RHIO Financial Models

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See also Federal HIT Initiatives.

NOTE: This section will expand as analysis becomes available from The Survey of Regional Health Information Finance, expected in June, 2006. If you seek more immediate assistance, please contact the survey team at team_rfs2006@hittransition.com.

Regional health information organizations rely on a combination of revenue sources, generally including:

Contributed Income:

- Grants (government and private)

- Gifts (cash and in-kind)

Earned Income:

- Membership/Subscription Payments

- Transaction Fees

- Contract proceeds

Loans and Investor Proceeds:

- Conventional loans and lines of credit with financial institutions

- Capital from investors in exchange for equity

As we study developing RHIO projects, a few identifiable financial models appear to be emerging. We divide the financial lifecycle of RHIOs into three general time frames:

1. Startup

2. Transition

3. Production

Each of these periods in the life of a RHIO finds differing challenges and consequently varying financial aspects.

During Startup, organizations must acquire capital with little immediate promise of quid pro quo, so that earned income is difficult or impossible to secure. Contributed income from grants and other forms of gifts -- including in-kind office space and personnel leasing -- are the primary source of income. During early startup, most income is directed toward simply keeping the organizational structure cohesive and (generally) growing, rather than to provision of services. Later in the startup phase, many successful organizations tend to begin move toward applying some funds toward the planning of earned income-bearing services. In this way, contributed income is leveraged to acquire the means of production which can lead to at least partial self-sufficiency.

During the Transition period, organizations begin expending funds on piloting one or a few basic services, which in some cases may lead very quickly to early (if small) earned revenues. However, transition is a period of shaping future services, and is generally not expected to yield substantial earnings. Contributed income may still be critical to ongoing operations.

Transition moves into the Production period, during which the organization much more quickly brings its services and partners online, and consequently begins earning more significant revenue. This offers the potential to shift some degree of reliance away from contributions. RHIOs which work toward financial self-sufficiency often cannot achieve it immediately upon entering full production, but must rely on contributions for some period of time.

DISCLAIMER: No portions of this section or its linked pages are offered as legal advice, and should not be taken as such. Rather, they are provided as general public information only. Organizations and individuals should seek formal legal counsel and appropriate accounting advice.

--Michael 11:21, 17 April 2006 (CDT)