In Focus: The Federal Healthcare

Technology Domain

R AY B J O R K L U N D , S V P A N D C KO
28 JANUARY 2010

© FedSources 2010 Ι 8400 Westpark Dr. McLean, VA 22102 Ι www.fedsources.com Ι 703.610.8700

 Scope of the Healthcare Tech Domain (1)

 This analysis is not about…

 Healthcare reform legislation

 Health IT (patient-centric information resources), per se

 HITECH Act incentives to practitioners

 Grants, loans, subsidies to S&L governments, such as Medicaid and

Emergency Medical Services for Children grants
 Health benefits directly to individuals, such as Medicare, other
insurance programs, and food and nutrition programs
 Social services, except delivery of healthcare

 Food production research

 Environmental studies

 HHS (alone) There’s more to healthcare

technology than Health IT

© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 2

 Scope of the Healthcare Tech Domain (2)

 Examines contractor-addressable federal spending on

technology and services for
 Healthcare policy development
 Researching advances in medicine, biology, and prostheses
 Public health data collection and analysis
 Disseminating information and education
 Overseeing healthcare system integrity
 Protecting food supply and medical delivery systems, including
veterinary sciences
 Analytical and diagnostic equipment
 Information technology to support healthcare operations
 Occupational safety and health administration
 Purchased services of health professionals

© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 3

 Impact of Healthcare Costs (1)
$3,500B
Healthcare costs
$3,000B growing faster
than the economy
Outlays of Federal Mandatory Spending

$2,500B
Medicare and Medicaid (6%)
Social Security (5%)
$2,000B TRICARE for Life (6%)
Federal Retirement (3%)
Other mandatory programs (-10%)
$1,500B
Veterans Income security (2%)
Income security (-3%)
$1,000B Net Outlays (3%)

$500B

$0B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: CBO, The Budget and Economic Outlook: An Update, August 2009; compound annual growth rates
(CAGRs) are for period 2010- 2019; does not address internal government spending on healthcare
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 4
 Impact of Healthcare Costs (2)

 CBO claims that healthcare is the biggest hurdle precluding

deficit reconciliation
 Indirect effect on contractor-addressable market = offsets
 Direct effect = medical benefits for federal employees
 Several key contributing factors to rising costs
 Salaries of healthcare professionals

 Healthcare education
“The federal budget is on an
 Liability indemnification unsustainable path, primarily because of
 Inefficiencies in the processes
the rising cost of health care and the
aging of the U.S. population.”
 Care delivery
www.cbo.gov
 Medical administration

Is the internal government healthcare system as efficient as it could be?

© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 5

 The Federal Healthcare System (1)
340,000+ healthcare professionals represents a nontrivial system

HHS civilian: DOJ civilian: VA civilian: DoD MHS

31,300+ 2,200+ 157,700+ military:
Other HHS 113,700+
DOJ FPS
Agencies and VA VHA civilian:
Offices DOJ USMS 34,300+
HHS CDC EPA USDA
civilian: DoD AMEDD
HHS FDA
DOC NOAA 2,100+ DoD BUMED
HHS IHS
DOI NPS USDA APHIS DoD AFMS
HHS AHRQ
USDA FSIS Def Agencies
HHS HRSA DHS ICE
DoD TMA
HHS CMS DHS USCG
Source: FedSources analysis of major populations
HHS SAMHSA PHS of federal healthcare professionals (medical and
HHS NIH military: veterinary), using OPM employment data, DoD
manpower requirements, Public Health Service
6,000+ statistics, and the President’s Budget
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 6
 The Federal Healthcare System (2)

 Direct recipients
 Active duty military, dependents, and retirees (9.5M beneficiaries)
 262,405 inpatient admissions
 30,558,627 ambulatory visits
 53,514,817 scripts
Veterans (6.1M patients, 900+ medical facilities)
 American Indians and Alaska Natives (1.9M patients)

 Inmates and detainees (210K inmates + 60K detainees)

 Certain civilian employees

 Disaster victims
More than 11 million
 Indirect recipients
direct recipients
 US public

 Other nations
Source: GFY2010 President’s Budget and agency Web sites

© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 7

 Federal Healthcare Tech Domain (1)

Studies of social and demographic factors,

Health research and investigations into prevention and cure of diseases,
promotion and enhancement of the healthcare system

Development of Application of
standards, analysis Health protection countermeasures to protect
of health trends, food and human health
and preparedness

Medical and dental services, other services,

pharmaceuticals, medical supplies, and Healthcare delivery
facilities construction and maintenance

© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 8

 Federal Healthcare Tech Domain (2)
Healthcare domain in the federal government $67.20B: 6% CAGR

Health research and promotion Health protection Healthcare delivery

$7.28B: 26% CAGR $5.83B: 8% CAGR $54.09B: 4% CAGR

Public health Disease Environmental

Biomedical
science, policy, prevention health Medical Combat
research
and practice care medicine
Epidemiology CBRNE
Medical Policy and assessment Emergency
Pathology Dental care
research planning Hazard and and
Toxicology stress analysis humanitarian
Clinical Behavioral, Pharmacy missions
investigation social, and Disease vector services
Compliance
economic management
Rehabilitative and testing Veterinary
research
research care
Preparedness
Public health Medical
Genomic and response
education device safety
research
Medical
Health Drug safety Acquisition of medical
counter-
professionals materiel, services, and
Food safety measures
education facilities
Cross-cutting and training Emergency
activities Occupational
response
health
Informatics : ~$725M
Health IT: ~$900M Source: FedSources analysis of GFY2010 President’s Budget, OMB, and agency
Program integrity: ~$130M Web sites; contractor-addressable dollars in GFY2010 and percent CAGR from
Grants management: ~$50M
GFY2008 to GFY2010; does not include grants, loans, subsidies, or incentives
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 9
 Federal Healthcare Tech Domain (3)
Healthcare domain in the federal government $67.20B: 6% CAGR

Health research and promotion Health protection Healthcare delivery

$7.28B: 26% CAGR $5.83B: 8% CAGR $54.09B: 4% CAGR
HHS NIH HHS CDC VA VHA
VA VHA
HHS CDC USDA FSIS DoD DLA DOJ FPS
USDA FNS
HHS FDA USDA APHIS DoD AMEDD
USAMRAA
USDA RUS HHS FDA DoD BUMED
DOL OSHA HHS CDC
DoD DARPA DoD MHS
EPA DoD AFMS
HHS NIH
DoD materiel DOL OSHA
commands SSA
DoD MHS HHS IHS
and labs DoD TMA
DHS OHA DOC NIST
HHS AHRQ
DOE labs HHS HRSA
DOJ FBI USPS
DoD USUHS
HHS HRSA HHS CMS HHS PHS
DOS
HHS SAMHSA DOE

Source: FedSources analysis of GFY2010 President’s Budget, OMB, and agency

Web sites; contractor-addressable dollars in GFY2010 and percent CAGR from
GFY2008 to GFY2010; does not include grants, loans, subsidies, or incentives
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 10
 Healthcare Tech Spending by Subdomain
$90B

-addressable federal spending

$80B

$70B

$60B

$50B
Source: FedSources Contractor-addressable Despite past growth
analysis of GFY2010 $40B in research, cost of
President’s Budget;
contractor-
$30B delivery will be the
addressable market $20B driver
does not include
grants, loans, $10B
subsidies, or
incentives $0B
CAGR CAGR
GFY2008 GFY2009 GFY2010 GFY2011 GFY2012 GFY08- GFY08-
10 12
Health protection $4.98B $6.42B $5.83B 8%
Health research and
$4.60B $6.13B $7.28B 26%
promotion
Healthcare delivery $49.91B $53.50B $54.09B 4%
Totals $59.49B $66.05B $67.20B $72.24B $77.30B 6% 7%
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 11
 Healthcare Tech Spending by Category
$80B

Contractor-addressable federal spending

$70B

$60B

$50B

$40B

Source: FedSources $30B

analysis of GFY2010
$20B
President’s Budget;
Contractor

contractor- $10B
addressable market
does not include $0B
CAGR CAGR
grants, loans, GFY2008 GFY2009 GFY2010 GFY2011 GFY2012
GFY08-10 GFY08-12
subsidies, or Real property $3.57B $4.62B $3.42B -2%
incentives
Telecomm $1.14B $1.28B $1.41B 12%
Prof services (incl R&D) $4.91B $7.24B $6.00B 11%
Other white collar services $11.26B $11.38B $12.33B 5%
Medical services $19.37B $19.90B $21.24B 5%
Investment products $3.65B $3.64B $4.25B 8%
Consumable products $13.72B $15.98B $16.49B 10%
Blue collar O&M services $1.89B $2.00B $2.06B 4%
Totals $59.49B $66.05B $67.20B $72.24B $77.30B 6% 7%
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 12
 Healthcare Contracting

 VA: more than half purchased through VA Schedules

 Pharmaceuticals
 Medical supplies and materiel
 Medical and laboratory equipment
Decentralized ordering is a
 Medical staffing
key purchasing method for
 HHS NIH
core services and products
 Agency-wide BPAs
 Some VA Schedules
 HHS CDC: pharmaceuticals, vaccines for Strategic National Stockpile
 DoD DLA-DSCP
 Pharmaceuticals, coordinated with VA
 Medical supplies and materiel
 DoD USAMRAA: specialized requirements, supported by VA
 DOJ FPS
 Services through agency contracts
 Pharmaceuticals through VA Schedules
Source: FedSources analysis of GFY2009 FPDS prime contract award data and online federal catalogs
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 13
 Inferred Business Opportunities (1)

 Certification processes
 Health information exchanges
Opportunities in implementing
 Information security and privacy
and applying governance
 Health IT “devices”

 “Meaningful use” standards

 Program integrity and forensics

 Strategic sourcing
 Clinicians and practitioners

 Pharmaceuticals and medical supplies

 Supply chain management

 Enhancements in grants management

Source: FedSources analysis

© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 14
 Inferred Business Opportunities (2)

 Modernization of healthcare delivery

 Workflow and process re-engineering
Opportunities in Health IT
 Case management tools
development and informatics
 Investment in clinical diagnostic tools

 Building out IT and facility infrastructure, including telecomm

 Training of healthcare providers in information-based technologies

 Information sharing, accelerated by high performance

computing and “cloud computing”
 Speeding research and collaboration
 Improving quality of care, patient-centric decision support
 Homeland security
 Preparedness
 Countermeasures
Source: FedSources analysis
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 15
 Pressing Healthcare Technology Issues

 Information assurance  Bandwidth

Availability
  Enterprise scalability
 Integrity  Accessibility to clearinghouses
 Authentication for technology
 Confidentiality  Ability to rapidly develop and
 Nonrepudiation
deploy
 Interoperability
 Compatibility

 Processes and procedures In healthcare technology,

 User-to-user human perfect is not the enemy
protocols of good enough
 Information exchange
standards
Source: FedSources analysis
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 16
 Observations

Bioterrorism countermeasures… the next

healthcare spending wave?

DoD materiel USDA FSIS

HHS CDC
commands
DOJ FBI and labs USDA APHIS

DOE DOS USPS

DHS OHA

Source: FedSources analysis of “World at Risk: The Report of the Commission on the Prevention of WMD
Proliferation and Terrorism,” 2 December 2009; and President’s State of the Union Address, 27 January 2010
© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 17
 Summary

Health research and

promotion
Measure and investigate

Protect … Health protection … and defend

Care for the entitled Healthcare delivery

A $70B You have great opportunities in improving the effectiveness

market and efficiency of the federal healthcare system

© FedSources 2010, All Rights Reserved. Reproduction Prohibited. 18

Experience | Intelligence | Integrity

In Focus: The Federal Healthcare

Technology Domain

Ray Bjorklund, SVP and CKO

28 January 2010

www.fedsources.com
 Selected Acronyms
 AFMS: Air Force Medical Service
 AHRQ: Agency for Healthcare Research and Quality
 AMEDD: Army Medical Department
 APHIS: Animal and Plant Health Inspection Service
 BUMED: Navy Bureau of Medicine and Surgery
 CAGR: compound annual growth rate
 CBRNE: chemical, biological, radiological, nuclear, and high-yield
explosives
 CBO: Congressional Budget Office
 CDC: Centers for Disease Control and Prevention
 CMS: Centers for Medicare and Medicaid Services
 DARPA: Defense Advanced Research Projects Agency
 Def: Defense
 DHS: Department of Homeland Security
 DOC: Department of Commerce
 DoD: Department of Defense
 DOE: Department of Energy
 DOI: Department of the Interior
 DOJ: Department of Justice
 DOL: Department of Labor
 DOS: Department of State
 DLA: Defense Logistics Agency
 DSCP: Defense Supply Center Philadelphia
 EPA: Environmental Protection Agency
 FBI: Federal Bureau of Investigation
 FDA: Food and Drug Administration
 FNS: Food and Nutrition Service
 FPS: Federal Prison System
 FSIS: Food Safety and Inspection Service
 HHS: Department of Health and Human Services
 HITECH Act: Health Information Technology for Economic and
Clinical Health Act
© FedSources 2010, All Rights Reserved. Reproduction Prohibited.
 HRSA: Health Resources and Services Administration
 ICE: Immigration and Customs Enforcement
 IHS: Indian Health Services
 IT: information technology
 MHS: Military Health System
 NIH: National Institutes of Health
 NIST: National Institute of Standards and Technology
 NOAA: National Oceanic and Atmospheric Administration
 NPS: National Park Service
 OHA: Office of Health Affairs
 OPM: Office of Personnel Management
 OSHA: Occupational Safety and Health Administration
 PHS: Public Health Service
 RUS: Rural Utilities Service
 TMA: TRICARE Management Activity
 TRICARE: health care program serving active duty service members,
National Guard and Reserve members, retirees, their families,
survivors and certain former spouses
 S&L: state and local
 SAMHSA: Substance Abuse and Mental Health Services
Administration
 USCG: United States Coast Guard
 USDA: United States Department of Agriculture
 USMS: United States Marshals Service
 USUHS: Uniformed Services University of the Health Sciences
 USAMRAA: United States Army Medical Research Acquisition
Activity
 VA: Department of Veterans Affairs
 VHA: Veterans Health Administration
 WMD: weapons of mass destruction
 USPS: United States Postal Service
20