Where Healthcare Payers and Providers Are Headed
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Path to Purchasing: Key Decision Makers
Though C-Suite executives and the board of directors oversee purchase decisions, middle management and end users influence final selection
Purchasing Scenarios Buying Criteria Purchase PlansKey Decision Makers Top-of-mind Vendors
Key Decision Makers
Board of Directors,C-Suite Finance Departments
Search relevant Solutions
(IT Department)
Identification of problem
(IT Department)
Benefit reportsubmission
(IT Department)
Bureaucrats
Empowered
“Bureaucrats”’ IT purchase decisions are much more structured and top-down driven than “Empowered” purchasers’ decisions.
Though decisions are still made in the C-Suite, “Empowered” purchase decisions are heavily influenced by lower levels of the organization.
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
Where Healthcare Payers and Providers Are Headed
“Major IT decisions are taken by the Board of directors. They take into consideration the proposals and information received on the basis of the report, which includes all the specifications related to the projects and the costs associated with it.”
—Project Manager, Healthcare Provider, Large Enterprise, N. America
TBR
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IT vendors can best target the shifting pockets of IT spend by helping healthcare organizations address regulatory and budget pressures
Healthcare organizations are investing in business applications, analytics and necessary infrastructure.
IT investments are seen as a necessity and opportunity for healthcare organizations.
Vendors need to adapt to an environment where healthcare expertise is critical and a flexible sales approach is required to address two different camps of purchasers.
Where Healthcare Payers and Providers Are Headed
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Improve go-to-market returns by understanding a segment’s opportunity and the unique needs of buyers.CY2013
Appendix:TBR SourceIT℠ Report Overview
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SourceITSM reports are opportunity playbooks on customer segments that help clients improve go-to-market returns
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SourceIT is a syndicated report program, offering clients the benefit of deep primary research at a fraction of the price of custom research.
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Compare segments across multiple industries
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Leverage a syndicated program
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TBR’s SourceITSM reports enable clients to more effectively capture business across specific customer segments
1. Understand and capture opportunityby comprehending buyer behavior in specific segments.
2. Improve GTM effectivenessby improving sales and marketing investment effectiveness.
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SourceIT℠ ReportValue
Identify opportunities
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Table of Contents3 SourceIT Methodology and Coverage
7 Executive Summary• Opportunity• Healthcare Organizational Behavior• Vendor Selection
16 Market Opportunity• Total Market Opportunity• Average IT Budgets in 2013• Fixed Spending Priorities• Discretionary Spending Priorities
24 Discretionary Spending Across Workloads• Workload Priorities• Opportunity by Workloads
50 Healthcare IT Purchasing Behavior• Investment Drivers• Paths to Purchasing for Key Priorities
66 Key Workload Case Studies• Electronic Health Records• Telemedicine/Mobile Healthcare• Clinical Decision Support• Patient Billing and Scheduling• Opportunity Mapping
87 Competitive Landscape• Purchasing Relationships• Vendor Footprint by Workload Category
for Fixed Spend• Vendor Footprint by Workload Category
for Discretionary Spend• Footprint by Workloads
90 Appendix
100 About TBR
TBR SourceITSM Reports
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Healthcare Provider (Public / Private), 73%
Long-Term Healthcare /
Senior Care, 4%
HMO, 4%
Health Insurance
Payers and Processors, 16%
Other, 3%
Respondent by Healthcare Organization Type
SOURCE: TBR Large N. American Healthcare SourceIT Study; N = 225.
The 225 organizations in this report are large enterprise healthcare payers and providers based on operating in the U.S. and CanadaSourceIT Large N. America Healthcare Research Demographics and 2013 IT Spending
Providers: Average IT Budget: $11.9 million
Payers: Average IT Budget: $18.3 million
Top Industry Workload Priorities:1. EHR/EMR2. Patient Billing and Scheduling3. Clinical Decision Making
Top Industry Workload Priorities:1. Claims Management2. Call Center3. Plan & Benefit Administration, Government
Agency Healthcare Management
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013
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TECHNOLOGY BUSINESS RESEARCH, INC.
About TBR
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