An HIE Business Model for Rural Areas: Elusive as a Jackalope

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An HIE Business Model for Rural Areas Elusive as
a Jackalope?
Preliminary Notes from a Western Nebraska
Collaborative

• Partial funding supplied by
• AHRQ THQTHIT Implementation Grant 1 UC1 HS
  16143-01
• AHRQ THQTHIT Planning Grant 1 P20 HS015365-01
• HRSA RND Grant D06RH06884

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(No Transcript)
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14,000 square miles 90,000 people 8 of
the 12 counties have less than 7 persons/square
mile
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• Population
• Poorer than in other parts of Nebraska and U.S.
• 40 live at or below 200 of federal poverty
  level
• Aging
• 21 over 60
• 40 of these over 75!
• Racial and ethic minorities 13
• Nebraskas largest Native American population
  without a reservation

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• Less access to insurance
• Next to last in Nebraska region with persons
  18-64 with no health insurance
• Higher unintentional injuries, motor vehicle
  deaths, and suicide rates
• Impact of drought 75 drop in farm incomes

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During the past month alone

• A Rough Script of Life, if Ever There Was One
• Chadron, Nebraska
• Item from the blotter of the Chadron Police
  Department Caller from the 900 block of Morehead
  Street reported that someone had taken three
  garden gnomes from her location sometime during
  the night. She described them as plastic, with
  chubby cheeks and red hats

September 2007, pp 40-44, 66
September 2, 2007 Sunday, Section 1, p. 12, DAN
BARRY
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Brutal Facts - HIT Initial Ongoing Costs is
Adoption Barrier for Hospitals
American Hospital Association. (2007). Continued
progress Hospital use of information technology.
Washington, DC Author, p. 15.
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HIT Ongoing Costs is Barrier for Smaller
Rural Hospitals
American Hospital Association. (2007). Continued
progress Hospital use of information technology.
Washington, DC Author, p. 16.
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HIT Initial Ongoing Costs is Barrier for
Rural Hospitals
Schoenman, J.A. (2007). Small, stand-alone, and
struggling The adoption of health information
technology by rural hospitals. (Working Paper
2007-02). Bethesda, MD Walsh Center for Rural
Health Analysis, p. 20.
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Operating Revenue Sustainability Suspect

• RHIOs continue to rely on grants for the lions
  share of revenues. RHIOs at all stages of
  development continue to anticipate the need for
  ongoing grant income
• Startup-stage RHIOs reported increased
  percentages of income from grants, up from 73
  for 2006 to 84 for 2007.

Healthcare IT Transition Group. (2007,
September). Sustainable RHIO funding and the
emerging business model. Retrieved Executive
Summary on September 10, 2007 from
http//www.hittransition.com/rhio2007/
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• FOUNDING PARTNERS
• Rural Nebraska
• Healthcare Network and
• its members
• Box Butte General Hospital
• Chadron Community Hospital
• Garden County Health Services
• Gordon Memorial Hospital
• Kimball Health Services
• Memorial Health Center
• Morrill County Community Hospital
• Perkins County Health Services
• Regional West Medical Center
• Panhandle Community
• Services Health Clinic
• Panhandle Mental Health
• Center
• Panhandle Public Health
• District

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Goals for Western Nebraska Health Information
Exchange

• Financial Sustainability
• Makes sense for Partners (Financially? Quality
  of care? Functional Improvement?)
• User-friendly
• The business model is impacted by all three!

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Our Approach to Modeling

• Two levels
• HIE as an organization
• AND
• Projections for partnering organizations

Western Nebraska Health Information Exchange
Partner
Partner
Partner
Partner
Partner
Partner
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Limitations

• Estimating vendor implementation and support
  costs
• Comparability of some partner data suspect
• Hospitals clinic information
• Hospitals nursing homes
• Hospitals assisted living facilities
• Acute swing beds behavioral health beds
• Some estimated percentages are based on national
  research (some HIE others EMR!), others educated
  estimates, and still others educated guesses
• THIS IS PRELIMINARY, PROJECTED INFORMATION!

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Ways We Are Calculating
Western Nebraska Health Information Exchange

• Annual Revenues and Expenses Over Five Years
  From Implementation to Production
• Cash Flow and Financing Needed
• Balance Sheets
• Shock Projections

DUMMY EXAMPLES TO FOLLOW!
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WNHIE - Revenues
Western Nebraska Health Information Exchange

• Phased over three years and production two years
• Operating
• Subscription
• Usage fees
• Click fees
• Other
• Grants/Contributions
• Loans/Financing
• Generated From
• Partnering orgs
• Others who benefit (insurers, outside labs)

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Expenses
Western Nebraska Health Information Exchange

• Operating Costs
• Cash
• Staff - Executive Director, Secretary
• Consultants IT, Legal, HIT
• Supplies, Furniture, Postage, Rent, Licenses,
  Computers, Copying, Meetings, Trainings,
  Accounting, PR/Advertising
• HIE Maintenance
• Interest Payment
• Non-cash
• Depreciation
• Capital
• HIE Installation
• IT

??
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Dummy R E Worksheet
Western Nebraska Health Information Exchange
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Shock Projections

• For example
• Only achieve 85 of revenues
• Exceed costs by 15

Cumulative Break-Even
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An Example
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Bottom Line Likely Goal
Western Nebraska Health Information Exchange

• Sustainable during 5 years at which point we will
  either be expanding or it will start not being
  sustainable.

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Partners Who Will Exchange Info
Partner

• Hospitals
• 1 Large Network Hospital (182 bed)
• 8 Critical Access Hospitals (each independent)
• Federally-Qualified Health Center
• Behavioral health
• Public health
• Commercial Insurers
• Doctors 200 in region (many employed by
  hospitals)
• Pharmacies 35 in region
• Pharmacy Benefit Managers
• Labs 2 major independent
• Others
• Medicaid
• Large private employers
• Large public employers

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Partners
Partner

• Projecting the impact of the HIE on their
  operations
• Initially focusing on the hospitals in our
  calculations

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PARTNERS
Partner
Even among our hospital partners there is widely
varying levels of sophistication and of products!
3 hospitals - No EHRs, no computers at key work
sites, no functional network.
Regional West Medical Center McKesson Most
Wired Rural Hospital (2003, 2004)
1 Physician-designed not interoperable
1- CPSI 1 - Dairyland
Clinic-only EHR
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Critical Access Hospitals

• Medicare payments cost-based (rather than fixed
  cost) plus 1 for inpatient, outpatient, and
  post-acute care services.
• Capital improvement costs (i.e. depreciation and
  interest expenses) are allowable costs for
  determining Medicare reimbursement.

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Western Nebraska Insured Patients Profile
approximate (Uninsured 30)
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Impact onPartners
Partner

• Fiscal
• Efficiencies
• Quality of Care (priceless)

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Benefits Projections
Partner

• Administrative Transactions
• Based on actual current costs and projected
  charge through HIE
• Accounts Receivables
• Accelerating 5 of annual volume and capturing
  5 of that (opportunity costs, administrative
  costs)
• Uncollectibles
• 10 decrease in annual uncollectibles
• ADEs
• 25 reduction in the estimated 31 in admissions
  _at_ avg cost per patient

1. Brennan T.A. Leape L.L. (1991). Adverse
events, negligence in hospitalized patients
Results from the Harvard Medical Practice Study.
Perspectives in Healthcare Risk Management, 11,
2-8.
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Benefits Projections
Partner

• Labs
• Hospitals - 10 reduction in total labs ordered _at_
  average cost per lab
• Outpatient 9 reduction in total labs ordered _at_
  average cost per lab

• Estimate based on mix of EMR vs. HIE studies
• Tierney et al. published the results of three
  prospective randomized controlled studies to
  examine the impact of electronic information on
  physician test ordering behavior. In each of
  these studies the authors found that the volume
  of tests decreased between 9 and 16.8.
  (Tierney, W.M., McDonald, C.J., Martin, D.K.,
  Rogers, M.P. (1987). Computerized display of past
  test results. Annuals of Internal Medicine, 107,
  569-574. Tierney, W.M., McDonald, C.J., Hui,
  S.L., Martin, D.K. (1988). Computer predictions
  of abnormal test results. JAMA, 259, 1194-1198
  Tierney, W.M., Miller, M.E., McDonald, C.J.
  (1990). The effect on test ordering of informing
  physicians of the charges for outpatient
  diagnostic tests. New England Journal of
  Medicine, 322, 1499-1504.)
• Girosi, F., Meili, R., Scoville, R. (2005).
  Extrapolating evidence of health information
  technology savings and costs. Santa Monica, CA
  RAND Corporation.

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Benefits Projections
Partner

• Radiology
• Hospitals - 10 reduction in total cost of
  radiology
• Outpatient 15 reduction in total cost of
  radiology

Girosi, F., Meili, R., Scoville, R. (2005).
Extrapolating evidence of health information
technology savings and costs. Santa Monica, CA
RAND Corporation.
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Benefits Projections
Partner

• Length of Stay
• 15 reduction in length of stay

Girosi, F., Meili, R., Scoville, R. (2005).
Extrapolating evidence of health information
technology savings and costs. Santa Monica, CA
RAND Corporation.
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Benefits Projections
Partner

• Chart Management
• Hospitals 50 reduction in Medical Records
  Personnel Costs
• Outpatient 36 reduction in Medical Records
  Personnel Costs

Girosi, F., Meili, R., Scoville, R. (2005).
Extrapolating evidence of health information
technology savings and costs. Santa Monica, CA
RAND Corporation.
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Benefits Projections
Partner

• Medical Staff Time
• Docs - 5 increase in efficiency
• Nurses 11 increase in efficiency

• Poissant, L., Pereira, J., Tamblyn, R.,
  Kawasumi, Y. (2005). The impact of electronic
  health records on time efficiency of physicians
  and nurses A systematic review. Journal of the
  American Medical Informatics Association, 12,
  505-516.
• Girosi, F., Meili, R., Scoville, R. (2005).
  Extrapolating evidence of health information
  technology savings and costs. Santa Monica, CA
  RAND Corporation.
• Overhage, J.M., Tierney, W.M., Zhou, X., McDonald
  CJ. (1997). A randomized trail of corollary
  orders to prevent errors of omission. Journal of
  the American Medical Informatics Association,4,
  364-375.

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Cost Projections
Partner

• Productivity loss (3 months, 15 of payroll)
  HUGE AMOUNT!
• Interface costs (building bridge between systems)
• Subscription/Usage fees to Exchange

Do not include EMR installation/maintenance
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Dummy Partner Summary
Partner
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Bottom Line for Partners?
Partner

• Not about cost savings, but about quality care,
  patient safety, and efficiencies.

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BenefitsNot So Much Financial
Schoenman, J.A. (2007). Small, stand-alone, and
struggling The adoption of health information
technology by rural hospitals. (Working Paper
2007-02). Bethesda, MD Walsh Center for rural
Health Analysis, p. 18.
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• Nancy Shank, Associate Director
• University of Nebraska Public Policy Center
• 131 S. 13th Street, Ste 303
• Lincoln, NE 68588-0228
• nshank_at_nebraska.edu
• 402-472-5687