What can FirstNet learn from Health Insurance Exchanges?

So, what lessons can be learned? Deltek’s Health Care and Social Services Team paired up with the Justice and Public Safety Team to see if any parallels could be drawn from the two very different efforts.

Q: As far as the “opt-in/opt-out” strategy goes, what does this mean for vendors and how should they position themselves? Do vendors profit more from being a nationwide provider or multistate provider?

A: With the HIX initiative, states were given the option to set up their own exchange, utilize the federal HIX (built by CGI), or utilize a federal-state partnership (hybrid model). Factors such as political resistance to the ACA and lack of federal guidance all contributed to states’ shuffle in deciding which direction to take. Only a handful of states were completely on board with developing their own exchange from the beginning; many went back and forth in their decision. For that, vendors should get involved with states early on and pay attention to each one.

Vendors can give themselves a considerable leg up by seeking contracts with the federal model that will be available to states. Vendors who win a contract for federal solutions may be more desirable to states as they decide who will build their solution. CGI won the contract with the Department of Health and Human Services (HHS) in December 2012 and has won several contracts to assist states in building out their exchanges. There is an undeniable advantage in being familiar with how the federal system was created, especially since these systems will need to be interoperable with state-level systems to some degree.

FirstNet vendors stand to have more opportunities to bid on projects if more states opt out. The federal government will likely issue several RFPs, giving vendors many large-scale projects to win. However, if a number of states opt out and build a network independently, it would provide vendors even more projects to bid on and potentially win.

It is unclear what the value of the federal government contracts for FirstNet will be, but state projects are often more predictable in terms of cost based on size and existing infrastructure. Also, state projects may be ideal because state systems will have many years of maintenance requirements.

On the other hand, as with HIX contracts, winning a large federal contract can show states that a vendor has the ability to build out something on a large scale, which can improve their chances of possibly winning a state contract. It is for this reason that going after federal business first might be a vendor’s best bet, followed by state projects.

Q: What are some marketing efforts vendors can undergo to help?

A: Again, getting into the game and making your solutions known early on is vital. Once these federal initiatives are launched, vendors should focus on building their resume and making themselves available to states. For instance, a lot of states released requests for information (RFIs) in order to obtain feedback on possible HIX solutions and implementation. Vendors who participate in these types of activities put themselves in a better position to be selected by states. Some states, like Oregon, may decide to sole source the contract to one of the RFI respondents to expedite the procurement process.

Like with the opt-in, opt-out strategy, getting into the market early will serve as an advantage for FirstNet vendors. A number of states that opt out are likely to wait for federal RFPs to be released before their own bids. Those states may also issue RFIs that can give vendors a leg up when a future solicitation is issued. Providing on-site demos and other information can improve a vendor’s chance of winning broadband business.

Q: How can vendors improve their revenue stream?

A: Vendors should keep in mind that winning the federal contract does not necessarily translate into a higher-valued contract. CGI’s contract with HHS to build the federally-facilitated model (a three-year base term, with two, one-year renewal options) is worth $94 million vs. California’s HIX, which came out to $359 million (a five-year base term, with three, one-year renewal options). The solutions resulting from these statewide initiatives are long term; as a result, maintenance and enhancements to these systems are inevitable, which is another opportunity for vendors.

Future federal contracts for FirstNet are unknown in terms of how many contracts will be available and what their value will be. Therefore, going after large states such as California, Florida, Pennsylvania, Illinois, Texas and Virginia may yield larger contracts. Minnesota is in the process of awarding a contract for its broadband network, which may give vendors a glimpse at what these systems will cost and the length of maintenance contracts that will add steady revenue.

Q: What does this say for future federal initiatives?

A: You can never really get involved too early with these types of efforts. Avoid letting state pushback or stalling efforts get in the way of designing innovative solutions. Just because states may be dragging their feet does not mean vendors should as well. States that wait until the last minute will be looking for solutions fast, and vendors that are ready to come in and implement credible solutions will be highly sought.

Acting early and being ready for late implementers will be essential for FirstNet vendors. Building credibility and trust from broadband systems and other large-scale radio projects will show federal and state governments that your company can get the job done properly without exceeding budgets.

Q: How does federal guidance affect implementation? Did this have an effect on states’ ability to fund the project, and are the budgets ever correct?

A: There is no doubt that the lack of HHS guidance in the initial launch of the HIX initiative paralyzed states in their planning efforts – they were frustrated by the slow release of requirements for the numerous components of implementing an exchange. Much of this may have been due to the fact that HHS was unsure how these novel systems should look. Fortunately for states, HHS did a phenomenal job of pumping money (more than $4 billion awarded so far) to the states at various stages to help fund implementation. Still, the initial lack of guidance released by HHS may have contributed to some states underestimating the level of funding needed to develop their solutions. As a result, many states ended up applying for multiple rounds of funding.

While it is still early in the game for FirstNet, states are in wait-and-see mode regarding next steps. Many of the overall requirements have been established, but some states have already developed broadband networks (Mississippi) and must wait for approval from the FCC to green light the system. The FirstNet Board is acting as quickly as possible, but with a network of unprecedented size, moving slowly will ensure mistakes are avoided. States are trying to develop inventories and determine what funding they will have should they opt out, or what funding they can contribute if they opt in. FirstNet has established a $7 billion budget with approximately $135 million for state grants. It is not clear whether this will be enough money, but grant funding will likely need to be expanded.

Q: So, state-run vs. federal-run: Which is better?

A: FirstNet can learn from the HIX federal model because HIX had federally developed systems and state-developed systems, both of which must work in unison – just as FirstNet will operate. The federal guidelines and standards for FirstNet need to be clear cut to ensure states that build their own system can easily connect to the federal network. States do not want to spend millions just to learn their system cannot connect to FirstNet.

Another point to consider is that state-run solutions allow for more unique infrastructure. With the HIXs, these systems must integrate with other existing eligibility systems within a state. For that, a solution that has been built to consider existing infrastructure undoubtedly helps.

On the flip side, being part of the federal solution’s development offers more experience with standardization and determining how to ensure the system will be able to work nationwide. As mentioned, vendors involved in this type of implementation are at an advantage as they are able to leverage lessons learned from the federal system to state-facilitated models.