Over the next five to seven years, major federal health-care initiatives will offer new and significant industry direction and funding for health IT investment.

The American Recovery and Reinvestment Act will pump billions of dollars into health IT through the act's Health Information Technology for Electronic and Clinical Health (HITECH) provisions. These provisions offer an estimated $2 billion in seed funding and $45 billion in incentives for the "meaningful use" of electronic health records (EHRs), as defined in recent regulations proposed by the U.S. Department of Health and Human Services, payable through the Centers for Medicare and Medicaid Services (CMS).

At the same time, major health-reform legislation at the federal level relies on health IT to implement payment reforms, new capabilities and cost savings. Although many aspects of the reform debate and federal regulations for health IT adoption remain unresolved, there seems to be one issue that all participants and policymakers -- from government to employers, health plans, providers and consumers -- tend to agree on: Health IT is a foundational and essential element of health-care reform.

Historic Opportunity

Guided by this new federal policy push and its associated funding, health IT investment over the next few years will likely have three main focal points:

• Health-care providers will use federal impetus and funding to move their business plans and agendas forward. Recovery Act funds are significant, but only available for a short time and will have the desired effect of getting the private sector to begin moving toward adopting health IT.
• Federal agencies will look to use broader IT capabilities in health care to streamline processing and payment of benefits -- and to track the nation's health and improve health outcomes through programs and policy. 
• States and territories will provide an important multiplier effect for federal efforts and a critical concentration point for providers seeking assistance and connection to federal efforts.

States Must Act Quickly

Providers, the federal government and the states are coming together, in many cases for the first time, as a result of health IT efforts -- specifically about health information exchange (HIE). The federal Office of the National Coordinator for Health Information Technology issued a request for proposals in August 2009 for states, territories and nonprofit organizations to participate in the State Health Information Exchange Cooperative Agreement Program. All eligible states and territories applied for funds in October 2009 and received preliminary budget determinations ranging from approximately $4 million to $40 million in federal funds over the next four federal fiscal years (through October 2013).

States will use these funds to plan and implement exchange capabilities designed to enable EHR systems in provider organizations, and state and federal agencies, so they are interoperable and share data for specific purposes. HIE funds are essentially a down payment on providers earning their portion of the larger CMS incentives. In fact, HIE funding represents the first small wave of health IT investment that's expected over the coming years -- to be followed by a larger investment in EHRs and, finally, an even larger wave of investment in a fully wired and reformed health economy that would be capable of providing population health analysis, management and decision support.

The new responsibilities require states to have high levels of organization, expertise and support, but states are currently all over the map in their plans for HIE. Some, like New York, have been investing in their own for years. Others have been planning for investment, but their plans may not be aligned with the federal guidelines detailed in the national coordinator for health IT's RFP. The majority, however, have only begun planning as a result of the RFP, and are now crafting an approach for investment, implementation and operation that takes into account the five areas of concentration directed by the