Despite the chill wind blowing through the technology market, the US health IT market proved resilient in 2001, largely avoiding the across the board declines seen in many other technology sectors.

According to new data from analysts Frost & Sullivan the US technology market generated a total of $6 billion in revenues from IT services, software, hardware, implementation and consulting in 2001.

The firm’s ‘Healthcare IT in 2001’ report, however, notes that 2001 saw some significant casualties, most notably in the dotcom sector where a swathe of e-health start-ups from the late 90’s plunged to oblivion.

Start-ups in areas such as online supply chain management, consumer content sites and practice automation were all heavily hit. The report says that over-saturation of e-commerce in healthcare eradicated many companies that may have otherwise survived.

Frost & Sullivan estimate that up to 70% of health dotcom start-ups have ceased trading, been acquired, merged or filed for bankruptcy. One of the most notable failures of last year was that of DrKoop.

The most successful players in the US market in 2001 were the big established top-tier vendors, who Frost & Sullivan say remain best placed to weather economic volatility.

“Top-tier companies — whose gross revenues exceeded $100 million — held the largest percent of the total market share in 2001,” noted Frost & Sullivan senior industry analyst Amith Viswanathan. "They are also relatively stable, with almost all participants maintaining their market position in relation to the previous year."

Middle-tier and lower-tier firms, meanwhile, are expected to continue to struggle for financial survival in a field marked by slackening venture capital interest, competitive saturation, and narrowing product margins. Frost and Sullivan predict consolidation will continue among smaller players.

Viswanathan predicted that in the short-term demand in the health IT market will continue to be driven by the major healthcare institutions: "Demand from large institutions for clinical software, clinical data repository products, electronic medical record keeping applications, and other software tools should sustain the industry in the short term".

The market for physician practice management systems and services, meanwhile, is expected to grow less rapidly due to the slower adoption rates among physicians. "This might be expected, given that 50 percent of all American private practice doctors operate single-member practices," said Vishwanathan.

Overall, Frost & Sullivan conclude 2001 has been a relatively unkind year for most Healthcare IT companies. Vendors have had to battle a combination of factors to gain market share. These factors have included: ongoing financial constraints of the US healthcare systems; a tightening pool of eligible, high value hospitals; slower than expected adoption of technology among private practice groups; and the fact that HIPAA spending has been directed at providers of data security systems.

Frost & Sullivan also announced its 2002 Marketing Engineering Awards, awarded to companies that have worked diligently to make a positive contribution to the healthcare IT industry.

Recipients of the 2002 awards were: Computer Sciences Corp. (Healthcare); GE Medical System Information Technologies; McKesson Corp.; Siemens Medical Solutions Health Services; and WebMD Corp.