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Financial sustainability: Third-party infrastructure stretches HIE budgets

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  By Gary Palgon,  August 31, 2012

Leveraging the existing cloud-based infrastructure of third-party integration and data management specialists, HIEs can quickly, securely and cost-effectively connect, integrate, aggregate and harmonize disparate data to better serve the patient care needs of their communities – and thus achieve sustainability.

Whether supported by federal or private funds, most health information exchanges (HIEs) are under mandate to rapidly connect large numbers of healthcare entities with vast quantities of variable data spread across disparate IT systems. It is a daunting task, and few are surprised by the fact that the majority of HIE funding and resources currently are consumed constructing basic interoperability infrastructure.

On the scale required, most HIEs – private and public – do not have enough internal expertise, resources or time to integrate data quickly, efficiently and cost effectively. As a result, few existing HIEs are financially viable independent of short-term government incentive funding. Long-term solvency depends on finding ways to become financially self-sustainable. One way is to reduce the need to build costly infrastructure.

Consider this analogy: A homebuilder doesn’t run the sewer connection from a new home to the wastewater treatment plant. Instead, the pipe is connected to a sewer main that connects the entire neighborhood to the treatment plant.

The reason is simple. Investing once in a main line and then having each homeowner pay to connect to it saves time and money – money the homebuilder can then use to actually build the house. Just as individual homebuilders rely on a third-party’s infrastructure to free their resources to focus on their home-building needs, hospitals, health systems and HIEs can also use third-party infrastructure to meet their connectivity mandate.

A common problem is the high cost of the infrastructure required to set up a mechanism to collect, transmit and share data. For example, if you were given a $10 million grant to create an HIE, you could easily spend the first $8 million on the hardware, software, data center and employees to staff the service. This leaves only $2 million to purchase the applications that allow actual use of the data, produce the reports necessary to meet meaningful-use requirements and differentiate your HIE from the competition. In other words, the money is gone by the time you get to the useful applications.

Eliminate infrastructure costs
Another option is to entirely bypass the investment in infrastructure by using a cloud-based third-party specialist. For a monthly fee, an organization has access to the infrastructure paid for, built by and supported by the third party – as opposed to the significant capital expense to build its own.

Let’s go back to the example of the $10 million grant. If your data management fee was $40,000 per month, in six years you will have spent less than $3 million of the $10 million to get the HIE up and running. The remainder of your budget could then be used to purchase a wider range of applications that add value to HIE customers. For example, adding the capability for electronic exchange of lab orders is something customers need – and for which they will pay. Because integration is handled by a third party, the HIE can focus on those kinds of applications that ensure the ability to attract new customers and retain existing ones. This leads to sustainability.

A natural question about contracting with third-party specialists is, “Isn’t it more cost efficient in the long run to make the capital investment upfront?” In some cases, the answer is yes. However, it is much like buying a car. For those who purchase a new car every few years, it makes sense to lease a vehicle. Those who drive a car until the wheels fall off are better off purchasing and avoiding the additional fees that come with a lease.

With information technology, however, the fact that software and hardware often are obsolete within five to seven years makes their purchase a costly option. The success of any business lies in innovation and progress, but the cost of progress for an HIE is the ongoing need for the best technology and services available. A third-party specialist’s success depends on offering the most up-to-date technology and data management expertise in a cost-effective manner.

Access expertise
Another advantage to the use of third-party integration and data harmonization specialists is access to personnel experience and expertise that hospitals and most HIEs do not have access to or cannot afford internally. By relying on a specialist’s staff of experts for the time-consuming activities required to integrate and harmonize large volumes of complex data, your staff can focus on day-to-day service to your customers. Offering a higher level of customer service is an important way to ensure the long-term competitiveness and financial viability of an HIE.

Access to the expertise of people who handle integration and address data harmonization and security issues on a day-to-day basis is especially important for hospitals or health systems setting up private HIEs. Internal IT staff typically is stretched thin meeting conversion deadlines like the upcoming ICD-10 transition, and they must set priorities based on day-to-day financial and patient care needs. This makes it difficult to stay abreast of advances in integration and data harmonization technology.

Whether supported by federal or private funds, every HIE needs to make the best use of funding to ensure sustainability. Leveraging the existing cloud-based infrastructure of third-party integration and data management specialists, HIEs can quickly, securely and cost-effectively connect, integrate, aggregate and harmonize disparate data to better serve the patient care needs of their communities – and thus achieve sustainability.

About the author
Gary Palgon is the vice president of healthcare solutions for Liaison Healthcare Informatics, which provides healthcare organizations with innovative solutions to complex integration and data management needs. He can be reached at gpalgon@liaison.com. Learn more at www.liaisonhealthcare.com.


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