North Carolina Health Information Exchange
Finance Work Group
Date: June 22, 2011
Time: 2:00 pm – 4:00 pm
NC Institute of Medicine, 630 Davis Drive, Morrisville, NC 27560
Dial in: 1-866-922-3257; Participant Code: 654 032 36#
Roll Call
O'Connor, Maureen - Co-Chair
Tayloe, Dave - Co Chair
Goldsboro Pediatrics, American Academy of Pediatrics
Bell, Mark
Harris, Brian
Hughes, Yvonne
Miller, Mark
Minnich, John
Owen, Steve
Pilkington, Phred
Sangvai, Devdutta
North Carolina Hospital Association
Rural Health Group, Inc.
Coastal Carolinas Health Alliance
Novant Health
Computer Sciences Corporation
Division of Medical Assistance, NC DHHS
Cabarrus County Health Department
North Carolina Medical Society
Welcome and Meeting Objectives
2:00 – 2:15
Recent Steps to Advance Finance Plan
2:15 – 2:45
Creation of an Incentive Pool
2:45 – 3:15
Next Steps for Workgroup
3:15 – 3:45
Wrap up and Public Comment
3:45 – 4:00
Financing Approach
Progress to Date
Activities Since Last Workgroup Meeting
Refined Prepayment Plan (April – May)
– Developed details of prepayment mechanism and next steps
– Presented prepayment plan to Executive Committee on May 13
Information Gathering (May – June)
– NC HIE staff conducted meetings with multiple stakeholders
– Capstrat launched interviews with hospitals
Establishment of Business Terms for HIE Vendor (June)
– Inclusion of revenue sharing
– Reduction of near term cash flow concerns
Proposed Prepayment Approach
Details Presented to Executive Committee
Financing Approach: Attributes agreed upon to date
Participation in the statewide HIE is voluntary.
Participants can pay through one of two mechanisms (“pay-as-you-go” or “prepay”).
NC HIE will seek prepayments to fund the anticipated four year funding gap.
Goals for prepayment will be based on the following percentages per stakeholder category
• Medicaid (20%) approximately $2.5 million
• Commercial Health Plans (35%) approximately $4.4 million
Hospital Systems
• Hospitals (35%) approximately $4.4 million
• Providers (10%) approximately $1.2 million
Note: Though the prepayment option will focus on the four
stakeholder categories identified above, additional participants in
the statewide HIE (e.g., laboratories, radiology centers,
pharmacies, research organizations) will also be invited to
participate in the prepay option as applicable and appropriate.
$ 4.4 M
$ 1.2 M
$ 4.4 M
$ 2.5 M
NC Medicaid
The upfront financing model must be structured in such a way that it rewards initial investors.
The NC HIE Board of Directors should adopt a pay-as-you-go pricing model for those who do not pay
upfront that nets out to a higher price point than the upfront model.
The difference between the pricing for up front and pay-go options should be sufficient to gain
investment, but not so large as to discourage future participation.
NC Medicaid: Seeking approximately $2.5 million
Key Considerations
• Based on federal rules for drawing down Medicaid 90/10 Administrative funding in support of statewide HIE,
NC Medicaid will not receive a single check for its proportional share/use of statewide HIE services. Instead,
NC Medicaid will receive approval to draw down funds on a quarterly basis to cover its share of the costs as
they are incurred.
• Process for gaining approval from CMS to use 90/10 Administrative funds in support statewide HIE:
Step 1. State Medicaid Agencies negotiate with CMS regarding: (1) which activities the Medicaid Agency
wants to support, (2) what percentage of the activity will be covered, and (3) how long the Medicaid
Agency will use 90/10 funds to support the activity (note: formal guidance from CMS to the states on
the use of 90/10 funding is expected to be released by the end of May).
Step 2: NC Medicaid develops and submits a formal request to use MU Administrative Funds to CMS in an
Implementation Advanced Planning Document Update (IAPD-U); this document can take three to
four weeks to develop and another four to six weeks for CMS to review and render a decision.
Next Steps
1. Work with NC Medicaid to develop a commitment letter that acknowledges NC Medicaid’s intent to leverage
90/10 Administrative funds covering its fair share of statewide HIE services.
2. Work with NC Medicaid to develop an IAPD-U request to support the Statewide HIE Network.
Commercial Payers: Seeking approximately $4.4 million
Key Considerations
• There is no single, authoritative source on the combined number of insured and managed lives per payer
for North Carolina.
• Based on data on market share provided in the attachments, NC HIE estimates that BCBS NC is North
Carolina’s largest insurer, with approximately 3 million members.
Proposed Allocation Methodology
• NC HIE seeks prepayment amounts from commercial payers based on the following step function:
• Step 1 (for each member up to 500,000 members) .............................. $0.50 per member/per yr
• Step 2 (for each member above 500,000 and up to 1 M members)..... $0.40 per member/per yr
• Step 3 (for each member above 1 M) ................................................... $0.30 per member/per yr
Next Steps
1. To refine the prepayment methodology, NC HIE needs authoritative data on insured and managed lives.
2. NC HIE will develop a pricing strategy that accounts for the different roles of commercial insurers, third
party administrators, and self-insured employers.
Hospitals: Seeking approximately $4.4 million
Key Considerations
• Amount sought per hospital could be based on a number of criteria (e.g., licensed beds, annual discharges,
gross operating revenue).
• NC HIE believes gross operating revenue to be the fairest mechanism to calculate charges.
• However, hospitals’ gross operating revenue on hospitals aren’t readily available, therefore for initial
modeling purposes, we propose using inpatient discharges as our base.
Proposed Allocation Methodology
• Proposed tiers (based on 2009 inpatient discharges) and number of North Carolina hospitals in each tier:
• Tier 1 (greater than 60,000 discharges).................. 5 systems
• Tier 2 (between 37,000 and 60,000 discharges).... 6 systems
• Tier 3 (less than 37,000 discharges)....................... 13 systems and 24 independent hospitals
• Proposed amount sought per tier:
• Tier 1 (greater than 60,000 discharges)........................$800,000 ($200,000 per system, per year)
• Tier 2 (between 37,000 and 60,000 discharges).......... $450,000 ($112,000 per system, per year)
• Tier 3 (less than 37,000 discharges)..............................$100,000 ($25,000 per system, per year)
Note: NC HIE anticipates that there will need to be a 4th Tier consisting of the smallest hospitals located in distressed,
underserved areas that will receive discounts for participation in the Statewide HIE Network.
• If 50% of the hospitals in Tiers 1 & 2, and 30% of Tier 3 hospitals prepay, NC HIE will receive $4.75 million.
• Tier 1 (3 organizations)...... $2.40 million
• Tier 2 (3 organizations)...... $1.35 million
• Tier 3 (10 organizations).... $1.00 million
Providers: Seeking approximately $1.2 million
Key Considerations
• The Finance Work Group has proposed that providers (whether employed, affiliated or independent) be
treated consistently.
• There is no authoritative source of data for number, size, or affiliation of practices in NC market. NC HIE’s
working estimates:
• NC Medical Society estimates there are approximately 22,000 physicians in North Carolina.
• Public information on North Carolina’s hospitals and physicians suggest:
• Carolinas Healthcare System employs 1,400 physicians.
• Novant has 1,100 physicians in its “medical group.”
• UNC employs 1,000 physicians on campus and 250 physicians in 25 practices off campus.
• The determination of who pays will be based on the physician’s affiliation.
• To account for economies of scale offered by larger institutions, NC HIE pricing will include both a
connection charge and a use charge. The connection charge will be a fixed fee, independent of
organizational size.
Proposed Allocation Methodology
• NC HIE will seek a minimum of $400 per physician for the prepayment option (on an annual basis, this
equates to $100 per year per provider)
• At $400 per physician, NC HIE would meet its prepayment goal if 3,100 physicians (14% of the total
physician population) chose to prepay.
Next Steps for Prepayment Plan
Adapt roll out strategy to reflect market stratification
• Recognize that prepayment will be difficult for smaller institutions
• Mid-July, NC HIE will have definitive information on its projected cash flow
• In Aug-Sept, NC HIE will seek prepay commitments
Use of Prepayment Funds for
An Incentive Pool
Creation of a Dedicated “Incentive Pool”
• Percentage of prepayment from commercial payers will be a restricted
grant to NC HIE which will be used to offset costs for hospitals in Tiers 2
and 3
Next Steps
• Determine percentage allocation of commercial payer prepayment to
set aside
• Develop details for implementation
Next Steps for NC HIE Staff and Finance Work Group
Next Steps
Tasks for NC HIE Staff
• Develop detailed cost projections
• Develop pricing models
Tasks for Finance Work Group
• Provide input on strategic direction of NC HIE financing plan
• Serve as sounding board for pricing and revenue options
• Assist in the identification of additional revenue sources
• Review workgroup membership and focus in light of NC HIE’s transition
into implementation phase
Public Comment
Board Actions Related to Finance
Board Decisions
On September 23, Board directs staff to develop more detailed cost estimate and description
and sequencing of HIE deployment. Board directs staff to address the following:
1. What will an effective policy and high-performing technical infrastructure cost to build and
2. What are the options for revenue and pricing?
3. What is the best approach to allocating funding most efficiently and effectively?
On November 17, after review of materials submitted in response to its September request,
Board directs staff to develop an option for “up front” revenue to support a state-of-the-art
system, and to reach out individually to key stakeholders to assess their support.
On December 16, Board supports the concept of up front financing option in which charges are
allocated based on stakeholder categories. It directs staff:
1. Investigate alternative pricing for hospital-affiliated practices owing to their technical and
business relationship with a hospital that may have paid for access to statewide HIE services
2. Expand the list of HIE participants and funders to include laboratories, pharmacies, etc
3. Consider additional value-added services (including administrative transactions) in light of the
broader health reform efforts
4. Refine the proposed approach through the NC HIE Finance Work Group

Finance Workgroup Presentation