HHS Interoperability: Navigating the Complex Landscape of Standards, Funding, and Future Directions
The promise of seamless data exchange across health and human services systems has long been a goal for government agencies. Yet despite decades of investment and policy initiatives, achieving true interoperability between case management, eligibility, and related systems remains elusive. As we move through 2025, the landscape is shifting rapidly with new standards, enforcement priorities, and funding mechanisms emerging alongside persistent challenges.
The Current State: A Fragmented Ecosystem
Health and human services agencies today operate in a complex environment where multiple standards, frameworks, and initiatives coexist—sometimes complementing each other, often competing for adoption and resources.
CMS's Bold New Direction: The Health Technology Ecosystem
In July 2025, CMS Administrator Dr. Mehmet Oz announced the Health Technology Ecosystem, a voluntary framework designed to "kill the clipboard" and enable seamless health information sharing. The Ecosystem builds on years of CMS and ONC efforts around certified health IT, TEFCA (Trusted Exchange Framework and Common Agreement), and information blocking regulations.
The CMS Interoperability Framework establishes five broad criteria categories:
Patient Access & Empowerment
Provider Access & Delegation
Data Availability & Standards Compliance
Network Connectivity & Performance
Security & Privacy
Companies that voluntarily commit to these criteria can become "CMS-Aligned Networks," gaining visibility and presumably, competitive advantage. The initiative aims to leverage AI-powered virtual assistants, improve care coordination, and make patient data truly portable across providers and systems.
The FHIR Revolution (and Its Limitations)
Fast Healthcare Interoperability Resources (FHIR) has emerged as the dominant standard for modern health data exchange. The HL7 Da Vinci Project has demonstrated impressive results—participants like Regence and MultiCare Health System achieved at least 140% improvement in transaction completion times compared to legacy standards. Implementation of FHIR APIs took approximately one week, compared to months for traditional approaches.
CMS is aggressively pushing FHIR adoption through the Medicare Promoting Interoperability Program. Starting in 2027, providers will be required to report on electronic prior authorization measures using FHIR-based systems. New certification criteria for real-time prescription benefit checks will become mandatory by January 2028.
However, FHIR's success has been primarily in the clinical health space—EHRs, payers, and healthcare providers. Its adoption for broader human services case management and eligibility systems remains limited.
The Forgotten Framework: NIEM and Human Services
While FHIR dominates healthcare conversations, the National Information Exchange Model (NIEM) was specifically designed for the broader justice and human services domains. Established as an operational program in 2007, NIEM provides a standardized approach to data exchange across federal, state, local, and tribal agencies.
The NIEM Human Services domain, officially recognized in 2012 and stewarded by HHS's Administration for Children and Families (ACF), addresses critical needs for child welfare, eligibility determination, case management, and cross-program coordination. ACF established the NIEM HS Domain Workgroup in 2015 to develop standardized data exchanges and Information Exchange Package Documentation (IEPDs).
Despite early promise and adoption in justice and homeland security domains, NIEM faces significant challenges in human services. The biggest obstacle? Getting the word out. As one NIEM program manager noted years ago, "The biggest challenge for driving success for the NIEM is getting the word out that it is not an UBER, all encompassing standard." Adoption requires understanding what NIEM is, what it isn't, and how to implement it effectively—a knowledge gap that persists today.
Legacy Standards and the APD Process
Behind the scenes of new standards and frameworks, state and local agencies continue to navigate the decades-old Advance Planning Document (APD) process to secure federal funding for their systems. The APD process, governed by 45 CFR Part 95, is how states obtain Federal Financial Participation (FFP) for acquiring and maintaining automated data processing systems.
The APD requirements were modernized in 2010 to reduce burden for lower-risk projects while increasing oversight for high-risk initiatives. States can now receive enhanced funding rates (typically 75-90% FFP) for certain activities, though eligibility varies by program and timeframe. For multi-program systems involving ACF programs (TANF, child welfare, child support), CMS programs (Medicaid, CHIP), and others, states must submit through the HHS State Systems Coordinator.
ACF has developed tools to help states navigate this complexity, including the Cost Allocation Methodology (CAM) Toolkit, which provides a "safe harbor" approach for allocating costs across multiple benefiting programs.
The Concerns: Why Isn't This Working?
Fragmented Standards and Competing Priorities
State and local agencies face a bewildering array of standards and frameworks, each with different governance, technical requirements, and communities of practice. FHIR excels for clinical data but may not address the full scope of human services needs. NIEM is comprehensive for justice and human services but lacks the momentum and commercial tool support of FHIR. Legacy HIPAA transaction standards persist for certain functions.
This fragmentation forces agencies to make difficult choices: invest in the standard that seems to be "winning" (FHIR), the one designed for their domain (NIEM), or maintain legacy systems that work but resist modernization?
The Funding Dilemma
The APD process, while improved, remains complex and time-consuming. States must navigate:
Different match rates for different programs
Complex cost allocation across multiple federal funding streams
Prior approval thresholds ($6 million for software application development, $20 million for hardware/COTS)
Independent Verification and Validation (IV&V) requirements for high-risk projects
Coordination across multiple federal agencies (HHS, USDA/FNS, etc.)
Moreover, enhanced funding rates—critical for major system modernizations—have specific eligibility windows and requirements. The Child Support Enforcement program's enhanced funding, for instance, ended in 1995, though regular FFP continues.
For interoperability initiatives specifically, funding has been sporadic. The OMB Partnership Fund for Program Integrity Innovation funded the S2I2 (State Systems Interoperability and Integration Projects) grants for seven states, but these were 12-month planning grants, not implementation funding. The resulting state innovations—California's governance model, Maryland's life-of-the-case workflow, New York's Children's Passport—demonstrated value but require ongoing resources to scale and sustain.
Information Blocking Enforcement Intensifies
In September 2025, HHS OIG and ONC issued an enforcement alert declaring that information blocking enforcement would be a "top priority" under the Trump administration. This puts pressure on health IT developers, health information exchanges, and providers to ensure they're not interfering with legally permissible data access and exchange.
For government agencies, this creates both opportunity and risk. The enforcement priority may accelerate private sector compliance, making it easier to exchange data with healthcare partners. However, agencies must ensure their own practices, contracts, and technical choices don't inadvertently constitute information blocking.
The Skills and Knowledge Gap
Successfully implementing modern interoperability standards requires specialized expertise that many state and local agencies lack. Understanding FHIR APIs, NIEM IEPDs, or even effectively navigating the APD process requires skills that are in short supply. Commercial tools and implementation support are more readily available for FHIR than NIEM, further tilting adoption decisions.
Where We're Going: Reasons for Cautious Optimism
Despite these challenges, several trends suggest progress is possible:
Convergence Through Necessity
The CMS Health Technology Ecosystem's emphasis on standards-based interoperability may create a forcing function for convergence. While initially focused on healthcare, the ecosystem's principles—patient empowerment, standards compliance, network connectivity—are equally applicable to human services data exchange.
TEFCA, the voluntary Trusted Exchange Framework and Common Agreement, is beginning to enable cross-network queries and responses. As TEFCA matures and achieves broader adoption, it could provide the infrastructure for human services agencies to participate in nationwide data exchange.
Renewed Federal Investment and Coordination
ACF's Division of Data and Improvement continues to lead interoperability initiatives, providing direct technical assistance, developing toolkits, and promoting data standardization. The Human Services Interoperability Innovations (HSII) demonstration program aims to identify and scale novel data sharing approaches.
The 2025 Medicare Promoting Interoperability Program's increased scoring threshold (rising from 60 to 70 points in 2025, and to 80 in 2026) demonstrates CMS's commitment to raising the bar. Electronic prior authorization requirements starting in 2027 will drive further adoption of FHIR-based exchanges.
Modern Tools and Reduced Barriers
The technical barriers to implementing modern standards continue to decrease. FHIR API implementation that once took months now takes weeks. Cloud-based platforms increasingly offer pre-built connectors and integration capabilities. The ecosystem of vendors, consultants, and implementation support continues to mature.
APD modernization efforts have reduced documentation requirements for low-risk projects and increased thresholds for prior approval, allowing states to move faster on smaller initiatives while maintaining appropriate oversight of major investments.
Data Linking and Integrated Systems
States increasingly recognize that siloed systems are unsustainable. Integrated Eligibility and Enrollment (E&E) systems and Integrated Data Systems (IDS) that span multiple programs are becoming the norm rather than the exception. These integrated systems create natural drivers for interoperability—after all, if TANF, SNAP, Medicaid, and child care subsidy determinations happen in one system, that system must already solve many interoperability challenges internally.
The question becomes: how do we extend that integration across organizational and jurisdictional boundaries?
The Path Forward: What Agencies Can Do Now
For state and local human services agencies working to improve interoperability, several practical steps emerge:
Start with business needs, not standards. What information do you need to exchange with whom, and why? What outcomes improve if you can share data more effectively? Once you understand the business case, you can evaluate which standards and approaches best fit your needs.
Engage early with federal partners. Whether through the APD process, ACF's interoperability team, or CMS's ecosystem initiative, federal agencies have resources and expertise to offer. Don't wait until you're ready to submit an APD—reach out during planning to understand funding options and requirements.
Look for quick wins. Not every interoperability initiative requires a multi-year, multi-million dollar system replacement. Can you improve data quality in existing systems? Implement a targeted FHIR API for a specific use case? Adopt a NIEM IEPD for a specific exchange? Quick wins build momentum and expertise.
Invest in staff capacity. Send staff to NIEM training, FHIR conferences, and technical workshops. Build relationships with peers in other states who are tackling similar challenges. Join the NIEM Human Services Domain Workgroup. Knowledge sharing accelerates progress for everyone.
Plan for sustainability. Interoperability isn't a one-time project—it's an ongoing operational capability. Budget for maintenance, updates, and continuous improvement. Ensure your governance and funding models support long-term success.
Conclusion
The path to true interoperability across health and human services systems is neither straight nor simple. We have multiple standards, complex funding mechanisms, evolving requirements, and limited resources. Yet the alternative—continuing to operate siloed systems that fail the families and individuals who need coordinated support—is unacceptable.
The initiatives of 2025—the CMS Health Technology Ecosystem, intensified information blocking enforcement, continued NIEM development, and ongoing APD modernization—create both challenges and opportunities. Agencies that thoughtfully navigate this landscape, leveraging available federal support and building on proven standards, can make meaningful progress toward the seamless data exchange that has long been promised but rarely delivered.
The question isn't whether we can achieve interoperability, but whether we have the collective will, resources, and persistence to do so. The answer, increasingly, must be yes.
Learn More
To learn more about this subject from the experts who are leading the way, check out the upcoming series of Interoperability Webinars. The first one is this Thursday, October 30th, from the Human Services IT Advisory Group (HSITAG). Learn more here: Interoperability Webinar Series | HSITAG.org
