Transcript emery

A Blueprint for Building a Sustainable
Health Information Exchange
Organization
Page 1
eHI Value and Sustainability Model
(VSM)
Hi-Level Summary
Presented by
Doug Emery
Page 2
PURPOSE AND METHOD
Purpose
• Defines and describes a stepby-step approach as to how to
construct a sustainable RHIO
• Leverages the key eHI
products and services in eHI’s
portfolio of tools that can assist
leaders in the development of
a RHIO
Answer
Method
• Based on learning from a
collaborative grant with HRSA
• Driven by and interdisciplinary
team of thought leaders in HIT
• Vetted with the leading RHIOs
in the country
Page 3
THE APPROACH AND SUPPORTING TOOLS
Tools
Activities
Assess
Define
Evaluate
Plan
Execute
• Acquire required
starting capital
• Begin execution
• Manage
business against
assumptions in
NPV model, pro
formas, and
business plan
• Asses the market’s
overall willingness to
participate
• Understand market
structure and balance
of power
• Identify key priorities
• Identify potential
ancillary/administrative
services
• Define the end
state that is desired
• Create several
options or paths
that lead to same
end state, including
varying
functionalities,
timing, and
ancillary services
• Quantify revenue
implications of each option
based on pricing strategy
• Quantity cost
implications of each option
based on timing and
technology platforms
chosen
• Quantify risk of each
option by assessing
operating, market, and
execution risk
• Choose optimal strategy
based on maximum NPV,
embedding risk in the
RADR
• Create business
plan based on
optimal strategy
• Create financial pro
forma projections
• Test assumptions
in the market
• Arrive at required
early stage funding
and detailed
implementation plan
• Market Readiness
Assessment Tool
• Priority setting
workshops
• Problem solving
workshops
• NPV Model
• Value Tool
• RADR estimator
• Analytical support
• Business plan
template and
support
• Pro forma
templates
• 10K mile checkups
• Key driver
identification and
sensitivity
analyses
Page 4
WHAT MAKES eHI AND ITS PORTFOLIO OF
PRODUCTS AND SERVICES DIFFERENT
Success &
Sustainability
Page 5
BENEFITS TO HIEs OF USING eHI TOOLS
With eHI Tools
Without eHI Tools
• Limited acceptance
• Slow, faltering
development and
execution
• Long periods of
dependence on
subsidies
• High risk of ultimate
failure
VS.
• Convincing
Business Case
Development
• Adaptability to
Unique Community
Demands
• Well-Planned
Implementations
• Earned Income
Sustainability
Page 6
Applying the VSM to the NEO
RHIO Project
Presented by
Claudia Ellison
Page 7
Overview
• NEO RHIO and its objectives
• How we applied the VSM
• Lessons Learned
Page 8
Most Pressing Challenges
•
•
•
•
Securing Upfront Funding
Developing a Sustainable Business Model
Addressing Privacy and Security Issues
Addressing Organization and Governance
Issues
• Addressing Technical Aspects
Page 9
The VSM Model
•
•
•
•
•
Assess: Market readiness
Define: Decision framework
Evaluate: NPV Model
Plan: Development of Business Plan
Execute: Acquire required starting capital,
begin execution
Page 10
Lessons Learned
• Discussion
Page 11
Regional Efforts to Sustainability
Presented by
Andrew Weniger
Page 12
Regional Efforts to Sustainability
• Completed assessment process for five Gulf
Coast states (AL, LA, MS, TX, and FL)
• Expanded upon existing state surveys
• Increase awareness within the state of other
state and national initiatives
• Identify the readiness of communities to
increase their use of health information
technology and health information exchange
• This information is used as a basis for a state
specific Roadmap
Page 13
eHI & Gulf States Status
2005
Q1 06
Q2 06
Q3 06
Q4 06
Q1 07
Q2 07
SGA Task Force &
Workgroup Support
State-level
Louisiana Assessment
& Roadmap
Texas Assessment
& Roadmap
Mississippi
Assessment & Roadmap
Florida Assessment
& Roadmap
Alabama Assessment
& Roadmap
Gulf Coast Integrated Plan
Media Kit
Reports Issued
Reports Scheduled
Page 14
Texas
Locations of HIE
Activities
Access Medica - East Texas
Access to Care for the Uninsured - San Antonio
CriticalConnection - South Austin
Houston - Harris County Health Care Alliance
Indigent Care Collaboration - Central Texas
(Hays, Travis, and Williamson County)
North Texas RHIO - Dallas and Tarrant County area
Southeast Texas Health System - South East Texas
Circles are illustrative of approximate areas of HIE coverage
Page 15
Florida
Locations
of HIE
Activities
1
3
2
4
&
&
6
1.
2.
3.
4.
5.
Escambia Health Information Network (Pensacola)
Big Bend RHIO (Tallahassee)
Community Health Informatics Organization
Jacksonville Health Information Network (JaxCare)
Nemours Remote Monitoring of Pediatric Diseases
(Jacksonville)
6. Heart of Florida Regional Health Organization (Ocala)
7. Space Coast Health Information Network
8. Central Florida RHIO
9. Tampa Bay RHIO (to include Pinellas)
10. Palm Beach County Community Health Alliance
11. South Florida Health Information Initiative
5
4
&
8
&
7
7
9
10
0
9
 Blue denotes planning stage
 Red denotes pilot operational
11
Page 16
Path to Sustainability
• Regional efforts – clear geographic
centers but unclear borders/transitions
• Prioritization frequently guided by conflict
avoidance and disproportional influence
• Subsidies may create momentum in the
wrong direction/wrong functionalities
Page 17
Making the Business Case
Presented by
Edric Engert
Page 18
VALUATION DISCUSSION OVERVIEW
• Why value is important
• What value and its components are
• The taxonomy of value
• How value is measured
• Implications for the tool
Page 19
THE IMPORTANCE OF VALUE
Exec comp
Capital
Stakeholders
Pricing
Focus
• Value provides
• Rigorous
• All players
• Pricing’s
• Manage-
founders and
management with
incentive to begin
and maintain
operation
determination of
value required for
access to capital
markets
need to
understand
value as it
accrues to
them in order
for network to
thrive
upper bound
determined
by value to
users
ment
needs to
focus their
priorities
on key
drivers of
value
• Is a critical
component of
total comp
package
• Helps
determine
fee structure
and
stakeholder
subsidies
Page 20
THE COMPONENTS OF VALUE
Cash outflows
Cash inflows
New costs/
Lost revenue
Reduced costs/
new revenue
Metrics of value:
• Absolute - NPV
• Relative - IRR
Timing and
riskiness of
cash flows
Page 21
Not captured
In valuation
methodology
THE TAXONOMY OF VALUE
Value
Financial
value
Accounting
value
Transactional
value
Non-financial
value
Economic
surplus
Clinical
value
Marketing
value
Page 22
TRANSACTIONAL VALUE EXAMPLE
Illustrative
POTENTIAL COST SAVINGS
Percent data availability
Percent physician will act on available data
Percent applicability
Hrly rate 2006
Growth rate
Hrly rate by year
30%
15%
5%
15.89
3%
15.89
Activity min. per visit
Wait min. per visit
24
10
Labor costs per visit
9.01
Paper costs 2006
Growth rate
Paper costs by year
0.2
3%
0.20
Fax costs 2006
Growth rate
Fax costs by year
0.1
3%
0.10
Page 23
Illustrative
CLINICAL VALUE EXAMPLE
2006
Case 1: reduction of redundant tests
Number of redundant tests per visit
Cost of tests
Price of tests
Revenue of tests weighted for payor mix
Cost trend
Price trend
Cash inflow per transaction:
2
18
36
$16
3%
3%
$3
Case 2: reduction of adverse drug events
Number of adverse drug events per visit
Cost of adverse drug event
Pirce of adverse drug event
Revenue of adverse drug event weighted for payor mix
Cost trend
Price trend
Cash inflow per transaction:
0.02
500
800
$366
3%
3%
$3
Page 24
ASSUMPTIONS AND CREDIBILITY
Credibility
Transactional
value
Clinical
value
Marketing
value
Need for Longitudinality
Page 25
DISCOUNT RATE – OVERALL PURPOSE
• How does the timing of cash inflows
Timing
and outflows relative to the valuation date
affect the valuation results
• How does the riskiness of the cash flows
Risk
compare to other potential investments
Page 26
DISCOUNT RATE – RISK COMPONENTS
Financial risk
• Traditional risk
+
Business risk
=
Overall risk
• Three key drivers:
as embodied in
Risk Adjusted
Discount Rate
- Operating risk
- Market risk
- Execution risk
• Can be driven
by WACC or
CAPM method
• Must be included in
valuation to fully
capture riskiness of
cashflows
Page 27
BUSINESS RISK DEFINITIONS
Operating Risk
Market Risk
Execution Risk
• How the company is structured, and the
details of its basic logistics in order for it to
carry out its plan successfully
• To what extent the market for the HIEs
services is ready for its adoption, what
barriers or obstacles if any exist, and how
well the marketing plan meets market
needs and obstacles
• Ability of the HIEs team to actually
execute, given the complexity of the
endeavor and their track record at rolling
out such products and services
Page 28
IMPLICATIONS FOR THE TOOL
• Not just transactional, need more data and
assumptions
• Sensitivity analyses and “zero solver” needed to
deal with uncertainties
• Longitudinality required to capture data over time in
order to refine forward looking assumptions
• Calculations must include risk of venture and
market of entry
Page 29