Sustainability in the New Funding Reality for HIEs

By Leo Pak, CEO – Interstella

For more than a decade, Health Information Exchanges have survived on the same operating playbook: win grants, build interfaces, move messages, and measure success by volume. That model was fragile even then. Today, it is unsustainable.

The national exchange frameworks such as TEFCA, QHINs, Carequality, and CommonWell are accelerating the end of this era. They will handle transactions at scale, cheaply and automatically. If HIEs define themselves only by data movement, they will be replaced.

Which leaves one question: how will HIEs sustain themselves in a future where transactions are free and AI defines value?

The Grant Trap

History is filled with examples of HIEs that went off the rails by chasing grants. A burst of funding fueled excitement, contracts were signed, and systems were stitched together. But two years later, the money ran out, and the HIE collapsed.

California’s Cal eConnect is a cautionary tale. Launched with $38 million in federal funding, it was heralded as the future of statewide exchange. Within two years, it shut down. The infrastructure was built for compliance, not sustainability, and when the grant ended, so did the exchange.

Dozens of regional HIEs across Illinois, Michigan, and Texas followed the same path. They built for the grant rather than for the future. A GAO review confirmed the pattern: more than half of the HIEs seeded with federal dollars struggled or failed once subsidies disappeared.

The lesson is simple. Chasing grants is not a business model. It is a countdown clock.

Beyond Iron Horses

The grant trap is just one symptom of a deeper issue: HIEs mistaking features for value. Too often, exchanges have invested in “iron horses,” projects that looked modern but were never built on a foundation of real data curation.

Take POLST. For years, Physician Orders for Life-Sustaining Treatment registries were treated as the next big thing. Grants flowed, systems were built, and dashboards were deployed. But most of these registries were bolted on as standalone features, not integrated into the core data fabric. When the funding dried up, they withered.

The same mistake is happening today with social determinants of health. Too many organizations think SDOH is a feature you can bolt onto an HIE. But SDOH is not a module. It is a data domain. Without refinement, quarantine, normalization, and governance, SDOH feeds are not assets. They are noise.

This is the essence of the iron horse problem. If you only build what people ask for — “add a POLST registry,” “give us an SDOH module,” “spin up another dashboard” — you deliver faster horses, not automobiles. You chase features instead of building the refinery discipline that creates durable value.

The New Value

Sustainability requires returning to the core of what HIEs should be doing: curating data into assets. Pipelines move crude. Refineries transform it into products. In healthcare, those products are Intelligent Assets that are quarantined, normalized, governed, and enriched into datasets that can be monetized across use cases.

Imagine one curated cohort of congestive heart failure patients. Hospitals can use it to reduce readmissions. Health plans can use it to manage costs under value-based contracts. Public health agencies can use it to track trends. Community organizations can use it to align services.

One asset. Four revenue streams. Recurring value.

This is the new funding model. Not reliance on grants or subsidies. Not chasing the next shiny feature. But sustainable revenue built on reusable assets that improve care, reduce costs, and advance equity.

From SOPs to Survival

To reach this future, HIEs must abandon legacy SOPs. Onboarding interfaces one by one. Cleaning data reactively. Relying on manual stewardship. Chasing grants. Chasing features. These practices cannot survive the AI era. They belong to pipelines, not refineries.

Systems like Carequality and CommonWell will cover the basics of connectivity. If HIEs define themselves only by keeping pace, those utilities will replace them. The only path to survival is to create value above the pipe, intelligence that national utilities cannot quickly replicate.

That is what Interstella provides. Our Lynqsys platform and Data Refinery as a Service replace fragile SOPs with refinery operations: automated quarantine, code normalization, longitudinal curation, and reusable asset creation. We give HIEs the process and tools to control costs, generate real revenue, and build data assets that endure.

A New Industry Reality

The old boys’ network of insider relationships and grant dependency is collapsing. The future will not reward message counts. It will not subsidize iron horses. It will reward those who understand their cost structure, transform data into assets, and create products that drive measurable outcomes.

At Interstella, our message is simple: dirty data is the real threat to AI. We solve it. And in doing so, we give HIEs not just survival in the new funding reality, but leadership in it.

This is the new definition of sustainability: building automobiles while others chase faster horses.