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Sustainable HIE Funding Model? Wait 'til Next Year

November 2, 2009
by David Raths
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The State of North Carolina just published an impressive Health Information Exchange Strategic Plan. As someone who follows health IT policy regularly, I found it fascinating reading because it encapsulates all the challenges states face as they try to move from a few regional health information exchanges, many only in their formative stages, to a statewide system offering shared services.

Spurred by federal ARRA funding timelines, North Carolina has set itself ambitious goals to simultaneously boost EHR adoption and build a statewide data exchange infrastructure.

Yet as I read this and other state health IT plans, it occurs to me that the development of a viable business model remains the largest obstacle. I know that health IT leaders have devoted considerable effort to studying this issue. For instance, the North Carolina report notes that the NC HIT Collaborative is charged with developing a final business and operational plan for submission to ONCHIT in the first quarter of 2010. But I am concerned that some states may be pushing ahead with the creation of a statewide entity, using HITECH funding, and leaving the development of a sustainable funding model for a later date.

For instance, a Florida work group at the National Governors Association's Alliance for E-Health meeting in September came to agreement on ways to move forward on several technical and funding issues. But in the notes of their meeting published by the Florida Health Information Network, the Floridians recognized they still have lots of work to do on funding issues. "How will we pay for it? Clearly, some of the HITECH money will have to be used to address technical startup issues. However, private funding would make up an increasing share of the funding. A sustainable framework will need to be in sight by the end of the 4 years of HITECH Funding."

Is it possible we will get to the end of that four years without any agreement on who will pay to maintain the technical infrastructure? If the economy continues to stagnate and state revenue pictures remain bleak, will any state resources for HIE projects be a tempting target for cost-cutting legislatures?

The North Carolina strategic plan lays out six potential business models:

1. Free market models, such as a community portal that would provide enough value that people would pay for its use.

2. Recaptured waste, a cost-avoidance model in which savings from streamlined clinical and administrative processes flow back into HIE operations.

3. Pay-to-play, a model in which subscription or transaction fees are charged for use of the exchange.

4. Value-based models, which require stakeholders to pay fees based on vaue received from participation.

5. Employer-based models involving insurance premium surcharges.

6. Public good models apply taxes or surcharges, spreading the cost across the largest number of stakeholders.

As you may recall, Vermont passed a measure last year to impose a fee of two-tenths of 1 percent on all medical claims to fund health IT efforts. It is expected to raise $32 million over seven years to help fund EHR adoption and HIE development. Will other states follow suit? Or will they put off the difficult business model issue until after the HITECH funding runs out?

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