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California Health IT Sphere in Flux in Wake of CalRHIO Shake-Up

CalRHIO, one of the country’s first organizations designed to oversee the exchange of digital health information, has been thrown into a state of flux after failing to win designation as California’s lead health information technology agency. Leaders and employees have left. Some of CalRHIO’s board members may still be active in negotiations with the state, but the future of the organization is unclear.

The upheaval at the California Regional Health Information Organization leaves the recently reorganized California eHealth Collaborative as the front-runner in the race to win the state’s nod to oversee billions of federal stimulus dollars for health IT projects.  The first wave of federal money — about $40 million — is expected to begin flowing into California early this year. The state-designated agency could end up disbursing billions of dollars through a variety of federal programs over the next several years.

Last year, the state received seven responses to its invitation for proposals from organizations interested in managing the state’s health information exchange. In December, Jonah Frohlich, California’s secretary of health IT, asked two finalists to amend their proposals and collaborate on a joint plan. Frohlich, on Tuesday, said the two organizations are still negotiating and he expects to see a joint proposal from them in the next two weeks.

Frohlich declined to identify the two organizations, but according to both CalRHIO and the CAeHC, they were the two finalists. A message on CalRHIO’s Web site says negotiations broke down and that a report was made to state officials saying “the parties were unable to reach an agreement.”

Letter to Stakeholders

The undated two-page “Letter to All California Stakeholders from the CalRHIO Board of Directors,” says in part:

“Earlier this year federal legislation was passed to provide funding for states to establish health information exchanges under the American Recovery and Reinvestment Act (ARRA). CalRHIO participated in California’s RFI process to be designated as the governance entity for HIE, including state-directed negotiations with the California eHealth Collaborative (CAeHC) in an effort to form a new governance entity. CalRHIO reported to the state last week that the parties were unable to reach an agreement.”

Attempts to get comments from CalRHIO officials were unsuccessful. The organization’s voicemail system is full and cannot accept new messages.

A statement from CalRHIO CEO Molly Coye in the letter indicates that individuals from CalRHIO’s board of directors or management team might still be participating in discussions with the state and California eHealth Collaborative, but so far, nobody’s talking.

In the letter, Coye wrote, “We are pleased that key leaders from the CalRHIO Board will play a significant role in the new governance entity.”

In an e-mail, Donald Crane, a CalRHIO board member and CEO of the California Association of Physician Groups, said he was unable to comment because of “confidentiality restrictions.” Crane is reportedly one of CalRHIO’s representatives still involved in negotiations.

Some reports have Crane and David Lansky, CAeHC board member and president/CEO of the Pacific Business Group on Health, becoming co-chairs of the soon-to-be-created entity.

CalRHIO Effectively Disbanded

Several sources in California’s health IT community acknowledged this week that CalRHIO has effectively shut down.

In an e-mail to friends and colleagues last week, Coye wrote:

“Building on five years of solid work, CalRHIO delivered a strong plan for HIE governance and deployment, with private capital to leverage the new federal funds available from the HITECH Act and finance the full costs of building out HIE connectivity in California. In the end, however, the state of California decided to form a new governing entity for the statewide HIE initiative. CalRHIO has pledged our support for the state’s efforts and for the formation of the new organization.

“As a result, I will be taking the next four months to engage in a variety of activities, starting with some time off and then providing support for several federal and private advisory groups.”

If CalRHIO is still involved in negotiations, it is in name (and perhaps selected board members) only, according to several sources. The organization has effectively disbanded, and the handful of employees are in the process of moving on, sources said.

CalRHIO was formed in 2005 when Gov. Arnold Schwarzenegger (R) convened a summit and called for the creation of a statewide organization to help the state’s health care system move into the digital age. CalRHIO was formed as a public-private entity encompassing health care providers, payers, patients, insurers, government agencies and consumer organizations with two main goals: investment in IT and the secure exchange of information using that technology.

New Leadership for eHealth Collaborative

Last fall, after officially entering the race to become the state’s designated information exchange organization, CAeHC (pronounced “cake”) reorganized with new board members and new management. The new CEO of “CAeHC 2.0” is Michele Kang, former vice president and general manager of Northrop Grumman Information Technology’s Health Solutions division.

Kang said CAeHC will issue an announcement Friday. The three-page announcement says, in part:

“We wish to express our gratitude to CalRHIO, led by Molly Coye, MD, for the devotion to pursuing a vision for improvements towards the use of health information technology.  Molly’s leadership and convening of stakeholders played a strong role in creating focus on important issues such as privacy and security, technical architecture, governance and business sustainability in California.

“We also thank the board members of CalRHIO for their leadership and the staff of CalRHIO for providing the groundwork for which the stakeholders may move forward in advancing the principles for which CalRHIO was founded.”

Next Steps

State officials expect to see a final proposal in the next two weeks.

“Our internal committee would have to review that proposal,” Frohlich said. “And I would hope we’d be able to make an announcement shortly after that.”

Frohlich said the new entity will be a private organization, not a part of state government.

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