Strong growth in German health IT market

A new study of the German health IT market has sized the sector as being worth between Euros 1.1bn and 1.4bn, and says it is set to grow at up to 6 percent a year over the next 4 years as the German economy gathers momentum.

The study by analysts IDC paints an optimistic outlook for the German health IT market. The study “Der IT-Markt in Deutschland nach Branchen” (“The IT market in Germany in different sectors”) predicts above average growth rate in public sector IT and health IT in the years 2007 to 2011.

“We see the German health-IT-market grow at an average of about 6 per cent a year in this period”, lead analyst Joachim Benner told E-Health Europe. “This is way above the 4.5 per cent which we expect for the German IT-market as a whole”.

Even better are the projections for public sector-IT. Here the analyst expects an average annual growth rate of about 8 per cent in the years 2007 to 2011.

One of the main reasons for the good outlook in public sector IT and health IT, Benner said, was that the public sector and the health system still have to catch up with other service industries when it comes to IT investments. “The financial situation in the public sector and in the health system was desolate for years. Now the economy is gaining momentum, and the broad economic outlook for Germany is brighter. This will improve the financial scope of the public sector and the health sector.”

Another reason Benner gives for growing investments not only in health IT but in all sectors of the IT business is seen in changes in the legal framework. The corporate tax reform in Germany, in particular, will make it easier for companies or indeed hospitals to write off IT-investments from 2008 onwards.

The main industry driver of growth in health IT, according to Benner, is software services. “But unlike in many other sectors, hardware services, too, will be growing in the health-sector, although less vigorously.”

In particular, the analyst expects hospitals to increase their investments in hospital information systems and electronic medical record solutions. But with more and more hospitals becoming private and with private hospital chains growing rapidly in size, the consolidation of other IT-services like archiving systems should also have its share.

In order to calculate the percentages, Benner and his colleagues used different data sources. They asked customers for their plans in the years to come. They interviewed heads of IT companies. And they analysed balance sheets and reports about company investments.

Benner admits, though, that the projections for the health IT sector could be too high if it turned out that the German national health IT project runs further out of schedule. “We have assumed a successful implementation of the German smartcard-project when calculating the growth rates for the health-IT sector”, said Benner. He could not say, however, how much lower the growth rate would be if the “elektronische Gesundheitskarte” (“electronic health insurance card”) experienced further delays.

In total, in Germany as well as in any other country, the health IT market is still only a small slice of the cake for IT companies. Benner said: “The whole market volume for IT in Germany was around Euros 57 bn in 2006.

Between 2 and 2.5 per cent of this went into health IT.” This adds up to between Euros 1.14 bn and 1.41 bn in 2006. An annual growth rate of 6 per cent would result in a market volume of nearly Euros 1.9 bn in the year 2011.