Idaho State-Designated Health Information Exchange Files for Bankruptcy

Idaho’s state-designated health information exchange (HIE) has filed for bankruptcy, reporting it owes creditors $4 million and is defending itself in three lawsuits, according to The Idaho Capital Sun.

Chapter 11 bankruptcy would allow Idaho Health Data Exchange (IHDE) 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.

Launched in 2009, IHDE has operated mainly on government funds intended to modernize health data sharing infrastructure. For instance, it received $5.9 million of federal funding in 2010 as the state-designated HIE.

More recently, the HIE received millions of dollars in federal funds per year through the Idaho Department of Health and Welfare. That flow of income ended when the HITECH Act expired last year, according to the HIE’s executive director and its bankruptcy attorney.

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

“We had done a lot of work to right-size the company and keep it moving so it can deliver the service that’s expected of it,” Kastensmith told the news outlet.

Kastensmith said that the HIE is working on finding new revenue sources to replenish its income stream while reducing costs.

Christensen said IDHE had “already sort of restructured how they were proceeding and relying more on a subscription-based, user fee-based (model),” which was a “fairly stable” business model so far.

In May 2021, the HIE announced that it had secured an $8 million grant from the philanthropic arm of a financing firm, Ethos Asset Management.

“IHDE’s and Ethos’s new partnership allows for long-term fiscal stability in an increasingly unstable financial situation for health information exchanges,” Jesse Meldru, the health data exchange’s finance director, said in the news release.

“Changes to federal funding programs … are producing a void in capital nationally for health information exchanges,” Meldru continued. “This changing landscape is producing instability in the market. This partnership will provide long-term financial support for IHDE and enable it to continue and improve on its innovative programs announced in late 2020 and into 2021.”

However, the exchange’s bankruptcy filing shows it owes several companies money. Three of those companies are suing.

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

SPUR Catalyst Inc., using the business name SPUR Capital, sued the IHDE this year. The bankruptcy filing notes that SPUR’s claim is about $331,311.

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

According to the filing, the debts to Cureous and SPUR are in dispute.

Christensen said Cureous Innovations claims it wasn’t paid in full for a three-year contract. However, IHDE believes it paid the company what it owed. Cureous Innovations sued in Ada County Court last year and won a prejudgment order that allowed the company to start going after the exchange’s assets, even before the court ruled on the lawsuit.

That brought the exchange over the edge of needing bankruptcy protection. The bankruptcy also stops the debt collection process for the time being, Christensen said.