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Hospital IT System market

Post: 18.01

Sell into hospital system IT/IS at your own peril. You'll be competing for a really tiny slice of pie.

The unfortunate reality is that almost all Health System IS departments are staffed and resourced as a cost center, not an innovation center.

The average annual IT budget for a hospital is just $7.8 million. So in aggregate, the 6,129 hospitals in the United States make up a $47.8 billion dollar market. That includes spending on software, devices, hardware and networking components, cybersecurity, and personnel.

At $4.6 billion per year, Epic’s annual revenues make up 10% of that. And the total EMR related spend (e.g. EMR hosting, indirect spend on the electronic medical record dedicated staff, etc, all considered non-discretionary) while harder to measure precisely, is at least 50% of total Healthcare IT spend.

If you’re selling a SaaS platform into IS, at a US hospital system, that leaves a $24 billion TAM for all other delivery system IT spending. Or said differently, that’s a generous $4M of total available budget per hospital. That's the pool of dollars that you’re competing for a piece of.

In order to get to $100M of revenues, you'd need to get $150,000 contracts at ~15% of those hospitals. So you'll need to convince almost 700 hospitals to allocate 3% of their total available budget to your product. And remember that your product will still need to compete for budget with phone systems, internal internet connectivity, and MS Office subscriptions.

Inspired by the recent "Who Pays for Healthcare AI?" article from Morgan Cheatham. Links to his article, and data sources provided in the comments


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