The National Association of State Chief Information Officers (NASCIO) is urging state CIOs who are developing health information exchanges (HIEs) to improve their business strategy. That strategy has to generate revenue to cover operational costs and provide sustainability for these exchanges, before the public funds that they have already received run out.

In its latest brief, Sustainable Success: State CIOs and Health Information Exchange, NASCIO points out that the State Health Information Exchange Cooperative Agreement Program alone has distributed nearly $550 million in funding.

State-run HIEs are fundamental to the vision of a new healthcare delivery system that electronically exchanges patient data securely among providers, payers, and other healthcare stakeholders, and their numbers have grown substantially, according to NASCIO. In July 2010, there were approximately 37 public health information exchanges, now there are 67. The number of private exchanges has increased from 52 to 161.

As CIOs prepare to implement a data infrastructure that includes budgeting for data services, maintenance, and upgrades, the report says they have to also plan for the unexpected with disaster backup systems. States should likewise prepare to share the cost of common health IT components among stakeholders.

[Legally, electronic health records are double-edged swords: They protect clinicians from malpractice litigation but also put them at greater risk. See Will Your EHR Land You In Court?]

"State-run HIEs will also need to anticipate the costs associated with hosting databases and any expenses needed for routine maintenance and upgrades in legacy technologies. States may choose to procure these services through a third-party vendor, but the hosting services will still need to be added into the overall costs for maintaining an HIE. Many state CIOs have already started to explore cloud options in search of cost savings, scalability, and many other benefits," the document said.

"The health information from states will need to be secure and, because of the vast amount of data, have the ability to scale quickly. State CIOs are already adopting cloud service models in state government and HIE is another area that should be explored by policy officials," Chad Grant, NASCIO's senior policy analyst, told InformationWeek Healthcare.

Among state-run HIEs, two revenue models are being considered: the transaction fee and the subscription fee model. In the transaction fee model, HIEs will charge for each set of data that is sent or received. One benefit of a transaction fee model is with increased transactions, there will be a corresponding increase in revenue. However, more transactions may require more monitoring, which will increase the administrative burden of tracking and recordkeeping, the document said.

The subscription fee model offers a predetermined level of access to data, which is set for those providers and other users of the system. A weekly, monthly, or annual subscription rate helps to maintain a consistent revenue stream for the HIE. The subscription model could lower costs if more participants use the HIE's service.

Some HIEs, such as the Utah Health Information Network, HealthBridge, and the Community Health Information Collaborative, are using a combination of the two models.

The NASCIO document noted that federal funds targeted toward the development of state exchanges have been generous, but will not be enough to keep HIEs operational in the years ahead. Furthermore, developing a sustainable model is vital to the long-term success of these exchanges.

Not every application is ready for the cloud, but two case studies featured in the new, all-digital issue of InformationWeek Healthcare offer some insights into what does work. Also in this issue: Keeping patient data secure isn't all that hard. But proposed new regulations could make it a lot harder. Download it now. (Free with registration.)