VITL National Benchmark Report

Capitol Health Associates has been retained by the Vermont State Legislature, Health Care Reform Commission to conduct an examination of the state of healthcare information technology and active IT initiatives in Vermont. In an effort to produce a comparative view of the Vermont Information Technology Leaders (VITL) initiative with like projects across the nation, Capitol Health Associates (CHA) has established a national benchmark derived from the findings of the eHealth Initiative (eHI) Second Annual Survey of State, Regional and Community-Based Health Information Exchange Initiatives and Organizations. ^{^[1]} The eHealth Initiative is a nationally recognized association focused on the advancement of healthcare information technology. A complete copy of this document is included as an appendix to our report.

The benchmark established, compares VITL to 109 Health Information Exchange (HIE) initiatives in six stages of development across the United States, and utilizes 135 points of comparison. We believe the benchmark produces a matrix for comparison as VITL continues to grow and will ultimately be of importance as an evaluation tool for the progress of the continuing endeavor.

CHA is publishing this report as an INITIAL SET of FINDINGS due to our perceived need of the Vermont State Legislature to make funding decisions and draft legislation in the near future. This set of findings is subject to change and will be updated in the course of our investigation. A final set of findings will be published in our comprehensive report on or about April 13, 2006.

General Findings

On January 12, 2006 CHA conducted initial interviews with VITL President Greg Farnum and its Chairman John Evans respectively. During the course of the interviews we conducted the first round of the benchmarking examination with Mr. Farnum and specific questions were asked of Mr. Farnum and Mr. Evans as to the direction, structure, and progress of the VITL initiative.

CHA compared VITL to both the startup and advanced categories contained in the eHI survey; in general, we found that VITL is, for the most part, on par with the other 109 respondents in their organizational structure and with the problems faced in establishing such an association. The VITL organization displays a level of immaturity in its long term business strategy and planning which is somewhat to be expected and appears to be the norm among early stage initiatives. We find the structure of the board of directors and the subsequent committees to be well thought out and on the mark with more advanced projects and ahead of a majority their counterparts in startup phases. VITL governance is made up primarily of volunteers donating their time and effort, board and committee meetings are reported to be well attended, and staffed with dedicated individuals. The group does however lack primary and specialty care physicians as members, it is reported by management that it is difficult to recruit these members due to time commitments that reflect a loss of revenue in their practices.

While conducting the benchmarking examination it became apparent that VITL is focused on it’s near term objective of completing the medication history pilot project, and working out the issues of security, privacy, infrastructure, and adherence to national standards. What also was apparent was the lack of a professional business plan as answers to questions concerning long term objectives were not as concise as those centered on present activities. Clearly, the medication history pilot is an important milestone for the success of the organization, however as a startup venture, it is equally important to formally develop a plan for the management and future direction of the enterprise.

Overall we believe VITL to be well established for its respective stage of development and on track to complete its mission, while experiencing expected delays and obstacles typical of a project of this magnitude.

Specific Findings and Recommendations

Funding

VITL has experienced the same problems with various levels of funding as have 91% of the 109 projects nationwide. In the case of startup funding; The State of Vermont has supplied 200,000.00 which placed VITL ahead of many projects in the advanced and startup stages which 29% and 17% respectively reported that State funding was made available to them at startup. A majority of HIT initiatives report that federal funding played a significant roll in the start up phase. 59% of advanced and 23% of early stage projects utilized federal funds, a majority of which were in the form of grants from The US Department of Health and Human Services, Agency for Healthcare Research and Quality (AHRQ). Though VITL has been unable to obtain Federal funding, three such projects were funded by AHRQ in Vermont, Southwestern Medical Center (SWMC), Springfield Hospital and Mt. Ascutney Hospital in essence paving the way for VITL to integrate information from and across these three enterprises. A recent visit to SWMC reveals that they received a 1.2 million dollar grant to establish a Regional Health Information Organization (RHIO) for the Healthcare Systems service area. The project is well underway and is in an advanced stage of development. SWMC is committed to VITL and is considering its contribution of healthcare data while currently offering advice and guidance. The numbers show that the State of Vermont is acting in an independent, forward thinking manner in this area of healthcare, placing itself in the top 25% of States in the effort to foster healthcare information exchange.

The Legislature appropriated 500,000.00 in additional funding with a requirement that VITL seek matching funds from other sources for its release. This issue has proven difficult for VITL as it has for many of the other projects in the benchmark study. Of the 109 RHIOs only 25% report that they have received money from hospitals, 21% from philanthropic grants, 12% from purchasers of healthcare and 11% from health plans. To date only a small amount of money has been committed from VITL stakeholders and healthcare concerns in Vermont. It is apparent that VITL, as well as their counterparts, face significant challenges in raising funds in the private sector. Without continued support from the State and some support from the stakeholders, along with success in obtaining Federal funds VITL is likely to face serious difficulties in its attempt to become a sustainable entity.

With assistance from the Legislature, VITL embarked on a fundraising effort aimed at acquiring both federal and local funding. The initial local fundraising effort appeared to utilize a shotgun approach and was lacking in its design, execution and follow-up. CHA believes this issue is a product of two items; the first and foremost is the lack of a business plan which, within its body should contain a detailed sales, marketing and fundraising plan. The second is the lack of a Director or Vice president of Marketing and Sales to establish and carry out the fundraising activities and promote VITL’s product. These two positions are typically staffed by different people with specific skill sets, due to the startup nature of this venture, as with many startups, one individual with broader skills could fill the position. CHA believes that VITL must add this position to achieve the level of success intended.

The Federal fundraising effort was focused on obtaining a federal earmark with the assistance of Senator Patrick Leahy. VITL proceeded in a professional manner working with the Leahy staff to write language in the Labor, Health and Human Services Sub-Committee on Appropriations Bill before the 109^th Congress. The attempt was unsuccessful due to budget issues in Washington contributing to the removal of all earmarks for any concerns. This was typical in many appropriation bills in the US Congress for FY06 due to the pressures of natural disaster relief and the war in Iraq and Afghanistan. VITL has been recently contacted by Senator Leahy’s staff and has been informed that the effort is reinitiated for FY07. In response, CHA recommends that VITL engage all Vermont Federal Legislators in this effort by obtaining support for this initiative in the form of a joint letter from the entire Vermont delegation and any other appropriate action that the individual Members of Congress would agree to. We would also suggest that a representative of VITL be present at any markup of legislation that concerns them and to monitor the bill closely as it goes through committee.

In our opinion, the State of Vermont and VITL should take on the relationship of Venture Capitalist to Entrepreneurial Startup Venture. The State should require VITL to produce a formal business plan including a use of proceeds statement and submit it to the Legislature for its consideration. The Legislature, as should any investor in VITL, measure the plan and management on its merits and act accordingly in the areas of funding and support. This method will give both entities a valuable tool with which to guide the formidable decision and development process. It will also provide a baseline to appraise performance and achievements, while assisting in managing the enterprise, identifying deviations, and solving problems.

Management

Nationally, Regional Health Information Organizations governing bodies are made up of a combination of representatives from Hospitals at 61%, Primary and Specialty Care Physicians at 48% and 35% respectively. Community Health Centers (CHC) are members in 33% of the organizations, Employers, Public Health, Patient and Consumer groups range from 21 to 27%. Based on these figures VITL is well within the norm, but could benefit from the recruitment of Primary and Specialty Care Physicians and the addition of a representative from Vermont’s CHCs.

Medication History RFP

VITL recently conducted a Request for Proposal (RFP) solicitation for the selection of an information technology vendor to support the HIE. CHA found that the process was handled in a professional manner and VITL was thorough in their search for available products and services having received bids from 11 nationally recognized vendors several of which having received prime or subcontract awards from the Office of the National Coordinator for Health IT (ONCHIT) to support the National Health Information Network (NHIN).

IRS Rule 170

Due to VITLs status as a 501(c)(3) classified non profit organization we recommend investigation of IRS Rule 170 which may allow for increased valuations on donations. CHA makes no legal representation that VITL is eligible to utilize Rule 170 we are simply suggesting that investigation is warranted. We have included background information on Rule 170 reprinted from the United States Internal Revenue Service public website.

BACKGROUND

Section 170(a) allows a deduction for a charitable contribution. Generally, if a donor makes a charitable contribution of property, the amount of the deduction is the fair market value of the property at the time of the contribution, reduced as provided in § 170(e) and § 1.170A-4 of the Income Tax Regulations. For certain types of property, § 170(e)(1)(B) reduces the amount of the deduction by the amount of gain that would have been long-term capital gain if the donor had sold the property at its fair market value, determined as of the time of the contribution. Under § 170(e)(1)(B)(iii), this reduction applies in determining a donor’s initial deduction for a charitable contribution of “any patent, copyright (other than a copyright described in section 1221(a)(3) or 1231(b)(1)(C)), trademark, trade name, trade secret, know-how, software (other than software described in section 197(e)(3)(A)(i)), or similar property, or applications or registrations of such property.”

Subject to the terms and limitations of § 170, § 170(m) allows a donor of qualified intellectual property to deduct, in the year of contribution or in subsequent taxable years, additional amounts based on a percentage (specified in § 170(m)(7)) of the qualified donee income received by or accrued to the donee with respect to the qualified intellectual property. For this purpose, “qualified intellectual property” is property described in § 170(e)(1)(B)(iii) other than property contributed to or for the use of private foundations as defined in § 509(a) (with certain exceptions as described in § 170(b)(1)(E)). “Qualified donee income” is any net income properly allocable to the qualified intellectual property (as opposed to the activity in which the intellectual property is used) that is received by or accrued to the donee organization during the year. Qualified donee income does not include any income received by or accrued to the donee organization after the earlier of the tenth anniversary of the date of the contribution or the expiration of the legal life of the qualified intellectual property. See § 170(m)(5) and (6). Additional deductions are allowed, however, only to the extent that the aggregate of the specified percentages of qualified donee income exceeds the initial deduction claimed by the donor. See § 170(m)(2).

To qualify for the additional deductions, the donor must inform the donee at the time of the contribution that the donor intends to treat the contribution as a qualified intellectual property contribution (the notification requirement). See § 170(m)(8).

Section 6050L(b), as amended by the Act, requires a donee (which may not be a private foundation described in section 170(e)(1)(B)(ii)) that receives notification from the donor to make a return with respect to a qualified intellectual property contribution for each taxable year of the donee showing the amount of any qualified donee income. Section 6050L(c) requires the donee to provide a copy of the return to the donor. See also § 1.6050L-2T of the Procedure and Administration Regulations (May 23, 2005); Prop. Treas. Reg. § 1.6050L-2 (May 23, 2005). The amount of net income taken into account by the donor may not exceed the amount of qualified donee income reported by the donee under § 6050L. _{Reprinted from http://www.irs.gov/irb/2005-23_IRB/ar10.html}

Highlighted Benchmark Categories

CHA has included in this report a table on pages seven thru twelve showing how VITL scored on the 135 points of comparison derived from the eHI study. Below are highlights of data we gathered in our interviews with VITL.

Stage of Development

eHI measured the stage of development of the projects on a scale of 1 to 6, six being the most advanced. The VITL organization is a stage three organization being defined by eHI as “Transferring vision, goals and objectives, to tactics and business plan”. “Defining needs and requirements, securing funding”. This definition accounts for 16% of the groups surveyed. There are 12 RHIOs in stage six of development, 13 in stage 5 while a clear majority are only slightly more advanced than VITL making up 40% of all projects that are underway.

Key Drivers

Not surprisingly, the key drivers for VITL were consistent with the majority of programs with close to 90% reporting that provider inefficiencies due to lack of data was the main reason for adoption. The second most significant driver was reported to be the raising cost of healthcare with 65% reporting. Availability for grant funding and increased national attention scored in the 40% range, Public health surveillance and demand for performance information ranked from 22% to the high thirties. We feel this finding to be significant in that it would suggest that the United States Healthcare System is beginning to form a consensus around the value of health information systems, clearly a departure from previously displayed actions and adoption rates.

Security of Data

In the advanced group of stages 4 to 6, 41% stated that they have HIPAA compliant policies in place, while a greater number of 59% which includes VITL, have drafted or enacted data security policies that exceed HIPAA requirements. This finding clearly shows the advanced nature of VITLs thinking when it comes to security matters and places them clearly ahead of their category in this issue. A large majority of RHIOs have policies and procedures completed, with VITL reporting the same points to be in the planning process:

· Contracting with HIE Participants

· Authorization of Users

· Documented Usage Procedures

· Terms of Use

Legal Structure

VITL ranked with the advanced group on this issue, the top 60% of mature Regional Health Information Organizations possess a legal structure of an established corporation which compared to the other 40% being classified as a “loose collaboration”. VITL along with 70% of advanced programs is a 501(c)(3) designated not for profit organization, with only 8% of organizations established as a for profit, Limited Liability Corporation and 14% acting as a virtual organization.

Challenges to Success

A strong majority of 91% of all stages of RHIOs reported that the largest barrier to entry was securing up front funding. Following in a close second is the ability to establish a sustainable business model with 84% experiencing difficulties, while accurately linking patient data and organization & governance issues ranked 82% and 80% respectively and engaging health plans was 5^th at 74%. VITL compared itself to the funding and sustainable business model concerns but reported that is had less trouble than the majority with issues concerning governance and health plans.

Tables of Findings

In the following tables CHA matches VITL responses to the 135 points of comparison. It is important to read the eHI survey to establish a baseline to interpret the findings listed in the tables below. In table 9, many answers were somewhat undefined, this is an expected outcome. Accordingly, we have marked these in red as follow up items to be further discussed during the development of a health information technology plan for establishing a statewide, integrated electronic health information infrastructure in Vermont, which is the next required deliverable defined by the 2005 Budget Bill (Sec. 277. 18 V.S.A. § 9417).

Table 1: Number of initiatives in various stages

eHI Survey Benchmark	VITL	Stage 6	Stage 5	Stage 4	Stage 3	Stage 2	Stage 1
Stage of Development	Stage 3	11.99	13.08	40.33	16.35	15.26	13.08

Table 2: Key drivers for adoption ranked by importance

eHI Survey Benchmark	Sub Categories	VITL	All	Adv	Early
Key Drivers	Provider inefficiencies lack of data	High	83.93
	Raising Healthcare Costs	High	65.4
	Availability of Grant Funding	Med	47.96
	Increased National Attention	Low	40.33
	Public Health Surveillance	Low	31.61
	Demand for Performance info	No	22.89

Table 3: Data Security ranked by percentage with policies in place

eHI Survey Benchmark	Sub Categories	VITL	All	Adv	Early
Security of Data	Policies in place
	HIPAA compliant	Yes		41%
	Beyond HIPAA	Yes		59%
	Contracts w/HIE participants	Planned		83%
	Authorization of Users	Planned		92%
	Covers Procedures	Planned		89%
	Terms of Use	Planned		87%

Table 4: Legal structures of entities ranked by percentage of sum

eHI Survey Benchmark	Sub Categories	VITL	All	Adv	Early
Legal Structure	Conceptual			0%	9%
	Loose Collaboration			40%	45%
	Established Corporation	X		60%	44%

Type of Structure	Non Profit	X	70%
	LLC for Profit		8%
	Virtual		14%

Table 5: Support of quality and safety ranked by percentage of total

eHI Survey Benchmark	Sub Categories	VITL	All	Adv	Early
Support Quality/Safety	Enrollment / Eligibility	No		43%
Current and Planned	Repository	No		43%
in next 6 months	Clinical Documentation	No		40%
	Referral / Consult	No		38%
	Results Delivery	Yes		36%
	Alerts	No		34%
	Reminders	No		24%

Table 6: Role of Stakeholders in Governance ranked by percentage of participation

eHI Survey Benchmark	Sub Categories	VITL	All	Adv	Early
Role of Stakeholders	Hospitals	Yes	61%
In Governance	Primary Care Physicians	No	48%
	Health Plans	Yes	37%
	Specialty Care Physicians	No	35%
	CHCs	No	33%
	Employers HC Purchasers	Yes	27%
	Patient or Consumer Groups	Yes	26%
	State Public Health Department	Yes	21%
	Quality Improvement Org	Yes	16%
	HIT Suppliers	No	12%
	School Based Clinics	No	8%
	Independent Labs	No	7%
	PBM	No	5%
	Pharmacies	No	5%
	Independent Radiology	No	4%
Lead Organization HIE	Existing HC Based Collaborative	Yes	43%	44%	41%
	Academic Medical Center		24%	22%	28%
	Existing HIC Initiative	X	12%	15%	8%
	Business Coalition		5%	7%	3%
	State		6%	3%	10%
	Other		10%	9%	10%

State Involvement	State Direct Participation	Yes	53%
	Medicaid	Yes	35%
	State as Purchaser	No	20%
	Public Health Department	Yes	49%
	Start up Funding	Yes	24%	29%	17%
	Sustainment Funding	Yes		24%

Table 7: Challenges faced in start up ranked by percentage of total

Red indicates an undefined or questionable answer

eHI Survey Benchmark	Sub Categories	VITL	All	Adv	Early
Challenges Faced in	Securing Up Front Funding	Medium	59%
Start up of HIE	Accurately Linking Patient Data	Low	33%
Significant Challenges	Engaging Health Plans	Low	33%
	Sustainable Business Model	High	31%
	Organization & Governance Issues	Low	21%
	Technical Issues	Low	19%
	Engaging Purchasers	High	18%
	Privacy and Security	Low	16%
	Engaging Hospitals	Low	14%
	Engaging Practicing Clinics	High	14%
	Other Legal Issues	Medium	12%
	Engaging Labs	Low	12%

Challenges Faced	Securing Up Front Funding	Medium	91%
Very Difficult to Moderate	Sustainable Business Model	High	84%
	Accurately Linking Patient Data	Low	80%	73%	90%
	Engaging Health Plans	Low	74%	35%	30%
	Organization & Governance Issues	Medium	82%

Table 8: Revenue sources ranked by percentage of total

eHI Survey Benchmark	Sub Categories	VITL	All	Adv	Early
Revenue Sources	Federal Grants / Contracts	None	46%	59%	23%
Start Up Funding	Advances From Hospitals	None	25%
	State/Local Gov't Contracts	Yes	24%	29%	17%
	Philanthropic Grants	None	21%
	Advances From Purchasers	None	12%
	Federal Grants / Contracts	None	12%
	Advances From Health Plans	Limited	11%
	Manufacturers/Vendors	Yes	8%
	Advances from Labs	None	6%
	Loans	None	4%
	Hospital ASSN	Yes
Financial Support for	Federal Grants / Contracts	Planned		48%
Ongoing Operations	Hospitals	Planned		38%
	Physician Practices	Planned		33%
	State or Local Government	Planned		24%
	Public Health	Planned		19%
	Philanthropic	Planned		16%
	Labs	Pay Them		15%
	Private Payers	Planned		15%
	Public Payers	Planned		15%
	Purchacers	Planned		9%
	Manufacturers/Vendors	Planned		7%
	Pharma	Planned		2%

Table 9: Functionality & data supported by RHIO ranked by percentage of total

VITL response ranked by 3 planned phases of project development. Red indicates envisioned but subject to future planning, “L” depicts limited deployment.

eHI Survey Benchmark	Sub Categories	VITL	All	Adv	Early
Support Quality/Safety	Enrollment / Eligibility	2		61%
Current and Planned	Repository	1		64%
	Clinical Documentation	2		69%
	Referral / Consult	3		60%
	Results Delivery	1		56%
	Alerts	L1		55%
	Reminders	L1		61%
Support of PH / Safety	Disease Management	L1		32%
	Quality Improvement	0		27%
	Public Health Case Mgt	1		25%
	Surveillance	0		20%
	Public Health Lab Reports	0		14%
Planned Functionality	Patient/Provider Com other	2		12%	3%
Provider Patient Coms	P to P email	0		10%	3%
	P to P Clinical Data	0		6%	3%
	Direct Patient Access to Data	3		6%	3%
Type of Data exchanged	Outpatient Episodes	3		63%
by advanced programs	Lab	1		60%
now or in the next	Enrollment / Eligibility	3		59%
6 months	Outpatient Lab	1		57%
	ED Episodes	0		50%
	Inpatient Diagnosis/Procedure	0		50%
	Pathology	0		50%
	Outpatient Prescriptions	1		49%
	Radiology	2		49%
	Claims Pharm/Med/Hospital	1		48%
	Dictation/Transcription	0		46%
	Cardiology	0		42%
	Retail Pharmacy	1		36%
	Pulmonology	0		36%
	Patient Reported Data	0		35%
Use of National Data	HL7	1		76%
Standards	LOINC	1		41%