Where Large Healthcare Payers and Providers are Headed — How IT Vendors can Capture Opportunity Insights from TBR’s Healthcare SourceIT Report

TBR

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

TBR

2 TBR Webinar Series – SourceITSM | 7.31.13 | www.tbri.com ©2013 Technology Business Research Inc.

Where Healthcare Payers and Providers Are Headed

Allan KransSenior Analyst, TBR’s Software [email protected] @allankrans

mailto:[email protected]

TBR


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


TBR


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.


TBR


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


TBR


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


“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

TBR


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.


Respondents: Workload Priorities for Discretionary IT Spending


“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

TBR


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


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


TBR


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



TBR


IT vendors can best target shifting pockets of IT spend by helping healthcare organizations address regulatory and budget pressures





TBR


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


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



TBR


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


$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



TBR


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



TBR


Healthcare IT budgets are structured first around priority-zero projects, with remaining funds allocated to road-mapped efficiency projects

Respondents: IT Spending Transitions


$

$ $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


“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


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.




TBR


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



TBR


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.



“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


IT vendors can best target the shifting pockets of IT spend by helping healthcare organizations address regulatory and budget pressures





TBR


Improve go-to-market returns by understanding a segment’s opportunity and the unique needs of buyers.CY2013

Appendix:TBR SourceIT℠ Report Overview

TBR


SourceITSM reports are opportunity playbooks on customer segments that help clients improve go-to-market returns

TBR SourceITSM Reports

SourceIT is a syndicated report program, offering clients the benefit of deep primary research at a fraction of the price of custom research.

SourceIT Reports use a structured and repeatable research and report framework that enables client organizations to easily consume, compare and leverage the insights across multiple customer segments.

Enable faster and more efficient go-to-market strategies by understanding a segment’s sourcing and investment decisions.

Compare segments across multiple industries

Understand opportunity by following the money

Leverage a syndicated program

TBR

21 TBR Webinar Series – SourceITSM | 7.31.13 | www.tbri.com ©2013 Technology Business Research Inc. SOURCE: TBR N. AMERICA, LARGE ENTERPRISE HEALTHCARE REPORT, SUMMER 2013

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.

3. Improve positioningby effectively targeting customer needs and managing competition.

SourceIT℠ ReportValue

Identify opportunities

Understand key business and IT strategy opportunity

drivers.

Capture sourcing and budgeting opportunities

across the stack.

Target decision makers

Understand purchasing scenarios.

Target key decision makers.

Improve positioning

See your position in a competitive landscape.

Manage positioning; Relationships vs.

opportunity.

SourceIT Reports help vendors better capture opportunity with their large enterprise buyers

Available Now: • Retail• Banking & Services• Federal & Public Sector• Telco & Service Providers• Healthcare Payers &

ProvidersPublishing 2H13:• Manufacturing• Energy & Utilities• Transport & Logistics


TBR


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


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


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



TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

About TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators.

Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996.

To learn how our analysts can address your unique business needs, please visit our website or contact us today.

Contact Us

[email protected] Merrill DriveHampton, NH 03842USA

This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.

mailto:[email protected]

http://www.tbri.com/

Economy & Finance

Where Large Healthcare Payers and Providers are Headed — How IT Vendors can Capture Opportunity Insights from TBR’s Healthcare SourceIT Report