What Caused the Fall of the Nevada HIE?

Sept. 23, 2014
By a vote of four to two, the Nevada Health Information Exchange (NV-HIE) was ordered to its death in January of last year. As HIEs across the country struggle with sustainability, Healthcare Informatics looks at why this one failed.

On Jan. 24, 2014, the board of directors at the Nevada Health Information Exchange (NV-HIE), the state-designated entity to foster data exchange, ceased operations by a vote of four to two.

Thanks to Nevada Open Meeting Law requirements, it’s immortalized for future generations to ponder.

One month after the vote, the NV-HIE shut down completely. CEO David LaBarge stayed on until March to close up operations completely. All the parties involved in the NV-HIE have since moved on and the only thing remaining is this website.

It’s easy to say the board killed the Nevada HIE that day in Carson City.  However, this isn’t a simple “whodunit.” The NV-HIE wasn’t done in by its board of directors, the maid, or the butler. There are several elements that led the people behind the NV-HIE to cease operations, just as there would be if a local startup restaurant flopped. 

LaBarge, a health IT veteran currently working as a consultant, whittles the failure of the HIE down to three specific reasons.

“The lack of opt-in capabilities, not having the legislator allocate money from the Medicaid population to help fund and sustain the HIE, and not starting early were three components we didn’t have that make most HIEs successful. If you don’t do at least one or two of those three, it’s pretty difficult to get started and to be sustainable,” LaBarge says. “We were zero for three.”

HIEs: Struggling to be Sustainable

The genesis of the HIE was the State Health Information Exchange Cooperative Agreement Program, based off the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009. HITECH authorized the establishment of the infrastructure that would lead to statewide HIEs. In 2010, the Office of the National Coordinator for Health IT (ONC) doled out grant funding to 56 states and territories through the State HIE Cooperative Agreement Program. The Nevada Department of Health and Human Services (DHHS) was awarded $6,133,426 over the course of a four-year period.

Simple math tells us that those four years have passed. With funding from the Cooperative Agreement Program finished, many HIEs are facing serious sustainability concerns. In 2013, a survey of HIE entities from the Robert Wood Johnson Foundation determined that three out of four were struggling to develop a business model for their organization. A few HIEs developed from the cooperative funding have already ceased operations, like in Nevada, and some have been forced to make substantial shifts in direction.

It hasn’t been all bad. Other statewide HIEs have seen substantial success. HIEs in Maine and Delaware, for example, are blossoming examples of the concept at work. Some have even found sustainability. It’s a mixed bag and many are wondering how HIEs will shape out. Andrew Pasternak, M.D., a physician with Silver Sage Center for Family Medicine in Reno and one of the NV-HIE board members who voted to cease operations, was involved with the HIE from its earliest days. His experience left him with more questions than answers.

“I think we’re going to need a lot more clarification of who is paying for HIEs. How are we going to make them financially viable and also, how many do you need in a state? How will this all play out? That’s what I’ve been reading nationally. Those are the two big issues,” Dr. Pasternak says.

Starting Slowly

Timing isn’t everything but it’s close. In many successful HIEs, leaders have gotten the concept off the ground, implemented a plan, and moved forward at rapid pace. Take North Carolina for example, where the plan for the statewide HIE (which covers 800 ambulatory sites and 33 hospitals thus far) was laid back as far as late 2010, shortly after the funds were distributed. Many involved with the NV-HIE say that kind of far-back planning didn’t happen in this case.

“(We) had nine months to do a multiyear project,” says LaBarge, who was hired in May 2013.

In 2010, the Nevada Office of Health Information Technology (OHIT) developed the “State Information Technology Strategic and Operational Plan.” This was finalized in May of 2011. The same year, the Nevada Senate passed a bill that required DHHS to establish or contract a governing entity for the statewide HIE. In late 2012, NV-HIE was established as a nonprofit organization. A few months later, they became the sub-grantee of the DHHS State HIE grant.

(We) had nine months to do a multiyear project. David LaBarge

The NV-HIE board of directors came on board in May of 2012. Pasternak was recruited as a physician representative because of his history with health information technology. Silver Sage was one of the first offices in Nevada to qualify for meaningful use Stage 1.

“When they decided to create the Nevada HIE board, the Nevada State Medical Society put my name forth as a physician representative,” Pasternak recalls. The board met, in accordance with open meeting laws, for the first time in August of that year. LaBarge was hired nine months after this and a request for proposal (RFP) for the HIE technology vendor was released two months after that. 

According to Amber Joiner, DHHS Deputy Director and NV-HIE board member, the NV-HIE was on a similar timeline to many other states. Further, she says they met all of the milestones, according to the federal grant guidelines. “People have different impressions when implementation starts and what success means and for us, we were successful in meeting our milestones for that grant,” she says.

LaBarge confirms that NV-HIE met the goals that the ONC requested of them. However, he, Pasternak, and others stress that DHHS was late to the game in many facets. Pasternak says that the board of directors should have been created shortly after the grant funding was distributed. This lack of head start allowed HealtHIE Nevada, a privately run HIE in the state that is still operational, to recruit hospitals and clinics that may have gone with the NV-HIE.

One source who observed the NV-HIE closely agrees with the idea that they took forever to get up and running, while HealtHIE Nevada (established in 2010) moved ahead from the start. “They didn’t have an executive director for the longest time. All they would do is hold these board meetings,” the source, who chooses to remain anonymous, says. “And they were prohibited from discussing anything related to the HIE outside the board meetings.”

Open Meeting Pains

The open meeting laws were a thorn in the side for many involved with the HIE. In a letter to Michael Willden, the director of Nevada DHHS, Pasternak specifically said the open meeting laws had numerous undesired effects. In his interview with Healthcare Informatics, he says that instead of getting things done quickly through email, they had to be accomplished in a public forum. This was a problem because they were on tight timelines to begin with.

Erick Maddox, HIT manager of HealtHIE Nevada, says that his HIE had an advantage for this reason. They were able to move quickly and be responsive to the market, whereas NV-HIE couldn’t hold a meeting and make a decision without going through an agenda creation, putting it on a board, waiting for comment, and having a quorum. “You can’t run a business that way,” Maddox says.

As mentioned, one of the major effects of these open meeting requirements was that LaBarge wasn’t hired as the CEO until May of 2013. He says this was because of a funding issue. “They didn’t have the money to hire me until late April 2013,” says LaBarge. “The board was unable to access the funds to hire me.”

Whether this was because of DHHS or ONC remains unclear.  LaBarge could not identify which entity was holding up the funds. Pasternak says ONC wouldn’t release the funds until they had a statement of work, which took a while to develop because of the open meeting laws and minimal staff support. Joiner, at DHHS, sent Healthcare Informatics an information fact sheet that points the finger at longer-than-anticipated federal approval processes and federal changes, as the core reason the implementation of the plan was delayed.

However, the same fact sheet details how some of the funds from HITECH were spent on a mandated State Health IT Coordinator position, which was filled by Lynn O’Mara in 2009. There were also funds to hire Capgemini Government Solutions, starting in 2010, well before the Board was ever created. DHHS used $2.4 million of the funds to hire State HIT Coordinator, her staff, and Capgemini. Pasternak is unsure why this is the case.

Meanwhile, Pasternak says that Capgemini was a wasteful hire. In his letter to Secretary Willden, he says they didn’t get enough value out of the investment and should have created the Board before hiring a consultant.

Two HIEs against Each Other

Beyond open meeting laws and scrunched timelines, a lack of trust between DHHS and the board of directors also helped doom the HIE.  A number of board members, including original chair, Joan Hall, left after one year. Pasternak says this became another obstacle they had to overcome. It also affected the relationship between DHHS and the NV-HIE board, going forward.

Reasons of those departures are unclear. One major reason may have had to do with HealtHIE Nevada. Hall is currently on the board of directors of HealtHIE Nevada.  (Hall did not respond to a request for comment). The two entities could never see eye to eye. While cooperative agreements were floated, it never came to fruition and they were seen as competitors. Board members were encouraged not to interact with HealtHIE Nevada.

“I never got the sense the state folks wanted us to facilitate a good relationship with HealtHIE Nevada,” says Pasternak, who is currently serving on the security and privacy committee for HealtHIE Nevada. “There was definite distrust (from the state).”

After conversations over possible consolidation efforts, LaBarge says HealtHIE Nevada determined that they were in good enough shape going forward that they didn’t need NV-HIE. However, Pasternak says this came after the state rebuffed the private HIE.

I never got the sense the state folks wanted us to facilitate a good relationship with HealtHIE Nevada. There was definite distrust (from the state). Andy Pasternak, M.D.

These kinds of bumps in the road seemed to become common for those involved with the NV-HIE. For instance, the University of Nevada School of Medicine decided to interface with HealtHIE Nevada instead of them.

Another came, Pasternak says, when DHHS signed up a fraction of the 200 providers required of them for the Direct Secure Messaging system that was launched in mid-2013. A document detailing plans for the launch confirms that goal of 200 users. DHHS ended up getting 30-40 providers to sign up.

“DHHS had incredibly limited resources. They didn’t have a large staff,” Pasternak says. “They needed people to go to the hospitals and sign up providers for Direct. They sent out emails, worked the State Medical Society and we sent out emails. They had some good knowledge when it came to the macro issues of HIE use but none had practical experience on how it worked in day-to-day, hospital setting. I think that was another clear problem.”

There were other support issues from DHHS. Pasternak says. He mentions that he did more work on that board than any of the others he has served on. Until LaBarge was hired, he says the board did a lot of the lay work and received only limited help from DHHS. For example, he posted and paid for the ad that led to LaBarge being hired.

They had some good knowledge when it came to the macro issues of HIE use but none had practical experience on how it worked in day-to-day, hospital setting. I think that was another clear problem. Andy Pasternak, M.D.

Funding Troubles

Both LaBarge and Joiner say the end of the NV-HIE came about because ONC funding. Like other state HIEs, Nevada requested a no-cost grant extension from the ONC. They asked for another six months for access to the funds that were allocated as part of HITECH. They were denied on Jan. 15, 2014. At the same time, Joiner says ONC moved back the date in which DHHS had to match the grant funding from May to February. By January, DHHS had matched $300,000 of the $1.3 million needed.

“For us, the reason we had to ask for an extension is we were in the process of getting match, gathering donors and participants. To cut three months off that timeline was problematic. That’s why we asked for the extension, we realized they were cutting it shorter, not even giving us what we had for the match,” Joiner says.

While the request for the extension was being made, LaBarge and his team estimated how long it would take the HIE to reach self-sustainability. He pegged it at six months, four if he was being optimistic. They presented it to ONC.

“We were trying to show them if we stayed the course, we could be successful,” LaBarge says. “Instead, the rug was pulled from under us.”

On top of that, LaBarge says ONC did not allow the Nevada HIE to pay its contracted funds (to Boston-based Orion Health) in advance. “That was a crippling event,” he says. “I could no longer pay the contracts that I had put in place, with the approval of Nevada DHHS and ONC. Orion Health was our HIE vendor. We had a software-as-a-service payment for $300,000 that was due at the end of January. I was not allowed to make that payment.”

LaBarge understands that the denial of this decision came from the highest levels. It coincided at the same time Karen DeSalvo, M.D. became National Coordinator for Health IT, and he is unsure if that was a major change in policy on her part.

“What seems contradictory to me is hearing how ONC wants to be able to increase interoperability but they pull the rug on existing programs,” LaBarge says. Other state entities, such as the Pennsylvania eHealth Partnership Authority, were similarly denied an extension for the HIE grant funding. No reason was given in a letter to the Pennsylvania group and they decided to dole out funds to groups within the state.

An ONC spokesperson said that the State HIE Program had a rolling completion date based on when the state programs were originally awarded their grants. “All grants should have been completed earlier this year,” the source says. “No cost extensions are not being considered for states with unspent funds.” Since all states have enabled statewide directed exchange or query-based exchange during the grant period, the spokesperson says the additional work that could be completed through no-cost extensions would be very limited. 

What seems contradictory to me is hearing how ONC wants to be able to increase interoperability but they pull the rug on existing programs. David LaBarge

Nevada ended up spending $4.2 million of the $6.1 million given to them by ONC. Joiner is adamant in saying that the state didn’t have access to the rest of the funds before the timeline ran out. “The timeline dictated how we spent that money,” she says.

With the federal grant funding scheduled to end on Feb. 7, 2014, LaBarge says he scrambled to see if he could gather some interim financing. He secured two banking sources but the board didn’t want to be personally liable for the funds gathered from the private sector. He doesn’t blame anyone though for not wanting to take that on as volunteers for a board of directors.

The Hypothetical

LaBarge seems confident that had either ONC not changed the course on its policy or they had gotten interim financing, the HIE would still be up and running today. He and his team were working nights and weekends to get the HIE off the ground.

“It was a tragedy. I feel terrible. We were on the brink of being self-sustainable. We worked so hard,” LaBarge says. “I had a 50-50 chance of making this turn around. We were close.”

Yet there were other things, LaBarge says, that were going against Nevada from the get-go. As mentioned, he says those that have been successful with HIE have implemented opt-in capabilities and allocated funding from Medicaid to the HIE. Nevada had neither. There was also, of course, the lack of a head start.

Pasternak may not have the same certainty in his voice that LaBarge had when it comes to what might have been, but he too says that more time would have given them more of a chance. In his case, he says things should have happened sooner. “If we had started the board a year earlier, hired (LaBarge) earlier, I think we would have had a shot,” he says.

Even still, there were still potential issues around funding and membership, Pasternak adds. HIEs across the country are struggling with sustainable models, bringing competing regional organizations together, and dealing with multiple networks. Just like starting the local restaurant, hope is not always painted in reality.

“You’re not going to make it viable in a year or two. It might take three to five years before you have enough revenue and members to make the whole thing work,” Pasternak says.

It was a tragedy. I feel terrible. We were on the brink of being self-sustainable. We worked so hard. David LaBarge

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