Keeping HIEs Afloat
In March 2010, the Office of the National Coordinator for Health IT (ONC) committed to providing states, or qualified state designated entities (SDEs), with a total of $548 million through its State Health Information Exchange (HIE) Cooperative Agreement Program (CAP) for the purpose of building and improving statewide HIEs. However, the money comes with a caveat: once it runs out, you are on your own. Many HIE employees enthusiastically tout the capability of HIEs achieving financial sustainability, but other health IT professionals are not so optimistic.
"I don't know that state or regional HIEs will succeed. The jury is still out," says Richard D. Lang, EdD, CIO and vice president of the 207-bed Doylestown Hospital in Doylestown, Pa.
Although he believes many community HIEs have been and will be successful, Lang says, "Most U.S. CIOs are pessimistic about the chances for statewide HIEs. The approach in many areas is not sustainable financially, or otherwise."
The eHealth Initiative (eHI), a Washington, D.C.-based nonprofit, conducts an annual survey of HIEs. In 2008, there were 42 operational HIEs across the U.S. identified in the survey; by 2011, that number had risen to 255. Only 24 of the 255 were recognized as sustainable and none of those were statewide HIEs.
Despite the federal government's aggressive encouragement of HIE development, grants are running out. "When your grant runs out, you will go out of business without another source of revenue that sustains the business," says Delaware Health Information Network (DHIN) Executive Director Jan Lee, MD.
Lee says private organizations, the federal government and the state government each have contributed roughly one-third of the approximately $30 million that DHIN has received in seed funding to become operational. Despite becoming a fully operational statewide HIE able to share clinical data in 2007, DHIN has yet to demonstrate financial sustainability. For 2012, the Delaware state legislature approved a bond bill in the amount of $3 million to cover DHIN's expected revenue shortfalls.
"We're going to get through this year on the capital funding that the state kicked in," Lee says, "but it was made abundantly clear: don't come back."
States, like the federal government, have no interest in paying for HIE operating costs. Instead, SDEs like DHIN are expected to behave more like businesses than public safety departments.
Besides limited term funding opportunities, DHIN's sole source of revenue is the state's data senders, such as hospitals and laboratories, which are charged between 2 and 25 cents per transaction performed over the HIE. The organization plans to add to its revenue by charging payors a monthly per-member fee in 2013 with the hope of becoming financially sustainable.
Data senders receive clear benefits from participating in the HIE, Lee notes. Sending lab results and discharge papers through DHIN is demonstrably cheaper and quicker than sending them through the mail.
DHIN has to provide "something of sufficient value that insurers will pay for at a price point that enables us to stay in business," Lee says.
Representatives from the payor community have generally been wary about this plan, she says, and have asked for statistical justification. "Health insurance is an industry that is driven by actuarial data and those data do not exist yet," Lee says. "We're a new industry."
In lieu of those data, Lee typically explains that without the fees, the HIE will go under. "Payors have to decide if they'll be better or worse off if DHIN goes out of business. They know that they really would be worse off." Payors benefit from DHIN due to fewer redundant tests so they should help pay, she says.
There is additional, federal evidence that payors may benefit through reduced rates of duplicate testing. A 2010 study of the U.S. Department of Veterans Affairs' (VA) HIE efforts concluded that the agency's HIE investments resulted in savings of $2.52 per member insured per month (Health Aff 2010;29:629-638).
The free market should dictate HIE activities, the services they provide and the prices they charge, suggests John Kansky, MBA, MS, vice president of product management at the Indiana Health Information Exchange (IHIE), a private, nonprofit entity.
"The marketplace is unmerciful," Kansky says. "If our services don't have enough value to cover the cost that we're charging, the market tells us, and we either create a better service or lower our price to become more efficient." eHI listed IHIE as one of the 24 sustainable HIEs.
IHIE's success, according to Kansky, is due to the fact that all of its services, which include internal clinical results delivery, a clinical data repository and a quality improvement program, stand on their own. Each service either generates more revenue for IHIE than it costs to operate, or it is redesigned or abandoned.
Also, he says that governmental operation and control can lead to HIEs that don't offer the best services and don't deliver them efficiently.
However, Kansky may make an exception for DHIN and similarly situated organizations. As a public-private partnership, DHIN has invited numerous representatives of Delaware's different stakeholders, including payors, to the roundtable to discuss DHIN's direction.
Both BlueCross BlueShield of Delaware (BCBSD) and the Delaware Division of Medicaid & Medical Assistance (DMMA), two of the state's largest insurers, are represented on the DHIN board of directors. In addition to helping to determine what services DHIN provides, Delaware's payors have been able to provide input on their charges.
Insuring approximately 200,000 Medicaid beneficiaries, DHIN would cost the state of Delaware approximately $150,000 per month at 75 cents per member.
Presuming that some of the savings recognized by the VA also would be recognized by Delaware, and considering that there's a commitment at the Centers for Medicaid & Medicare Services to cover half of the Delaware DMMA's DHIN costs, then the value of HIE for payors becomes more clear. "We're not actually asking them to just pay for anything," Lee says.
DHIN has received a formal commitment from Delaware DMMA to begin paying the fee, and Lee says that DHIN is close to an agreement with BCBSD. She hopes that netting two of the state's largest payors means others are not far behind.
Both DHIN and IHIE are unique in that they are more mature than most other HIEs. Still, the leaders are concerned over the ability of many states to achieve sustainability when the CAP grants run out.
That is a real danger, since eHI's report says that only seven HIEs were able to achieve sustainability within one year and only 12 did it within three.
It also is important to remember that the goal of HIEs is twofold: to save money and to improve the quality of care. While many don't believe that HIEs will show a return on investment any time soon, if ever, few seem to question HIEs' ability to coordinate care and improve its quality.
"I don't think there will be a quantitative return on investment," Lang says. "But qualitative? Absolutely."
"I don't know that state or regional HIEs will succeed. The jury is still out," says Richard D. Lang, EdD, CIO and vice president of the 207-bed Doylestown Hospital in Doylestown, Pa.
Although he believes many community HIEs have been and will be successful, Lang says, "Most U.S. CIOs are pessimistic about the chances for statewide HIEs. The approach in many areas is not sustainable financially, or otherwise."
The eHealth Initiative (eHI), a Washington, D.C.-based nonprofit, conducts an annual survey of HIEs. In 2008, there were 42 operational HIEs across the U.S. identified in the survey; by 2011, that number had risen to 255. Only 24 of the 255 were recognized as sustainable and none of those were statewide HIEs.
Despite the federal government's aggressive encouragement of HIE development, grants are running out. "When your grant runs out, you will go out of business without another source of revenue that sustains the business," says Delaware Health Information Network (DHIN) Executive Director Jan Lee, MD.
Generating revenue
Although the eHI report did not identify any sustainable statewide HIEs, a 2011 National Association of State CIOs (NASCIO) report, "Sustainable Success: State CIOs and HIE," recognized DHIN for its viable business plan.Lee says private organizations, the federal government and the state government each have contributed roughly one-third of the approximately $30 million that DHIN has received in seed funding to become operational. Despite becoming a fully operational statewide HIE able to share clinical data in 2007, DHIN has yet to demonstrate financial sustainability. For 2012, the Delaware state legislature approved a bond bill in the amount of $3 million to cover DHIN's expected revenue shortfalls.
"We're going to get through this year on the capital funding that the state kicked in," Lee says, "but it was made abundantly clear: don't come back."
States, like the federal government, have no interest in paying for HIE operating costs. Instead, SDEs like DHIN are expected to behave more like businesses than public safety departments.
Besides limited term funding opportunities, DHIN's sole source of revenue is the state's data senders, such as hospitals and laboratories, which are charged between 2 and 25 cents per transaction performed over the HIE. The organization plans to add to its revenue by charging payors a monthly per-member fee in 2013 with the hope of becoming financially sustainable.
Data senders receive clear benefits from participating in the HIE, Lee notes. Sending lab results and discharge papers through DHIN is demonstrably cheaper and quicker than sending them through the mail.
DHIN has to provide "something of sufficient value that insurers will pay for at a price point that enables us to stay in business," Lee says.
Demonstrating value
DHIN plans to charge payors a monthly fee of 75 cents per member, which is "not a trivial amount," Lee acknowledges.Representatives from the payor community have generally been wary about this plan, she says, and have asked for statistical justification. "Health insurance is an industry that is driven by actuarial data and those data do not exist yet," Lee says. "We're a new industry."
In lieu of those data, Lee typically explains that without the fees, the HIE will go under. "Payors have to decide if they'll be better or worse off if DHIN goes out of business. They know that they really would be worse off." Payors benefit from DHIN due to fewer redundant tests so they should help pay, she says.
There is additional, federal evidence that payors may benefit through reduced rates of duplicate testing. A 2010 study of the U.S. Department of Veterans Affairs' (VA) HIE efforts concluded that the agency's HIE investments resulted in savings of $2.52 per member insured per month (Health Aff 2010;29:629-638).
The free market should dictate HIE activities, the services they provide and the prices they charge, suggests John Kansky, MBA, MS, vice president of product management at the Indiana Health Information Exchange (IHIE), a private, nonprofit entity.
"The marketplace is unmerciful," Kansky says. "If our services don't have enough value to cover the cost that we're charging, the market tells us, and we either create a better service or lower our price to become more efficient." eHI listed IHIE as one of the 24 sustainable HIEs.
IHIE's success, according to Kansky, is due to the fact that all of its services, which include internal clinical results delivery, a clinical data repository and a quality improvement program, stand on their own. Each service either generates more revenue for IHIE than it costs to operate, or it is redesigned or abandoned.
Also, he says that governmental operation and control can lead to HIEs that don't offer the best services and don't deliver them efficiently.
However, Kansky may make an exception for DHIN and similarly situated organizations. As a public-private partnership, DHIN has invited numerous representatives of Delaware's different stakeholders, including payors, to the roundtable to discuss DHIN's direction.
Both BlueCross BlueShield of Delaware (BCBSD) and the Delaware Division of Medicaid & Medical Assistance (DMMA), two of the state's largest insurers, are represented on the DHIN board of directors. In addition to helping to determine what services DHIN provides, Delaware's payors have been able to provide input on their charges.
Insuring approximately 200,000 Medicaid beneficiaries, DHIN would cost the state of Delaware approximately $150,000 per month at 75 cents per member.
Presuming that some of the savings recognized by the VA also would be recognized by Delaware, and considering that there's a commitment at the Centers for Medicaid & Medicare Services to cover half of the Delaware DMMA's DHIN costs, then the value of HIE for payors becomes more clear. "We're not actually asking them to just pay for anything," Lee says.
DHIN has received a formal commitment from Delaware DMMA to begin paying the fee, and Lee says that DHIN is close to an agreement with BCBSD. She hopes that netting two of the state's largest payors means others are not far behind.
Both DHIN and IHIE are unique in that they are more mature than most other HIEs. Still, the leaders are concerned over the ability of many states to achieve sustainability when the CAP grants run out.
That is a real danger, since eHI's report says that only seven HIEs were able to achieve sustainability within one year and only 12 did it within three.
It also is important to remember that the goal of HIEs is twofold: to save money and to improve the quality of care. While many don't believe that HIEs will show a return on investment any time soon, if ever, few seem to question HIEs' ability to coordinate care and improve its quality.
"I don't think there will be a quantitative return on investment," Lang says. "But qualitative? Absolutely."