Financial model shows costs, savings from HIE

July 11, 2012

Being able to access your patients' health data immediately is good for their health. Now you can find out whether it can help your bottom line.

Have you ever wondered whether participating in an electronic health information exchange (HIE) makes financial sense? If so, now you have a tool that can help you find out.

A team of researchers at the University of Wisconsin–Madison has developed a financial model that enables payers and providers to quantify the financial worth of participating in an HIE. The model can be used for any of the three most common ways of funding an exchange: a fixed annual fee for each participant, a charge for each patient visit to a provider institution, or a charge for each look-up of information. The researchers describe their model in a paper published in the Journal of the American Medical Informatics Association.

“We wanted to provide a very generalized methodology that aggregates a variety of datasets and can be applied anywhere,” lead researcher Srikrishna Sridhar tells Medical Economics exclusively. “You can plug in datasets and it will be able to make predictions [about the financial value of HIE] in any part of the country and any part of the hospital,” he says. 

The research team applied their model using data from 4,639 visits to three large emergency departments (EDs) in Milwaukee, Wisconsin, over a year. They obtained data from Medicare and Medicaid claims, public reports of hospital admissions, published payer mix data, and use data from the Wisconsin Health Information Exchange, a nonprofit regional HIE. All the patient visit studied were associated with treatment for asthma, chronic lung disease, or diabetes.

The study found that, in this case, access to the data provided through HIE would have resulted in financial gains for providers and payers. For payers, the gains would have been due to a decrease in reimbursements brought about by reductions in hospitalizations and ED visits. Providers would have realized savings from a reduced need for tests on, and hospital admissions of, Medicare and Medicaid patients.

Overall, about 70% of the savings to participants would have been the result of fewer unrequired hospitalizations-which the investigators define as “those that occur because there is insufficient information available in the ED to make a diagnosis and disposition”-and fewer repeat ED visits. The remaining 30% of the savings would have resulted from a reduction of duplicated tests and imaging studies.

The model demonstrates that hospitals and EDs that treat large numbers of health maintenance organization (HMO) enrollees in particular stand to benefit from HIE participation, according to Sridhar.

“HMO contracts with hospitals and EDs usually are capitated, so there’s an incentive for the institution to perform as few procedures as possible to attain the same level of care,” he says. “By seeing what has been done for the patient already, HIE enables the institution to avoid wasting money by duplicating tests and procedures that have already been performed.”

Depending on a provider’s patient mix, HIE participation could in theory be revenue-neutral or even unprofitable, but the necessary combination of circumstances is unlikely to occur, Sridhar says. 

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