(Story updated at 12:29 p.m. ET)
The hospital association that operates a major Chicago-area health information exchange is suing its health information technology vendor that abruptly announced it will go out of business.
The hospital Metropolitan Chicago Healthcare Council, now merged with the Illinois Health and Hospital Association, operates the MetroChicago HIE that connects more than 30 northeastern Illinois hospitals, according to a membership list on its website.
A suit in U.S. District Court for the Northeastern District of Illinois names as defendants Sandlot Solutions and Santa Rosa Consulting, an owner of the company. The suit alleges that Sandlot breached its agreement “by shutting down the MetroChicago HIE system and denying MCHC's participants access to their client data on the system.”
The hospital association learned that Irvine, Texas-based Sandlot was “winding down and would cease operations by April 8, 2016." The records show that Sandlot was planning to provide MCHC a copy of its raw client data and then destroy the existing client data from its third-party hosting service.
That plan, according to the complaint, would breach Sandlot's data management and transition obligations under its contract, and would prevent the association from properly validating the data, which would result in a clear violation of federal privacy laws.
The suit seeks both a temporary restraining order and an injunction against Sandlot and Bloomfield Hills, Mich.-based Santa Rosa, barring them from destroying or transferring the data.
The restraining order was granted, barring the destruction of patient data, according to IHA spokesman Danny Chun.
The HIE, meanwhile, is recovering the records of about 2 million unique patients from 34 member hospitals, two health plans and one federally qualified health center. A replacement vendor has not been selected.
Sandlot was founded in 2006 by North Texas Specialty Physicians, a Forth Worth-based independent practice association, in an effort to commercialize its in-house IT development work.
Sandlot's website is down and its phone is disconnected.
Health information exchanges have always been plagued by an industry dichotomy -- providers, payers and researchers like the idea of swapping data, but often don’t like paying for the services that enable that data to be swapped.
“We believe Sandlot had a great product and (was) on the verge of doing great things in healthcare communications,” said Richard Saslow, general counsel and chief administrative officer at Santa Rosa, an investor in Sandlot.
But a commitment of additional investment capital in Sandlot “didn’t materialize,” a verbal commitment from a potential major customer didn’t mature into a contact and, more broadly, slower adoption of HIEs nationally “caused the company to run out of capital and go out of business,” Saslow said.
Sandlot ceased operations on April 15, he said.
All of Sandlot’s customers, including MCHC, that wanted their data returned and not destroyed by Sandlot have received it, Saslow said, adding that Sandlot has not yet filed a response to the lawsuit.
“Santa Rosa believes we have no liability to MCHC and will vigorously defend those claims,” if it comes to that, Saslow said.