The sharing of health data across providers, delivery networks and geographic regions is crucial to achieving the twin goals of reducing health-care costs while improving the quality of care. A new paper from the Brooking Institution’s Governance Studies examines state efforts to produce health information exchanges (HIEs) that accomplish those goals and the broader challenges these initiatives face.

In a panel discussion following the paper’s release, representatives from the federal government and policy think tanks outlined two fundamental issues facing the large-scale implementation of HIEs: the creation of trust between health-care providers, insurance companies and other stakeholders and the development of a sustainable business model that will allow the exchanges to continue operating for the foreseeable future.

Early HIE efforts began with the U.S. Departments of Defense and Veteran Affairs, which needed to exchange electronic health records (EHRs) of military personnel. In 2004, President George W. Bush established the Office of the National Coordinator for Health Information Technology (ONC), intended to facilitate health IT adoption. The American Recovery and Reinvestment Act (ARRA) included $44 billion for EHRs, data connectivity and the development of privacy and security standards. The Affordable Care Act (ACA) mandated that states (or if they choose not to, the federal government) create health insurance exchanges, which would rely on HIEs to determine eligibility and provide transparency about insurance pricing and quality of care.

Exchanges can be government-led (such as Indiana’s, one of the first HIEs, founded in 2004 by the state government) or provider-led (such as the one in Massachusetts, launched in 2004 by Blue Cross/Blue Shield at the urging of the state government). The specifics vary widely: As of 2011, 255 state, regional and metropolitan HIEs exist, according to Brookings.

But fundamental questions persist about their governance, compliance and financial sustainability. Overcoming those obstacles is imperative for long-term success, according to a Brookings panel that featured Claudia Williams, director of the state HIE program at ONC; Jon White, director of the health IT portfolio at the Federal Agency for Health Research and Quality (AHRQ); and Janet Marchibroda, chair of the health IT initiative for the Bipartisan Policy Center’s Health Project.

Federal, state and local governments must provide incentives for private companies and consumers to buy into the HIE movement, the panel said. At the moment, providers are more likely to benefit from withholding information versus agreeing to share info with competitors. To name one example, Williams said, the most prominent pay structure (known as fee-for-service) rewards a health-care provider for doing repeated testing on a patient. Those duplications could be avoided if providers could access patient information on an exchange.

If the government incentivized quality outcomes and cost controls over sheer number of services performed (a policy already being tested in state Medicaid managed-care programs), providers would benefit financially from sharing information in an HIE. That would, in turn, lead to lower costs and better care for patients. Right now, compliance “doesn’t make sense from a business perspective,” Marchibroda said. “We’ve got to tackle that first.”

And more generally, Marchibroda said, policymakers and stakeholders must come to a mutual understanding about HIEs, as distrust and uncertainty has prevented some providers from joining or fully compiling with exchange efforts. In a recent survey of members of the Healthcare Information and Management Systems Society (HIMSS), only 45 percent reported that their organization participated in an exchange, according to Brookings.

The issue of governance has been raised repeatedly as states, cities and regions seek to implement exchanges. Different states have populated their HIE governance boards in different ways, according to Brookings. California and Massachusetts, for example, have union representatives on their boards, but most other states do not. Tennessee’s board includes pharmacists and nurses.

Bringing all stakeholders together and involving them in the decision-making process will facilitate the trust necessary for effective exchanges, the panelists agreed. And without HIEs, they said, health IT can’t reach its full potential for improving the overall health-care system. Adopting EHRs without properly functioning exchanges “is sort of like getting all dressed up for the prom and you don’t have a date,” said White.

States are also pursuing diverse policies to address budgetary concerns about HIEs, according to Brookings. Those concerns are substantial: only 10 percent of HIEs self-report that they have a sustainable business model. Even Indiana, one of the oldest and most respected state exchanges, had an operating loss of nearly $275,000 in 2010. Vermont has begun funding its exchange with state tax dollars. Delaware launched an initiative to earn revenue through public health and Centers for Disease Control and Prevention reporting. Tennessee has proposed a one percent medical claims fee to pay for its exchange.

Despite these remaining challenges, Williams predicted that 2012 would be a watershed year for the widespread implementation of HIEs. There is a general optimism that increased data sharing, facilitated by the exchanges, could be instrumental in reshaping American health care. The recent survey of senior HIMSS members found that 40 percent believe health IT “can have the most impact on patient care by improving clinical and quality outcomes,” according to Brookings. ONC will also release a rule within the next month, expanding on the “meaningful use” regulations for health IT systems, Williams said, another step toward standardizing health IT nationwide.

Williams expects HIE implementation to move “from a trickle to a flow to a flood,” she said. “But we can only move as fast as we develop trust.”

Below is a copy of the Brookings Institution’s full report.