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ARRA Stimulus Package: $20 Billion for Healthcare IT, $4.3 Billion for Smart Grid Technology

"This new government money will flow to both the private sector and directly to federal, state and local government."

by / March 4, 2009

The American Recovery and Reinvestment Act (ARRA), recently signed into law by President Obama, provides welcome news to technology suppliers who are facing a 0.1 percent 2009 U.S. growth rate, according to new research from IDC's Industry Insights Companies.

"With all the uncertainty surrounding the specifics of the new economic stimulus package, one thing is certain -- there will be a large amount of government money flowing towards technology spending," said IDC's Meredith Whalen. "This new government money will flow to both the private sector and directly to federal, state and local government."

Intelligent Grid Technologies

ARRA includes over $4.3 billion of funding specifically for "smart grid" technology investment. According to research from Energy Insights, the energy subsidies contained in the economic stimulus package will dramatically accelerate intelligent grid technology investment during the next four years; with the possibility of spending levels reaching $70 billion by 2013. This spending would span a wide range of technologies, including:

  • IT and communications hardware
  • Smart meters and other intelligent devices
  • Applications software used to operate the grid and enable active energy management by consumers
  • Software to manage huge amounts of meter and grid data
  • Advanced energy storage systems and grid-connected distributed generation resources and
  • A variety of services required to plan, integrate, deploy and maintain the technologies.

"Although the mechanisms for getting the subsidies to the utilities and other technology buyers are as yet unclear, we believe that spending will not start to accelerate until 2010," said Energy Insights' Rick Nicholson. "Once spending does start to accelerate, it is likely that it will be focused initially on smart metering projects. Broader deployments using technologies beyond smart metering will come later."

Digital Patient Information

Included in the $787 billion ARRA is approximately $20 billion in funding for healthcare IT, including incentive payments to physicians who implement and use eligible electronic medical records systems under the conditions laid out in the law.

"The approximately $20 billion in ARRA funding allocated to healthcare IT investment will have a positive impact and will begin the transformational process the U.S. healthcare industry so desperately needs to remain viable and competitive," said Health Industry Insights' Lynne A. Dunbrack and Marc Holland. "That said, even if implementation proceeds as intended, a number of issues still loom."

Health Industry Insights believes the combination of near-term stimulus funding for patient care, coupled with significant long term incentives and investments in new core health IT infrastructure will accelerate the move toward digital patient information. New Medicare and Medicaid stimulus money will ease cost pressures for many providers, while direct incentives to physicians and hospitals should ensure aggressive implementation of new patient information systems starting in 2011. Between now and 2011, the companies expect significant new spending on standards development and core federal infrastructure.

Defining Strategies Will Be Key

Industry Insights analysts believe it will be imperative for the vendor community to be both aggressive and agile in their strategy to capture this newly addressable market. This once-in-a-lifetime flood of new technology money requires a new way of finding and following opportunities. Success will not come from traditional business development via relationships and RFPs. While some of these new monies will be allocated via grants and accelerated acquisitions contracts, there will be new ways of engaging with the government.

"Technology monies will not necessarily be identified as such, but as an element of new and urgent government initiatives," said Teresa Bozzelli of Government Insights.

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