Healthcare First Look at 2003 IT spending.
The HIPAA hoopla continues to color IT vendors' visions of gold in the healthcare hills. While it's true that both health plans and hospitals will outspend other businesses on technology in 2003, compliance is only one of several critical drivers. Forrester's Business Technographics® February 2003 North America Benchmark Study of 877 decision-makers at North American companies includes 33 plans and 39 hospitals. Drilling down into their responses reveals that:

Health plans expect IT spending to lift innovation.

Health insurance executives plan to spend an average of 7.2% of revenues on IT in 2003, down from 8% last year but still ahead of the rest of the market, which will average only 4.9%. Lowering operational costs and improving quality are certainly high IT organization priorities, but plans distinguish themselves by emphasizing IT's role in attracting and retaining customers and launching new products. For example, plan spending on interactive voice response and call center software outpaces the rest of the market. And to deliver the decision support tools that are the backbone of a consumer-directed product, plans will spend more this year on new applications and platforms for Web development.

Hospitals' spending aligns with clinical quality. Like their friends at the plans, hospital executives will outspend the broader market on IT in 2003, tapping 5.9% of revenues. And 62% of the hospitals surveyed foresee higher technology spending this year than last, nearly double the 35% of firms across all other industries that plan higher IT spending in 2003. What's hot? Virtual private networks to secure communications with business partners and doctors in compliance with HIPAA. And spending on business intelligence apps will equip hospitals to sort through the reams of data accumulating within disparate clinical systems to reveal -- and report -- the quality of patient care.

How are plans doing with member services? In researching part two of her series on health plans' member services challenges, Liz Boehm discovered that plan executives struggle with two central questions: What are members' self-service needs, and how should technology spending be prioritized? As one leader put it:

"When we built our site three or four years ago, we thought we'd save money on calls. But with membership adoption rates so low, we don¿t know where to focus our enhancements. It's a double bind, though, because you need to offer self-service to be competitive these days."

Taking a member's point of view of Harvard Pilgrim Healthcare (HPHC) and UnitedHealthcare's (UHC) member sites, Forrester experienced a mixed bag of online and offline services. While HPHC lacks easy access to member data like claims history, UHC's Web mastery is undermined by offline service snafus. In part three of this series, Forrester will discuss people, process, and technology strategies for successfully meeting users' service needs.

What does Organic IT mean to hospitals? Centralized control over commodity infrastructure assets promises to cut costs in half, but this transformation won't happen overnight. Hospitals' voyage toward the flexible deployment of networks, storage, processors, and apps begins with cataloging existing assets; setting clear IT standards; and picking an Organic IT partner among HP, IBM, or Sun. It's time for providers on the crest of building new enterprisewide clinical systems to lay in an Organic IT foundation. Need to know more? Contact Eric Brown at ebrown@forrester.com.

We have heard from many of you that this newsletter is helping you find the research you need. Let us hear from the rest of you on what we can do better here or in our research to help your organization succeed.


Brad Holmes
Research Director

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