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

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Bankruptcy would keep the IHDE operating while it pays off debts

A small organization that operates a massive database of Idaho patient medical records filed for bankruptcy 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 keep operating while it pays creditors and works through litigation, according to its bankruptcy attorney, Matthew T. Christensen of the Johnson May law firm in Boise.

The health data exchange is a nonprofit organization that provides a centralized repository of health records. It allows participating health care providers to see each other’s records for individual patients — so that, for example, a primary care doctor in Coeur d’Alene could access X-ray records for their patient who was treated for a broken bone in Nampa.

The IHDE currently lists 194 health care providers and organizations among its participants, including the state’s largest health systems.

The Idaho Health Data Exchange launched in 2009 and relied mainly on government funds intended to modernize health records infrastructure. For example, it received $5.9 million of federal funding in 2010 as the designated health information exchange for Idaho.

More recently, the health data exchange received millions of dollars of federal funds per year through the Idaho Department of Health and Welfare. That income stream ended when the HITECH Act, a 2009 law, expired last year, according to the health data exchange’s executive director and its bankruptcy attorney.

New sources of income? ‘We’re 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, the executive director of the exchange and a managing partner at Capitol Health Associates, a consulting group based in Washington, D.C.

“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 said.

Asked whether the health data exchange found new revenue sources to replenish its income stream, Kastensmith said, “We’re working on it. … We have been working to increase revenue while reducing costs.”

Christensen said the health data exchange 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.

The exchange announced in May 2021 that it had secured an $8 million grant from the philanthropic financing 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 director of finance, said in the news release. “Changes to federal funding programs … are producing a void in capital nationally for health information exchanges. 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 organization is now defending itself against three lawsuits from companies who say the exchange owes them money.

Bankruptcy follows lawsuits against IHDE

The data exchange’s bankruptcy filing shows it owes several companies money. Three of those companies are suing.

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

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

The IHDE also lists an $80,330 claim from vendor PointCare LLC, a company based in the Bay Area. PointCare sued the 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.

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

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

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

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

The IHDE’s main asset is its database, Christensen said. The records stored and exchanged through that database belong to patients and/or health care providers, not to IHDE, he said.

This article was originally published in the Idaho Capital Sun and is republished here under Creative Commons license CC BY-NC-ND 4.0. The Idaho Capital Sun is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity.

Audrey Dutton is a senior investigative reporter at the Idaho Capital Sun. Her favorite topics to cover include health care, business, consumer protection issues and white collar crime.