HIE 2.0: Data Exchanges Face Consolidation Or Elimination

This week the Colorado Quality Health Network, one of the nation’s first health information exchange platforms, announced that it would be partnering with 20 other HIEs from across the US to form an HIE trade association. The group hopes to begin pursuing new business opportunities through joint ventures by building national data exchange capabilities. The news is not unprecedented; there are already a small but growing number of similar partnerships working to establish national exchange capabilities in the US. In February 2014, 16 regional HIEs operating in the mid-West announced that they would form a consortium, providing mid-West health systems a broader reach in their efforts to coordinate care. CommonWell, a vendor-led, not-for-profit health information exchange, is also pushing to stand up a national exchange platform.

This very trend was anticipated by ONC leadership as early as 2004, when Dr. David Brailer, the first National Coordinator for Health IT, called for a national health information exchange network to be established. While a truly integrated national HIE would have countless positive benefits for care coordination, the wave of consolidation passing through the HIE market today is not being driven by a desire to improve care. These are business decisions being made by regional HIEs that are struggling to reach financial sustainability.

The sudden explosion of regional HIEs came at the same time that the US was rapidly rolling out EHR technology in its hospitals, and this is because both projects were federally funded through the same piece of legislation. The HITECH Act, passed in 2009, provided hospitals with incentive payments to implement EHRs, and provided states with seed funding to launch regional HIEs. The federal funding made available to states through the HITECH Act was never intended to support HIEs indefinitely. Instead, the goal was to help states install the infrastructure needed to stand up an exchange, with the expectation that each HIE would then develop its own business model to sustain itself.

Thus far, the HITECH stimulus funding has worked as planned and most hospitals now have at least one information exchange partner available to them.  However, the future of HIEs is in doubt. The exchanges have struggled to find a business model that provides financial sustainability. Most exchanges are trying to establish subscription-based business models where the cost of operating is passed on to the hospitals that exchange data through them, but regional exchanges are finding that the economy of scale is not on their side and subscription costs are significant. In Nevada, the state shut down its HIE in January 2014 after failing to generate enough funds to continue operations. Prior to that, DC’s regional HIE closed for the same reason.

Now, as HIEs continue to look for ways of improving their financial performance, partnering with others and scaling up to a national level seems to be the logical next step. There are some tangible benefits that HIEs hope to realize through these partnerships:

• Economy of scale: spreading the cost of network operations across multiple organizations is expected to reduce overhead costs for each member.

• Attracting national health providers: through a joint venture, these HIEs hope to win the business of major national health systems that would rather do business with one single entity than with dozens of regional HIEs.

• Advocacy: the HIE trade group plans to send lobbyists to Washington to advocate for the value HIEs bring to the nation, and the need for prolonged funding.

HIEs are having unanticipated financial consequences on hospitals as well, making them that much less likely to participate, or pay a significant subscription fee. In Oregon this week, a major interoperability project shut down despite most hospitals being on the same EHR platform. The post-mortem analysis of the failed project found that interoperability simply wasn’t good business for hospitals operating under a fee-for-service reimbursement model. OHSU’s chief health informatics officer explains, “There’s no financial incentive for the providers. In fact, in many cases, the financial incentive is reversed. Better I don’t know that the patient had an MRI a month ago and repeat it because in a fee-for-service world we get paid for the procedures we do, not the ones we avoid.” While HIEs are intuitively a good thing for care coordination and cost control, the complex financial landscape in the US healthcare market is putting their very existence in jeopardy.