Idaho Health Data Exchange files for bankruptcy, with $4 million owed to creditors

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A small organization that operates a massive database of Idaho patient medical records filed for bankruptcy on Friday, reporting it owes creditors $4 million and is defending itself in three lawsuits.

Chapter 11 bankruptcy would allow the Idaho Health Data Exchange to continue operating while it pays creditors and works through litigation, according to its bankruptcy attorney, Matthew T. Christensen of the Johnson May law firm at Wooded.

The Idaho Health Data Exchange filed for Chapter 11 bankruptcy Aug. 12. Click or tap the image for the full 86-page document. (Courtesy of United States Bankruptcy Court, District of Idaho)

The Health Data Exchange is a non-profit organization that provides a centralized repository of health records. It allows participating healthcare providers to see each other’s individual patient records – so that, for example, a primary care physician in Coeur d’Alene can access the x-ray records of his patient who has been 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 state.

The Idaho Health Data Exchange was launched in 2009 and relied primarily on government funds to modernize health records infrastructure. For example, it received $5.9 million in federal funding in 2010 as the Designated Health Information Exchange for Idaho.

More recently, the Health Data Exchange has received millions of dollars in federal funding annually through the Idaho Department of Health and Wellness. That revenue stream ended when the HITECH Act, a 2009 law, expired last year, according to the health data exchange’s executive director and his bankruptcy attorney.

New sources of income? “We are working on it”

The data exchange’s staff currently includes three employees and 10 to 12 outside contractors at a time, according to Hans Kastensmith, executive director of the exchange and managing partner of Capitol Health Associates, a Washington-based consulting group, DC.

“We have worked hard to scale the business and keep it moving so it can deliver the service expected of it,” Kastensmith said.

Asked if the health data exchange has found new revenue streams to replenish its revenue stream, Kastensmith said: “We are working on it. … We worked to increase revenue while reducing costs.

Christensen said the health data exchange had “already sort of restructured how they did it and relied more on a subscription-based, user-fee (model)” which was a “pretty stable” business model so far.

The exchange announced in May 2021 that it had secured an $8 million grant from the philanthropic funding arm of a finance company, Ethos Asset Management.

“The new partnership between IHDE and Ethos enables long-term fiscal stability in an increasingly unstable financial situation for health information exchanges,” said Jesse Meldru, Chief Financial Officer of the exchange. health data, in the press release. “Changes to federal funding programs … are creating a nationwide capital void for health information exchanges. This changing landscape produces instability in the market. This partnership will provide long-term financial support to the IHDE and will allow it to continue and improve its innovative programs announced at the end of 2020 and until 2021.”

However, the organization is now defending itself against three lawsuits from companies that claim the exchange owes them money.

Bankruptcy follows legal action against IHDE

The data exchange’s bankruptcy filing shows it owes money to several companies. Three of these companies are complaining.

Cureous Innovations, a Maine software services company, is listed with a total claim of $788,544.

SPUR Catalyst Inc., using the trade name SPUR Capital, is an Ohio-based company that sued IHDE this year. The bankruptcy filing indicates that SPUR’s claim is approximately $331,311.

The IHDE also lists an $80,330 claim from provider PointCare LLC, a Bay Area-based company. PointCare sued IHDE in Contra Costa County Superior Court last month, alleging the exchange stopped making payments on a two-year, $130,500 contract and still owed $85,350.

Debts to Cureous and SPUR are in dispute, according to the filing.

Christensen said Cureous Innovations claims he was not paid in full for a three-year contract, but IHDE believes he paid what he owed. Cureous Innovations sued in Ada County Court last year and won a prejudgment order that essentially allowed the company to begin searching for the assets of the exchange, even before the court ruled on the lawsuit.

This pushed the exchange to the brink of needing bankruptcy protection. The bankruptcy also halts the debt collection process for the time being, Christensen said.

“There were extraordinary circumstances, based on this litigation, that caused us to do this, to protect (IHDE and its services),” Kastensmith said in an interview on Monday.

IHDE’s main asset is its database, Christensen said. Records stored and exchanged through this database belong to patients and/or healthcare providers, not IHDE, he said.

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