A small organization that operates a massive database of Idaho medical records filed for bankruptcy on Friday, reporting it owes creditors $4 million and is defending itself in three lawsuits.
A Chapter 11 bankruptcy would allow the Idaho Health Data Exchange to continue operating while it pays creditors and conducts litigation, according to its bankruptcy attorney Matthew T. Christensen of the Johnson May law firm in Boise.
The health data exchange is a non-profit organization that provides a central repository for health records. It allows participating healthcare providers to see other patients’ records for individual patients – so, for example, a GP in Coeur d’Alene can access X-rays of his patient who was being treated for a broken bone in Nampa.
The IHDE currently lists 194 healthcare providers and organizations among its participants, including the largest healthcare systems in the country.
The Idaho Health Data Exchange was created in 2009 and relied primarily on government funding to modernize medical records infrastructure. For example, it received $5.9 million in federal funding in 2010 as the designated health information exchange for Idaho.
More recently, health data exchange has received millions of dollars in federal funding annually through the Idaho Department of Health and Human Services. That revenue stream ended when the HITECH Act, a 2009 law, expired last year, according to the executive director of the healthcare data exchange and its bankruptcy attorney.
New sources of income? ‘We’re working on it’
According to Hans Kastensmith, executive director of the data exchange and a managing partner at Capitol Health Associates, a consulting group based in Washington, DC, the data exchange currently has three employees and 10 to 12 outside contractors at one time
“We’ve put a lot of work into getting the company sized and moving to provide the service that they expect,” said Kastensmith.
When asked if the health data exchange had found new revenue streams to replenish its earnings, Kastensmith said: “We’re working on it. … We’ve been working to increase sales while reducing costs.”
Christensen said the health data exchange had “already restructured their approach and relied more on a subscription-based, user-fee-based[model],” which has been a “fairly stable” business model so far.
The exchange announced in May 2021 that it had received an $8 million grant from a funding firm’s philanthropic funding arm, Ethos Asset Management.
“IHDE and Ethos’ new partnership enables long-term financial stability in an increasingly volatile financial environment for health information exchanges,” said Jesse Meldru, finance director of health data exchanges, in the press release. “Changes to federal funding programs … result in a capital shortfall for health information sharing at the national level. This changing landscape creates instability in the market. This partnership will provide long-term financial support to IHDE and allow it to continue and enhance its innovative programs announced in late 2020 and into 2021.”
However, the organization is now defending itself against three lawsuits from companies that claim the exchange owes them money.
Insolvency follows lawsuits against IHDE
The bankruptcy filing of the data exchange shows that it owes money to several companies. Three of these companies are suing.
Cureous Innovations, a Maine software services company, is listed with a total claim of $788,544.
SPUR Catalyst Inc., using the company name SPUR Capital, is an Ohio-based company that sued the IHDE earlier this year. The bankruptcy filing states that SPUR’s claim amounts to approximately $331,311.
The IHDE also lists an $80,330 claim from vendor PointCare LLC, a Bay Area-based company. PointCare sued IHDE in Contra Costa County Superior Court last month, alleging the exchange stopped paying on a two-year $130,500 contract and still owes $85,350.
According to the file, the debts to Cureous and SPUR are disputed.
Christensen said Cureous Innovations claims it wasn’t paid in full for a three-year contract, but that IHDE believes it paid what it owed. Cureous Innovations sued in Ada County Court last year and won an interim order that essentially allowed the company to begin tracking the exchange’s assets before the court ruled on the lawsuit.
That pushed the stock market over the edge of bankruptcy protection. The bankruptcy will also stop the debt collection process for the time being, said Christensen.
“As a result of this litigation, there were some exceptional circumstances that made us want to protect (the IHDE and its services),” Kastensmith said in an interview Monday.
The IHDE’s most important asset is its database, Christensen said. The records stored and shared through this database belong to patients and/or healthcare providers, not IHDE, he said.