For hospitals looking to transform into accountable care organizations (ACOs), the transition can be overwhelming. So much so, said Brent Dover, president at HIE technology company Medicity, that it's basically like becoming a mini insurance company.

"And they need to do it overnight -- it's kind of a scary and daunting thing," he said. "Right now, hospitals and doctors are paid on a fee-for-service model, and a fundamental element of an ACO is saying 'we're not going to pay you on that model anymore. We're going to pay you to take care of the overall health of this population. The more proactive you are, and the better quality you deliver, we will share that savings with you."

"And so, I don't care how you swipe it, but in essence, you're asking hospitals and doctors to take on risk and share in that risk," Dover continued. "And if they need to do a good job of managing that risk and paying for that risk. It sounds a lot to me like they're being asked to become truly managed care organizations, or more like health insurance companies."

With that said, Dover and Jared Crapo, chief of staff at Medicity, outline five reasons HIEs are critical to the success of ACOs.

1. The financial model of an ACO is incenting people to want to know what's going on. Essentially, a fundamental aspect of an ACO is "a doctor needing to know what's going on in a hospital, and a hospital needing to know what's going on with a doctor," said Dover. In turn, the financial model of the ACO is requiring people to know what's happening with patients at a "computer level," so doctors can scan patients and pinpoint who may need interventional care. "You really can't get to an ACO unless you have the capabilities that an HIE provides," said Dover. "It's a foundational element. There's no way for you to identify those patients unless you know all of the clinical data happening to them at the different points of care."

[See also: HIE market still a little like the 'Wild West'.]

2. HIEs connect the referral pattern from physicians to a hospital or service center. "I've had many CIOs across the country say to me, 'You know Brent, before ACOs, HIEs were a really nice idea; they were a better and more efficient way of distributing results and sharing data in our communities," said Dover. But along the way, he continued, HIEs established themselves as a "more aggressive way" of connecting the referral pattern from physicians to hospitals or service centers. "Now they say, 'we save costs by getting results serviced out better, and we increase revenue by having a good physician affinity strategy, and that's how we justified our investment in HIE." Add in many organizations now being faced with transitioning to an ACO, Dover continued, and an HIE has suddenly become a key business necessity. "If they didn't have an HIE in place, they'd have no way of beginning to even understand how to manage the risk. And so, health information exchange has gone from a nice thing to have to reduce costs to a business imperative and a foundational element."

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