Date : March 3, 2011 Time : 2:00 pm – 4:00 pm Location : NC Hospital Association; 2400 Weston Parkway, Cary, NC

1. Date: March 3, 2011 Time: 2:00 pm – 4:00 pm Location: NC Hospital Association; 2400 Weston Parkway, Cary, NC Dial in: 1-866-922-3257; Participant Code: 654 032 36#

2. Agenda

3. Financing Considerations...Focus of today’s meeting

4. Financing Considerations...Focus of our work through April

5. Statewide HIE: Identifying Lessons from Other States • Reviewed State HIE Operational Plans from thirty states • Found twenty states had sufficient information to conduct further analyses • Focused on the eight statewide HIEs that are operational and have publicly available revenue and pricing models • Maine • Maryland • Nebraska • New Mexico • Rhode Island • South Carolina • Utah • Vermont • Conducted additional research and follow-up interviews

6. Allocation of Charges

7. North Carolina: Stakeholders and Proposed Allocations Hospital Systems PROPOSED ALLOCATION (NOV 2010) • Payers (55%) • NC Medicaid (20%) • Commercial Payers (35%) • Hospitals (35%) • Providers (10%) Providers Commercial Payers NC Medicaid Rationale for Recommended Allocation • All states have concluded that major stakeholder groups should share in the cost of developing and operating statewide HIE. • In North Carolina, initial discussions with stakeholders suggested that the public and commercial payers are willing to play a major role in supporting statewide HIE. • Percentage allocation was based on a rough consensus among key stakeholders on the Board, presented to the Board, and adopted as a framework recognizing that further refinement was needed.

8. Findings from Other States: Stakeholder Categories Findings • Only two states (ME and SC) charge entities other than hospitals, practices, & payers. • Currently, no statewide HIEs charge labs, pharmacies, or radiology centers. • A number of HIEs expressed a desire to broaden charges to other stakeholder categories, but indicated that new charges would be part of discrete services delivering value to those entities (e.g., a radiology results and image delivery service would create an opportunity to extend charges to radiology centers). Implications for North Carolina • Initial focus on hospitals, practices, payers is consistent with other states and appears reasonable until such time as more specific “lines of service” can be developed for other constituents.

9. Findings from Other States: Percentage Allocations Fixed Allocations • Two states (Maine and Utah) have fixed allocations of charges: • In March 2010, Maine’s HealthInfoNet decided to allocate charges equally across the public sector (33%); private payers (33%); and providers (33%) • In 2010, Utah’s UHIN determined an allocation based on “rough consensus of estimated value (33%) to each group” Implications for North Carolina • States that have pursued this path indicated that assigning allocations to stakeholders is less a “science” and more an “art” of what is reasonable, fair, and practical.

10. Costs for Statewide HIE Services

11. HIE Costs: Statewide HIE infrastructure & the internal connections within QOs Vendor(s) for Statewide HIE services NC HIE 1 Large Hospital System Physicians (IPA, PHO, PO) Regional HIO Physician Practice Physician Practice Physician Practice Hospital 2 2 2 2 2 HIE Vendor EHR Vendor EHR Vendor HIE Vendor EHR Vendor Key Points • NC HIE will incur costs to create a statewide HIE technical infrastructure that facilitates exchange across Qualified Organizations and provide a foundation for value-added services. • In response to incentives or in recognition of the “cost-of-doing business,” Qualified Organizations and their Participants have (or will need to) acquire the systems to organize information and share within their closed systems. These costs vary according to the complexity and number of internal connections. These costs will be incurred regardless or not the Qualified Organizations connect to the Statewide HIE. 1 2

12. HIE Costs: Technical cost for QOs to connect with Statewide HIE infrastructure NC HIE 3 3 3 Physicians (IPA, PHO, PO) Regional HIO Large Hospital System Physician Practice Physician Practice Physician Practice Hospital Assumptions • Estimate based on the initial technical costs (e.g., design, development, deployment) and the ongoing technical costs (e.g., operations to maintain interface) • Estimate does not include the administrative costs of establishing and maintaining status as a “Qualified Organization” (e.g., recruiting participants; collecting and maintaining agreements; participation in statewide HIE collaborative process)

13. HIE Costs: Technical cost for QOs to connect with Statewide HIE infrastructure NC HIE Physicians (IPA, PHO, PO) Regional HIO Large Hospital System Physician Practice Physician Practice Physician Practice Hospital Estimates • Large Hospital System: $202,000-$128,000 in one time cost to design and build interfaces; annual cost of operations between $9,000 and $4,500 per year. For a system like Novant, spreading the total four year cost across 10 hospitals would be approximately $19,100 per site. • Physician Organizations: $64,000-$39,000 in one time cost to build interfaces; annual costs of operations approximately $4,000 per year. For a large, 100 doctor practice, the total four year cost would be approximately $675 per physician. • Regional HIOs: $291,000-$186,000 in one time cost to build interfaces; annual cost of operations approximately $18,000 per year. For Coastal Connect, spreading the total four year costs across the 5 hospitals and 100 affiliated practices of its demonstration project would be approximately $2,900 per site.

14. HIE Costs: Why connectivity is expensive & strategies to reduce the costs Data Exchange in the Current Landscape • Achieving interoperable health information exchange (HIE) continues to be a challenge • The business and technical considerations for just one type of exchange (laboratory data) highlights the difficulties we face and the financial implications of the lack of interoperability Business Considerations for Exchange of Lab Data • Over 200,000 labs in the US • More than 75% of laboratory tests conducted by hospitals and local labs • Lab interfaces cost $5-$25K each • Interface approval and deployment process can take months, which lengthens interface time and cost Weak market incentives prevent rapid growth in standards-based lab interfacing; interfaces still not replicable and are thus time-consuming and costly Technical Considerations for Exchange of Lab Data • Messaging and vocabulary standards exist but are not monitored or enforced • Allowable variations in HL7 standards keeps costs high; high number of optional fields • Hospital labs usually use local legacy codes; national labs closer to conforming with LOINC, but still have internal legacy-based variations High degree of allowable variation in current messaging and vocabulary standards makes interfacing time-consuming and costly State HIE Strategies • States are pursuing options to align and share resources in order to reduce the overall cost of system integration • The cost to exchange data will be reduced substantially if it is facilitated through HIE instead of multiple, point-to-point connections with external entities

15. Financial Flows

16. Financing Flows NC HIE Physicians (IPA, PHO, PO) Regional HIO Large Hospital System Physician Practice Physician Practice Physician Practice Hospital Payers (Commercial and Medicaid) Key Points • Participation in statewide HIE exchange will be voluntary. • Participants in Qualified Organizations would not be charged directly by NC HIE. • Qualified Organizations would determine if, and how much, to charge their participants.

17. Financing Flows: Questions regarding potential surplus of funds Only one State (Utah) indicated experience with a “surplus” • Midway through the 2010 fiscal year, UHIN forecasted that it would run a surplus through the remainder of the year • UHIN granted a two month moratorium on payments to its stakeholders. Implications for North Carolina • NC HIE’s estimates for funding will be based on overall system costs over 4 years. • Revenue model will be based on pricing and adoption rates via two payment options: (1) up front payments or (2) pay-as-you go. • While still rare, surpluses can be addressed through a variety of mechanisms (e.g., repayment, reinvestment into new services, expansion of existing services) that would be determined by the Board.

18. Financing Flows: Question of charging practices owned or affiliated w/hospitals Two States (Utah and Colorado) have addressed this question • In both cased, the Utah Health Information Network and the Colorado RHIO charge the practice a fee, irrespective of the practice’s relationship with a hospital. • The state HIOs suggested that it was administratively simpler to charge practices given the complexity of the practice-hospital relationships in their markets. Questions for the Work Group • What are the practical, policy, and financial considerations that should be factored into the decision with respect to charges for affiliated and owned practices? • What data on the state of hospital-practice affiliation and ownership in North Carolina would help to inform a recommendation?

19. Public Comment

20. Next Steps

21. Next Meeting, Upcoming Tasks Next Meeting • March 29, 2:00 – 4:00 pm at IOM Next Steps • Building the Revenue Model • Prices charged to the Qualified Organization • Difference in pricing for the “up front” vs. “pay-as-you-go” options • Development of scenarios with different adoption levels • Defining the Payment Mechanisms • Terms and conditions for the payment options • Periodicity of collection

22. Attachments

23. Board Actions Related to Finance

24. Case Studies of Operational HIEs: Maine’s Forecast of Savings *Source: State of Maine, Statewide HIE Operational Plan Update; August 6, 2010

25. HIE Services Cost Contributors • Master Patient Index • Record Locator Service • Personal Health Record gateway • Claims Clearinghouse • Immunization Gateway • Disease Registries • Decision Support • Image Sharing • E-prescribing • Hospitals • Providers • Payers • Hospitals will contribute a subscription fee based on their bed size: 500+: $12,000/mo; 301-500: $8,000; 150-300: $4,000; 51-150: $2,500; 26-50: $2,000; 1-25: $1,500 • Providers will contribute a subscription fee of $10/month. E-prescribing will cost an additional $10/month. • Payers will contribute through a flat fee of $25,000/year, plus $1 PMPY. Nebraska Case Studies of Operational HIEs: Nebraska* • NeHII (Nebraska Health Information Initiative) has a pricing structure that is “tiered”;’ it varies based on the size of facilities connecting to the exchange. • NeHII’s sustainability model is a license-based. NeHII purchases user and participant license from Axolotl at a volume discount price, and resells the license to Nebraska participants at retail price • As of December, 2010: • A total of 1,288 clinical users (e.g., providers, nurses) were utilizing NeHII • 15 hospitals (consisting of 13% of the state’s hospitals) were connected to the exchange • NeHII’s Master Patient Index had information from over 1.2 million Nebraska residents • Projected revenue from subscription and license fees is expected to be approximately $2.7 million in 2011 *Information from July, 2010 operational plan and January, 2011 annual report

26. HIE Services Cost Contributors • Hospitals • Providers • Payers • State Agencies • Hospitals will contribute a subscription fee based on their bed size: 1-15: $103/bed; 16-25: $1,600 plus $98/bed over bed 16; 26-49: $2,600 plus $94/bed over bed 26; 50-99: $4,900 plus $80/bed over bed 50; 100-199: $9,400 plus $85/bed over bed 100; 200-299: $17,900 plus $81/bed over bed 200; 300-399: $26,000 plus $76/bed over bed 300; 400+: $33,600 plus $72/bed over bed 400 • All provider-types (e.g. nurse practitioners, dentists, optometrists) will contribute a subscription fee of $150 per clinic, plus $150/provider • None • The state’s Department of Health and Environmental Control will contribute through a fee of $20,000/year; the Department of Mental Health will contribute $30,000/year South Carolina • Master Patient Index • Record Locator Service • Terminology • Audit/Log • Authentication Case Studies of Operational HIEs: South Carolina* • SCHIEx’s pricing structure is “tiered”;’ it varies based on the size of facilities connecting to the exchange • Fees were based on the revenue required to cover the SCHIEx administration costs, the total number of potential SCHIEx users, and the expected SCHIEx adoption rate or market penetration • SCHIEx estimates the following adoption rates to be reached by 2014: small hospitals (<50 beds), 67%; medium hospitals (51-300 beds), 44%; large hospitals (300+ beds), 50%, small practices groups (<10 eligible users), 23%, and large practice groups (>10 eligible users), 55% • By 2015, annual revenue is expected to be $2,232,000, fully covering operating costs, with a margin of 18% *Information from Aug, 2010 operational plan. Pricing information from schiex.org

27. Estimated Costs: Large Hospital System Integration cost for a large hospital system with an underlying exchange in place to share information across the system Low Range High Range • Assumptions • Assumes a complex mix of legacy systems • Assumes need to coordinate data across multiple systems and outreach to vendors • Costs also assume that the hospital will work with a HIE vendor for design and development • Integration of a large hospital system to statewide HIE services is less complex than creating connections for RHIOs One Time Costs $128,000 $202,500 $17,500 $57,500 Design $18,500 $15,000 Development $92,000 $130,000 Deployment $4,500 $9,000 Annual Operations

28. Estimated Costs: Large Provider Group Large provider groups are practices that consist of numerous specialty providers. Cost will be impacted by complexity and functionality of system Low Range High Range • Assumptions • For low range • Assumes simple portal/browser based integration • Assumes provider group design and development is limited based on existing application/MU deployment • Assumes deployment and operations are scaled down and supported via vendor • For high range • Assumes functional EHR integration • Assumes legacy system and complex integration (i.e., connectivity with labs already exists) • Assumes provider group design and deployment is limited based on existing application/MU deployment • Assumes deployment and operations are scalded down and supported via vendor One Time Costs $39,250 $64,250 $4,000 $16,000 Design -- -- Development $35,250 $48,250 Deployment $4,000 $4,000 Annual Operations

29. Estimated Costs: Regional Exchange/RHIO Development of push and pull messaging integration service consumer agents and services to and from NC HIE Low Range High Range • Assumptions • Assumes direct to EHR and browser based integration • Assumes that the RHIO needs to design the integration pattern to scale across multiple providers • The RHIO already has capability and infrastructure to map codes to standard terms • Development environments are in place • Assumes integration platform is in place, so costs are resource based • Assumes 6 interfaces to provider systems/connecting systems One Time Costs $186,000 $291,000 $20,000 $20,000 Design $17,000 $47,000 Development $149,000 $224,000 Deployment $18,000 $18,000 Annual Operations

30. 2.5 2 1.5 1 0.5 0 Projected Rates of Adoption: Breakdown by stakeholder Payers Hospitals Percent of Connected Participants 2015 2016 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 • High initial participation due to: • Participation of largest organizations • Availability of advanced financing • Adoption expected to increase at an 18% rate after initial connectivity • We are holding payer adoption steady at just the 2 for the time period selected since other payers lack significant market share Beds Providers 2015 2016 2015 2016 2011 2012 2013 2014 2011 2012 2013 2014 Draft for Discussion PurposesNC HIE Executive Committee Meeting, December 2010

31. Initial Assumptions on Pricing “Up Front” “Pay as you go” Example Four Year Totals : Provider Example ( 5 person practice) $ 100 per Provider/ year $ 2,000 Pay as you go $ 55 / Provider $ 1,100 Pre-pay Hospital System C Example (1,393 Beds) $ 557,200 $ 100 PBPY $ 423,472 $ 76 PBPY “Pay as you go” participants will end up paying more over a period of four years * This example is based on a per bed charge. Several other methods are also possible including broadly tiered rates Draft for Discussion PurposesNC HIE Executive Committee Meeting, December 2010