There are many different methods for generating revenue and ultimately achieving sustainability.  However, each sustainability model has pros and cons.  Therefore, HIEs should use a robust process to identify the right mix of funding sources, while simultaneously gaining stakeholder support.  By following the process below, HIEs can find the mix that satisfies the unique conditions surrounding each HIE.

A step-by-step process can use eight (8) integrated phases to find the sustainability model that satisfies the wants and needs of any particular HIE.  These phases include:

• Phase 1 – Stakeholder Engagement
• Phase 2 – Research and Analysis
• Phase 3 – Principles and Stakeholder Value Propositions
• Phase 4 – Capital and Operating Strategies
• Phase 5 – Risk Mitigation
• Phase 6 – Financial Modeling and Scenario Development
• Phase 7 – Stakeholder Testing and Modifications
• Phase 8 – Adoption and Implementation

Each phase is closely integrated with the other phases; the phases frequently overlap.  For ease of understanding, each phase will be described separately below.

Phase 1 – Stakeholder Engagement
It is critical to sustainability that the key stakeholders are engaged from the beginning of the process.  Therefore, identification of the key stakeholders is a fundamental requirement.  These stakeholders will usually include the major hospital systems; the primary payers, including Medicaid; state and local government; public health organizations; and physician representatives.  Success factors for this phase include:

• Active and meaningful engagement of the key stakeholders, as shown by participation in the development of the HIE structure and agreement to help fund the HIE.
• Development of trust between stakeholders, as shown by a willingness to share financial and operational data and information.

Phase 2 – Research and Analysis
There is wealth of information about HIE available to provide a solid background of successes and failures.  Several national organizations including eHealth Initiative, Health Information Management Systems Society (HIMSS), Office of the National Coordinator (ONC), Center for Medicare and Medicaid Services (CMS), National Governors Association (NGA), National eHealth Collaborative (NeHC) and the Markle Foundation have published numerous articles on HIE.  In addition, all states and territories have prepared strategic and operational plans for building an HIE and many vendors have published research papers. Success factors for this phase include:

• Applying lessons learned from other HIE efforts around the country to the local effort.
• Obtaining relevant use cases from stakeholders supporting the sustainability of the HIE.
• Reporting of the research to stakeholders and receiving feedback on the relevancy to the local HIE effort.

Phase 3 – Principles and Stakeholder Value Propositions
It is important to understand the value of participation for each stakeholder in the HIE.  The probability of successful sustainability will be greatly improved, if the HIE can directly relate its value back to each stakeholder and show a positive return on investment over time for each participant.  Success factors for this phase include:

• An adopted set of guiding principles for building and sustaining the HIE.
• A description of the value propositions for each stakeholder.
• Connection of the use cases from phase 2 to the value propositions identified in this phase.

It is best to discuss how the stakeholders want to establish the HIE before funding becomes an issue.  Questions such as “does every participant pay something?” or “who is on the Board of Directors?” are important.  Developing a set of guiding principles can help alleviate difficult discussions later in the process.

Phase 4 – Capital and Operating Strategies
Funding can come from many sources.  Capital funding to build and launch the HIE will be different from the operational funding that is likely to come from participants, in some form.  It is important to identify the sources for each type of funding, determine the probability of obtaining that funding, and develop a strategy to secure the funding required for both building and operating the HIE.  Success factors for this phase include:

• Determination of the funding required to build as well as operate the HIE until it is sustainable on its own merits.
• Identification of the various sources of funding and the requirements to secure funding from each proposed source.
• Stakeholder support for the funding strategies.

Phase 5 – Risk Mitigation
All projects entail risk.  Some risks are significant and some are minor.  Identifying each potential risk and determining a mitigation strategy is essential to reach sustainability.  In addition, it is important to measure the costs and benefits of each mitigation strategy moving towards sustainability.  Success factors for this phase include:

• Clear definition of each potential risk related to sustainability, for example a lack of data in the exchange can threaten its sustainability.
• Prioritization of each risk to determine where mitigation strategies are critical to sustainability.
• Analysis of the costs and benefits of each mitigation strategy to determine where resources should be focused to ensure sustainability.

Phase 6 – Financial Modeling and Scenario Development 
Developing a flexible financial model will provide decision makers with the capacity to test various assumptions regarding sustainability. Concurrent with the development of the financial model, it is important to identify potential scenarios for how the HIE will develop and grow.  Together, decision makers can model the consequences of various scenarios on the issue of sustainability. During this phase, HIEs should consider the potential constraints they may face, including:

• Balancing the requirements of the ONC HIE Cooperative Agreement with the HIE’s business model (only applicable to HIEs operating under the Cooperative Agreement).
• Considering sustainability within and across state boundaries.
• Considering the limitations or constraints that 501(c)3 status may impose on opportunities for revenue generation.

Success factors for this phase include:

• Design, test, and adopt a flexible financial model.
• Realistic scenarios are created based on various likely assumptions.
• Scenarios are tested against the financial model to determine the correct strategy for sustainability.

Phase 7 – Stakeholder Testing and Modifications
Once the best financial model is defined, it needs to be tested with the stakeholders for input and feedback.  As the stakeholders have been involved in the process since the beginning, their input will already have been built into the different scenarios.  However, stakeholders generally do not fully commit to something, until they see the final sustainability model.  Therefore, once developed, the sustainability model needs to be tested and modified, as required and forecast financial returns over a period of multiple years. The sustainability plan should include how the HIE will be sustainable after federal funding ceases.  Success factors for this phase include:

• The desired sustainability model is presented to the key stakeholders and feedback is obtained.
• Modifications are made to the model as required.
• Stakeholders approve the sustainability model.

Phase 8 – Adoption and Implementation
Once the sustainability model is approved and adopted, the HIE can move forward with implementation.  It is important to have the key stakeholders publically endorse the model, agree to participate, and make a firm financial commitment to the HIE.  At this point, the HIE can move forward.  Success factors for this phase include:

• Formal stakeholder approval.
• Communication of the approval to all stakeholders and the general public.