I was talking the other day to the network administrator of a 70-bed hospital with a dozen internal physicians’ practices about the trials and tribulations of achieving the first phase of the “meaningful use” standards set by the American Recovery and Reinvestment Act’s embedded Health Information Technology for Economic and Clinical Health (HITECH) Act.  Yes, I sometimes talk to people about such things.  And maybe more people should.

Back when they passed the “bailout” bill (ARRA) last year, Congress embedded the HITECH Act, which basically offers a bounty to hospitals if they can not just put electronic health records in place, but use them in a meaningful way across their organization to improve care, reduce errors, and reduce paperwork.  There’s a big cash reward for meeting Phase I of these standards before the end of 2011–$2 million, plus $200 for every patient discharged past the 1150th patient and up to the 23,000th patient. In other words, high-volume hospitals could see as much as $6.37 million in incentives in the first year.  That amount goes down by a quarter for each succeeding year.  So over 4 years, hospitals that comply with meaningful use could see between $5 million and $10.9 million.

Not enough of an incentive? There’s a stick with that carrot–hospitals that don’t get their IT systems in compliance with the Health Insurance Portability and Accountability Act’s security and privacy standards are exposed to potential government civil suits and penalties. And the Department of Health and Human Services has finally started to get serious about HIPAA–Prince Georges’ County, MD based Cignet can tell you about that.

So, hospitals are paying out a big chunk of their capital budgets this year, if they haven’t in previous years, to upgrade their patient information systems.  And they’re discovering that electronic health record systems are, to put it bluntly, storage pigs.

The network administrator I was talking to said that in the two years they’ve had their EHR system in place, their tier 1 storage requirements — that’s their mission-critical online data storage–has grown by almost 500 percent.   Mind you, this is a relatively small hospital, and that 500 percent increase came from going from 20 terabytes to almost 100 terabytes.

But those storage requirements grow daily. And as they bring their systems into meaningful use compliance,  their audit trail data will amount to about another terabyte of data a month–which they’ll have to retain for seven years or so.  So, add another 84 terabytes of audit trails over 7 years, plus whatever natural growth in records they have from new patients, emergency room visits, and visits to the dozen or so physicians practices they own.

In other words, the big winner from ARRA HITECH is the storage industry.  The storage dillema of that small hospital is being writ small, medium, and large across the country at every clinic, doctor’s office, and hospital.  That means petabytes of new storage sitting in someone’s data center somewhere.