HIEs must understand the costs they need to cover with their revenue streams.  If they do not understand these costs, or are unaware of them, they will not succeed.

Startup and Implementation Costs
Two of the largest costs that HIEs must consider are startup and implementation costs.  Large capital investments are needed in order to create the infrastructure necessary for an HIE to function.  Many HIEs receive grant funding for their startup costs from government agencies, foundations, philanthropists, or seed money from key stakeholders. Other HIEs take loans for the initial investment funds and incur costs for repayment of the loan funds, as well as the interest accrued on the loans.  In addition to the large capital investments needed, the general and administrative costs associated with implementing a new HIE have to be taken into account.  Many HIEs need additional staff in order to meet tight timeframes required by the State HIE Cooperative Agreement and to show a return on investment (ROI) to stakeholders.  In many cases, consulting groups are retained to bring expertise that the HIE staff does not have. Furthermore, HIEs use consultants to assist in architectural design, data center development, and creation of the legal frameworks required by the Health Insurance Portability and Accountability Act (HIPAA), and in accordance with state laws and regulations.  The state-run HIEs also have the additional consulting expense of creating the state strategic and operational plans; these are required to be submitted to the Office of the National Coordinator, under the State HIE Cooperative Agreement program.  Click here to access a list of the ONC approved plans.

Hosting Services and Data Service Costs
Many community and state-run HIEs include centralized technology and/or databases.  As a result, most HIEs will incur costs for hosting services and data services, even if a third party is providing the hosting services.  There are ongoing maintenance and upgrade costs, as well as the potential need for back-up systems and hot sites, off-site locations where services can be relocated to in the event of a disaster.

Administrative and Operational Costs
While the startup and implementation costs are large, the ongoing administrative and operational costs can be a much larger burden on HIEs.  Administrative costs include:  leases, full time employees, consultants, and marketing.  Operational costs include licensing and maintenance fees, hardware and software upgrades, insurance/liability fees, and legal fees.  The startup and implementation costs, administrative and operational costs, and the potential hosting services and data center costs can run into the millions.