Monday, September 27, 2010

Reflections on Business Models

In commentaries on US policies to promote meaningful use of health information technologies and electronic health records, I have pointed out the importance of a system level view of infrastructures for health information exchange. Key to the development of such infrastructures is the underlying business model to assure nationwide integration and system sustainability. A number of papers on health care system business models are available from a variety of agencies:

A Strong State Role in HIE: Lessons from the South Carolina Health Information Exchange

(2010) AHIMA


HIEs provide the infrastructure for information exchange, including the business model, governance structure, operating principles, legal model, and technology model for the exchange of healthcare information among various organizations. HIEs and regional health information organizations (RHIOs) have struggled with development and sustainability. The causes of failures are varied, but a lack of a compelling value proposition for all stakeholders is often cited as the prevailing reason.1
The primary beneficiary from an HIE is often the patient, who contributes the least directly toward the HIE’s development and operational costs. Other vested stakeholders, such as payers and providers, all receive varying benefits and bear varying responsibilities for the costs. A major barrier in the development of HIEs then is the identification of a model that fairly and equitably distributes the costs and benefits among the various stakeholders. At the crux of this issue is whether HIEs should follow a private, market-driven model that requires the generation of profit and value for the participants, or if HIEs are a public good that requires public financing. RHIOs and HIEs typically rely on a mix of government and private grants in the start-up phase, with the expectation of self-sustainability in the future: Four categories of business models are: not-for-profit, public utility, physician-payer collaborative, and for-profit.

ICT for the Health Unit, Directorate General Information Society and Media, European Commission: Business Models for eHealth (2010)


The evidence suggests that a solid business model is required for developing and
implementing a value-creating and sustainable eHealth service. In particular, this business
model needs to map all key supporting activities, value chain relationships and
dependencies impacted by the introduction of an eHealth service. This state of affairs can
be achieved if a set of activities and steps are implemented.
First, the structuring and implementation of such business model requires strong senior
management involvement throughout the various phases of the design, development and
delivery of an eHealth service. More importantly, senior management should not just act
as a project or programme manager; instead, it should make sure that the eHealth system
that it is supporting is provided with the required funding throughout its entire
development and implementation phases. Essentially, senior management is expected to
have a clear vision of what its healthcare delivery organisation wants to achieve with a
specific eHealth service and system, and lead the required operational steps.
In addition, staff involvement is essential in designing a business model of an eHealth
service. They need to be given the opportunity to understand how the specific service is to
change their activity or role, and need to provide evidence for mapping their interactions
in order to see how the eHealth service is going to improve or modify them. All of these
activities are aimed at making sure that business models do not fall short of reflecting the
interactions of those actors who are to use them in their day-to-day professional activities.
A business model of a value-creating and sustainable eHealth system is a static entity. It
might change as a consequence of technological and organisational evolution. However, it
can evolve following an evaluation aimed at measuring the potential and current impact of
the eHealth system. This may require data collection concerning activity, costs and
benefits. It also involves the need to apply sensitivity analysis to assess different scenarios
through which it is possible to design or modify a business model. Although the literature
provides several eHealth evaluation models, their implementation requires strong senior
management and process management, since regular performance data needs to be
collected and examined in order to assess current performance and estimate future

US Regional Health Information Organizations and the Nationwide Health Information Network: Any Lessons for Canadians? D. Protti ElectronicHealthcare, 6(4) 2008: 96-103

There seems to be general agreement in the United States that a Regional Health Information Organization (RHIO) is a neutral, non-governmental, multi-stakeholder organization that adheres to a defined governance structure to oversee the business and legal issues involved in facilitating the secure exchange of health information to advance the effective and efficient delivery of healthcare for individuals and communities. The geographic footprint of an RHIO can range from a local community to a large multi-state region. As regional networks of stakeholders mature, they often find the need for a formal independent organizational and governance structure (i.e., an RHIO) with systems to ensure accountability and sustainability for the benefit of all stakeholders. Experts maintain that RHIOs will help reduce administrative costs associated with paper-based patient records, provide quick access to automated test results and offer a consolidated view of a patient's history. The terms RHIO and Health Information Exchange (HIE) are often used interchangeably though most would see HIE as a "concept" relating to the mobilization of healthcare information electronically across organizations within a region or community as opposed to an "organization." Typically, an HIE is a project or initiative focused around electronic data exchange between two or more organizations or stakeholders. This exchange may include clinical, administrative and financial data across a medical and or business trading area. HIEs may or may not be represented through a legal business entity or a formal business agreement between the participating parties. Local Health Information Infrastructure (LHII) is a term occasionally used synonymously with RHIO. LHII was originally termed by the Office of the National Coordinator of Health Information Technology (ONCHIT) to describe the regional or local initiatives that are anticipated to be linked together to form an envisioned National Health Information Network (NHIN). The NHIN describes the technologies, standards, laws, policies, programs and practices that enable health information to be electronically shared among multiple stakeholders and decision makers to promote healthcare delivery. When completed, the NHIN will provide the foundation for an interoperable, standards- based network for the secure exchange of healthcare information in the United States.

eHealth Initiative (2007): Health Information Exchange: From Start-up to Sustainability

University of Copenhagen Masters Thesis (2009):

Behind the Internet Business Models: An E-health Industry Case

OECD International Futures Project on
“The Bioeconomy to 2030: Designing a Policy Agenda”

Health Biotechnology:
Emerging Business Models and Institutional Drivers (2008)

Up until today, two business models have been dominant within the application of
biotechnology for human health, or what is called health biotech in this report. One is the
classical biotechnology model. In this model, scientific discoveries and technological
inventions have been quickly developed within entrepreneurial firms, usually based upon
venture capital. They compete through their specialized scientific knowledge, often sold to
large companies, and they also compete through their flexibility, especially quick
commercialization of new fields. The other dominant business model is that of the large,
vertically integrated company. These large firms have integrated everything inside the
boundaries of the firm, from research and development (R&D) to production to marketing
and after sales monitoring. Firms in pharmaceuticals have competed through finding the
next ‘blockbuster drug’ and those in medical devices have also competed through
developing specific technologies and devices for large numbers of customers.
The report argues that four institutional drivers will form a very different context to deliver
human health care. Those four institutional drivers for change are 1) Scientific and
technological advances; 2) Public research and the public-private interface; 3) Public policy,
institutions and regulation; and 4) Demand and consumers.

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