North Carolina Health Information ExchangeFinance Work Group

Date: February 9, 2011Time: 10:00 am – 11:00 am

Location: Conference Call ONLYDial in: 1-866-922-3257; Participant Code: 654 032 36#

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Roll Call

O'Connor, Maureen - Co-Chair BCBSNCTayloe, Dave - Co Chair Goldsboro Pediatrics, American Academy of Pediatrics

Bell, Mark North Carolina Hospital AssociationHarris, Brian Rural Health Group, Inc.Hughes, Yvonne Coastal Carolinas Health AllianceMiller, Mark Novant HealthMinnich, John Computer Sciences CorporationOwen, Steve Division of Medical Assistance, NC DHHSPilkington, Phred Cabarrus County Health DepartmentSangvai, Devdutta North Carolina Medical Society

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Agenda

Topic Leads Time

Welcome Co-Chairs 10:00-10:10

Update on Statewide HIE ProgressDiscuss Relaunch of Work Group

NC HIE CEOCo-Chairs

10:10-10:20

Approach to Statewide HIE NC HIE CEO 10:20-10:30

Financing Statewide HIE Co-Chairs 10:30-10:45

Next Steps Co-Chairs 10:45-10:55

Public Comment N/A 10:55-11:00

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Recap and Relaunch

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NC HIE Progress Since Submission of HIE Plans

September: NC HIE supports collaboration on lab results delivery project Multiple stakeholders (North Carolina REC, State HIT Coordinator, NCHICA,

LabCorp and other laboratories, providers, and EHR vendors) begin developing a project to reduce the cost and complexity of electronic laboratory data exchange

October: ONC approves North Carolina HIE Strategic and Operational Plans North Carolina can now access $11.8 million for implementation

December: Governor Perdue establishes NC HIE as “State Designated Entity” Via Executive Order, Governor Perdue designates NC HIE as the fiscal agent,

replacing Health and Wellness Trust Fund

January: NC HIE wins one of 10 federal HIE Challenge Awards ONC awards NC HIE a $1.7 million Challenge Grant to deploy medication

management services

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Finance Work Group...Charter and Deliverables to Date

Charter...Purpose and ChargeForum for identifying and assessing key financing issues, building consensus, and advancing recommendations for Board consideration on

• Budget to support implementation of strategic plan• Costs and ongoing funding streams (existing and potential) associated with statewide HIE• Value, business case, ROI of investments at the state, regional, and institutional levels• Financing strategies to support adoption of HIE

Scope of Work...Deliverables

Deliverable Status Environmental data collection / provider landscape Complete

Financial model scenarios Complete

Payment flow models Complete

Finance section of NC HIE Operational Plan Complete

Workplan for ongoing sustainability effort In-Progress

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Statewide HIE in North Carolina

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What We Are Building...

Vision• A secure, sustainable technology

infrastructure to support the real time exchange of health information to improve medical decision-making and the coordination of care to improve health outcomes and control health care costs for all residents of North Carolina.

Key Principles• Utilize an open, inclusive and transparent

collaborative process• Maintain the focus on the goals of

improved health• Participation is on a voluntary basis• Build in a cost-effective manner and

deliver value

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First Steps...The Imperative for Exchange and Need for Trust

• Fundamentally (either through incentives or what we know to be good practice of care) providers and hospitals will be exchanging more protected health information electronically with an expanding array of external entities.

• Participants will exchange data only if they can trust their trading partners.

• We are developing the policy mechanisms and technical infrastructure to create and maintain that foundation of trust

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• By the end of 2011, NC HIE will deploy core services that allow participating organizations to: Accurately identify authorized users

Search and locate data

Securely transport and deliver messages

• NC HIE offer access to a variety of value-added services through a single point of entry, thereby eliminating the need for stakeholders to maintain an ever expanding array of costly point-to-point connections and interfaces.

Technical Infrastructure...Core and Value-added Services

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Financing Statewide HIE

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Board Action Since the Finance Work Group Last MetBoard Decisions

On September 23, Board directs staff to develop more detailed cost estimate and description and sequencing of HIE deployment. Board directs staff to address the following:

1. What will an effective policy and high-performing technical infrastructure cost to build and maintain?

2. What are the options for revenue and pricing?3. What is the best approach to allocating funding most efficiently and effectively?

On November 17, after review of materials submitted in response to its September request, Board directs staff to develop an option for “up front” revenue to support a state-of-the-art system, and to reach out individually to key stakeholders to assess their support.

On December 16, Board supports the concept of up front financing option in which charges are allocated based on stakeholder categories. It directs staff:

1. Investigate alternative pricing for hospital-affiliated practices owing to their technical and business relationship with a hospital that may have paid for access to statewide HIE services

2. Expand the list of HIE participants and funders to include laboratories, pharmacies, etc3. Consider additional value-added services (including administrative transactions) in light of the

broader health reform efforts4. Refine the proposed approach through the NC HIE Finance Work Group

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Assessing Revenue Options: Approach and Findings

Findings• Most states relying on federal funding to support capital phase of deploying infrastructure

• As the NC HIE will be used on a voluntary basis, it must create value or it won’t be sustained

• Lessons from other HIEs suggest that success depends upon the ability to secure a critical mass of users by deploying the services of greatest value as quickly as possible

• Analysis suggests significant value in securing commitment of funding upfront

Approach to Defining Revenue Options• Reviewed and documented HIE financing and sustainability strategies in other states• Developed alternative models and implications for up-front financing• Vetted models with stakeholders for feedback • Presented to Executive Committee and Board

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Upfront Financing Option...Benefits

Benefits of Including an Option for Upfront Financing1. Allows us to procure and deploy fuller range of HIE services more quickly, efficiently and at

lower cost2. Creates incentives for broad and sustainable participation because: (a) value is apparent

sooner, (b) stakeholders are engaged from the outset, and (c) we avoid assessing fees based on transaction volume (in which the more you use the system, the higher your costs)

3. Broader participation means lower unit costs for all participants and more health information in the system, further increasing the value

4. More efficient and cost-effective administration and substantially reduced bureaucracy by reducing or eliminating the need to build and operate a per-use billing and collection system.

Financing Model Proposed to Board• NC HIE creates a voluntary “pre-pay” option for participation in the exchange.

• Entities that don’t pre-pay can still participate, but will be subject to higher payment rates.

• Engage in consultations with key stakeholders to find a fair balance among hospitals, physicians, insurers and other participants in the HIE.

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Upfront Financing Option...Allocation MethodApproach to Determining Payment Structure• Division of payments will be based on stakeholders’ assessment of the fair percentage of contribution, reflecting

the value from a fully operational system and the ability of stakeholders to move the process forward. The percentages below were derived from stakeholder conversations and are subject to adjustment.

• All payments are voluntary. Hospitals, providers and payers listed below were selected for projection purposes only. All others are encouraged to join.

• Other categories of stakeholders (e.g., labs, pharmacies) are also encouraged participate, in order to take advantage of lower rates for prepayment and to support the building of the system.

Hospital Systems (cover 35% of needed funds) Goal: Upfront payments from 6-10 largest systems

Providers (cover 10% of needed funds) Goal: Upfront payments from large practices of 100 or

more (representing approx 21% of providers)

Commercial Payers (cover 35% of needed funds) Goal: Upfront payments from 2-3 largest payers

NC Medicaid (cover 20% of needed funds) Goal: Medicaid 90/10 funding to contribute

Other...Labs, Pharmacies, Etc (additional funds)

35%

10%

35%

20%

Hospital Systems

NC Medicaid

Providers

Payers

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Estimating Costs: Approach and Findings

Methodology for Estimating Costs• Defined the activities and resources that will need to be in place over the next 5 years.• Collected information on administrative and technical costs from other states• Presented estimates to stakeholders for feedback• Revised estimates accordingly

Findings• Prices for HIE services are highly variable from state to state. Estimates for comparable technical

services range from $1.25 million to nearly $7 million per year. Significant variation also exists between vendor estimates for capital vs. operating expenses.

• Based on information available as of Jan 26th, the average cost is $3 million per year for the types of statewide HIE services identified in North Carolina’s approved HIE Operational Plan.

• With a large number of competent vendors offering services, buyers can negotiate aggressively.

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Cost 2011 2012 2013 2014 4 YR Total

Admin & Operations $1,800,000 $1,800,000 $1,800,000 $1,800,000 $7,200,000

Technology $7,259,500 $4,851,170 $3,558,573 $1,580,407 $17,249,650•Core Services (Hardware & software) 3,830,000 1,120,000 325,000 325,000 $5,600,000

•Value-Added Services (Develop & deploy Phase 1 Services) 675,000 225,000 0 0 $900,000

•Value-Added Services (Develop & deploy Phase 2 Services) 250,000 1,250,000 1,400,000 47,196 $2,947,196

•Building and testing connectivity to Qualified Organizations

1,802,500 1,287,500 772,500 51,500 $3,914,000

•Ongoing maintenance 702,000 968,670 1,061,073 1,156,711 $3,888,454

Total Costs $9,059,500 $6,651,170 $5,358,573 $3,380,407 $24,449,650

Funding 2011 2012 2013 2014 4 YR Total

ONC Funding $7,835,637 $2,005,656 $1,774,567 $235,000 $11,850,860

ONC Match Funding $476,426 $645,510 $670,610 $78,333 $1,792,546

NC Medicaid 90/10 Funding TBD TBD TBD TBD

Total Funding: $8,312,063 $2,651,166 $2,445,177 $313,333 $13,643,406

Costs

Funding

Administration & operations cover costs for NC HIE staff, organizational needs and collaborative process

Technical costs gradually decrease after 2012 when system is complete

Alternative pricing models (e.g., subscription service) offer a variety of cost allocations

Funding calculation only includes ONC funds for 2011 (doesn’t include the $1.1 M spent on planning in 2010)

Estimated Costs vs. Available Federal Funding

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Summary of Key Points

• Through a collaborative, open process, NC HIE is building the policy, legal, and technical infrastructure to support (with close oversight by the Executive Committee) the exchange of health information in North Carolina

• The statewide HIE technical infrastructure will be determined by decisions of the Clinical & Technical Operations Work Group, presented and approved by the Executive Committee and the full Board.

• In accordance with NC HIE’s principles, the statewide HIE will be: (1) designed by the participants to maximize value, (2) procured through an open, competitive process; and (3) overseen and maintained in a cost-effective manner

• Questions regarding financing will be addressed through NC HIE’s Finance Work Group and presented to the Executive Committee and Board. Full consultation with key stakeholders will occur at every stage.

• Strong controls will be in place to ensure a transparent rigorous commitment and expenditure process

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Next Steps

Develop and advance recommendations to the Board on the following:1. The proposed percentage of stakeholder’s share of costs2. Allocation of costs for other stakeholders3. Strawman for pricing options for those who pay upfront vs. pay as they go4. Process to address unexpected surplus of funds if revenue exceeds costs5. Terms, conditions and collection timing of upfront payment option

NC HIE Staff will provide additional information on:1. Categories of additional costs for Qualified Organizations (beyond interface and

ancillary connection costs) – such as labor, system configuration, etc.2. Comparative pricing and revenue models in other states

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Public Comment