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

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

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  1. An HIE Business Model for Rural Areas: Elusive as a Jackalope? Preliminary Notes from a Western Nebraska Collaborative • Partial funding supplied by: • AHRQ THQTHIT ImplementationGrant 1 UC1 HS 16143-01 • AHRQ THQTHIT Planning Grant 1 P20 HS015365-01 • HRSA RND Grant D06RH06884

  2. 14,000 square miles … 90,000 people 8 of the 12 counties have less than 7 persons/square mile

  3. 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% • Nebraska’s largest Native American population without a reservation

  4. 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

  5. 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

  6. 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.

  7. $ 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.

  8. $ 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.

  9. Operating Revenue Sustainability Suspect “RHIOs continue to rely on grants for the lion’s 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/

  10. 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

  11. 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!

  12. 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

  13. 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!

  14. Western Nebraska Health Information Exchange Ways We Are Calculating • Annual Revenues and Expenses Over Five Years – From Implementation to Production • Cash Flow and Financing Needed • Balance Sheets • Shock Projections DUMMY EXAMPLES TO FOLLOW!

  15. Western Nebraska Health Information Exchange WNHIE - Revenues 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)

  16. Western Nebraska Health Information Exchange Expenses • 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 ??

  17. Western Nebraska Health Information Exchange Dummy R & E Worksheet

  18. Shock Projections • For example • Only achieve 85% of revenues • Exceed costs by 15% Cumulative Break-Even

  19. An Example

  20. Western Nebraska Health Information Exchange Bottom Line – Likely Goal Sustainable during 5 years at which point we will either be expanding or it will start not being sustainable.

  21. Partner Partners Who Will Exchange Info • 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

  22. Partner Partners • Projecting the impact of the HIE on their operations • Initially focusing on the hospitals in our calculations

  23. 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

  24. 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)areallowable costs for determining Medicare reimbursement.

  25. Western Nebraska Insured Patients Profile – approximate (Uninsured =30%)

  26. Impact onPartners Partner • Fiscal • Efficiencies • Quality of Care (priceless)

  27. 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 3%1 in admissions @ 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.

  28. Benefits Projections Partner • Labs • Hospitals - 10% reduction in total labs ordered @ average cost per lab • Outpatient – 9% reduction in total labs ordered @ 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.

  29. 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.

  30. 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.

  31. 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.

  32. 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.

  33. 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

  34. Dummy Partner Summary Partner

  35. Bottom Line for Partners? Partner Not about cost savings, but about quality care, patient safety, and efficiencies.

  36. Benefits…Not 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.

  37. Nancy Shank, Associate Director University of Nebraska Public Policy Center 131 S. 13th Street, Ste 303 Lincoln, NE 68588-0228 nshank@nebraska.edu 402-472-5687

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