KHI News Service

KHIE committee changes course on funding scheme

Networks not providers would be charged

By Phil Cauthon | March 26, 2012

The operations of Kansas Health Information Exchange Inc. probably should be funded by fees assessed on the networks it licenses instead of by charges levied against individual medical providers, KHIE officials have concluded.

Members of the KHIE Sustainability Committee agreed to the new approach today during the panel's second meeting.

At the panel's first meeting, members had considered charging users of the health information exchange, such as hospitals, labs, insurance companies, physicians and other providers. The networks, called Health Information Organizations or HIOs, weren't even on a list of potential funding sources discussed at the previous meeting.

"As I went down that list (of potential funding sources), I thought we'd get pushback," said Jerry Slaughter, executive director of the Kansas Medical Society and the committee's chair. "I don't think providers are going to want to pay subscription fees to KHIE and subscription fees to their HIOs.

"I came to the conclusion about the only place KHIE is going to get operating funds are from the HIOs it licenses. I just don't know that there's any other way," Slaughter said. "We could go to the Legislature and ask (for the money.) I have a feeling they're going to say 'no.' With the feds, you won't even get an answer."

KHIE is the semi-public entity responsible for overseeing the exchange of digital health information in Kansas, which is set to begin sometime this year. The organization will certify the networks that handle the transfer of electronic health records. Health care providers who exchange patient information via a KHIE-approved network would be granted some immunity from lawsuits should they inadvertently breach patient privacy while doing so.

KHIE is reviewing license applications from two private networks: Kansas-based KHIN and Missouri-based LACIE.

Committee member Melissa Hungerford said even though KHIE may not charge users of the exchange directly, ultimately the cost would be passed to them.

"Let's be real. If KHIN and LACIE pay KHIE, who pays for that? It's the providers," said Hungerford, who represents the Kansas Hospital Association. "It's like any tax you put on an insurance company. The subscriber pays for that, even if they don't have a line item."

KHIE operations are currently funded by a federal grant that runs out next year. Officials have estimated that in 2013 the agency would need about $650,000 for core operations including three staff salaries, a service desk, office space and utilities.

Under one scenario discussed, that could mean a fee of about $400,000 for KHIN and about $250,000 for LACIE.

"Are these numbers even reasonable?" asked committee member Teresa Gerard of Blue Cross Blue Shield of Kansas City. "Are we blowing up HIOs' sustainability plans with this?"

KHIE Chief Executive Bill Wallace replied: "That's a fair question with respect to LACIE. KHIN is OK. That's a legitimate question."

Currently KHIE is funded by a $9 million federal grant, of which $7 million remains and must be spent by September 2013. The lion's share is earmarked for setting up the technical infrastructure for the statewide exchange.

KHIE faces a June 8 deadline for submitting a financial sustainability plan to the Office of the National Coordinator, the federal agency that funds state-based health information exchange efforts.

"Most of this work is still pretty theoretical. There is very little in the way of actual operational health information exchange," Slaughter said. "Everybody is struggling with this issue and there's not a right or wrong answer."

Wallace said that of the 250 or so regional and state exchanges being set up, fewer than 20 are self-sustaining and none are funded by tax dollars.

Committee members agreed that when they make their recommendations to the full KHIE board in May, the financing proposal should be limited to a one- to three-year timeframe.

"When we're a mature operating (exchange), we're probably going to be a lot different than we are today," Slaughter said. At that point, KHIE might be able to fund operations in part through services it might provide, such as analytics or quality reporting sometimes referred to as "secondary data use."

The committee's next meeting is scheduled for 11 a.m. April 10.

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